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EHRMAN v. HENKEL CORP. LONG TERM DISABILITY PLAN

April 4, 2002

BILL J. EHRMAN, PLAINTIFF
V.
THE HENKEL CORPORATION LONGTERM DISABILITY PLAN AND PRUDENTIAL LIFE INSURANCE COMPANY, DEFENDANTS



The opinion of the court was delivered by: Bernthal, United States Magistrate Judge.

    ORDER

In April 2001, Plaintiff Bill Ehrman filed a Complaint (# 1) against Defendants The Henkel Corporation Long Term Disability Plan (hereinafter "Henkel Plan") and Prudential Life Insurance Company (hereinafter "Prudential") alleging improper denial of disability income benefits pursuant to Section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (hereinafter "ERISA") (29 U.S.C. § 1132 (a)(1)(B)). This claim arose after Prudential terminated Ehrman's disability benefits in April 2001. In November 2001, Ehrman filed a Motion For Summary Judgment (# 21). In January 2002, Prudential filed a Response To Plaintiff's Motion For Summary Judgment (# 25). After reviewing the pleadings and record, this Court GRANTS Plaintiff's Motion For Summary Judgment (# 21).

I. Background

Bill Ehrman worked full-time for the Henkel Corporation as a chemist and in various other capacities from May 1977 until October 1998. Through his employment with the Henkel Corporation, Ehrman was insured under a long-term disability insurance policy (hereinafter "LTD plan") underwritten by Prudential. Under the LTD plan, benefits were payable for "total disability," which was defined as follows:

"[D]isability" means your inability because of an illness or injury to perform the type of occupation in which you normally engage for the first 18 months of longterm disability. The 18 month period begins the day your LTD benefits commence. This period is called the "Initial Duration." After the first 18 months of disability, "disability" means your inability because of illness or injury to perform any job for which you are qualified by training, experience or education.

(Comp # 1, Exh. A, p. 1.) The LTD plan also noted that "[b]enefits are not payable for your Total Disability for more than 24 months if your Total Disability, as determined by Prudential, is caused at least in part by a mental, psychoneurotic or personality disorder." (MSJ # 21, Exh. 3, p. 2, hereinafter referred to as "R.") The LTD plan's benefits are payable at a rate equal to 60% of monthly earnings.

In October 1998, Ehrman ceased working at the Henkel Corporation due to unstable angina and severe coronary artery disease. In February 1999, Ehrman applied for long-term disability benefits under the LTD plan. Ehrman supported his claim for long-term disability benefits with numerous medical records and reports. After an initial dispute, Ehrman's claim was approved, resulting in Ehrman's receipt of 60% of his pre-disability income. Following his receipt of the benefits, Ehrman also applied for Social Security disability benefits. Ehrman was initially denied Social Security benefits, and that decision was appealed. In March 2000, a Senior Attorney Advisor Decision approved Ehrman's application for Social Security disability insurance benefits. The payment of Social Security benefits integrated with Prudential's payment of long-term disability benefits, thus reducing Ehrman's monthly benefits under the Prudential plan by approximately $400.00 a month.

After receiving benefits for approximately two years, Prudential notified Ehrman in September 2000 that his benefits were being terminated because his condition did not preclude obtaining gainful employment at another occupation. (R. 79.) Ehrman appealed this decision to Prudential, which resulted in a reinstatement of his benefits through April 2001. At that point, Prudential claimed that the 24-month mental disability limitation became applicable. In April 2001, Prudential terminated Ehrman's benefits after determining that his disability was caused at least partly by a mental, psychoneurotic, or personality disorder.

In April 2001, Ehrman filed a complaint (# 1) against the Henkel Plan and Prudential, seeking recovery of benefits pursuant to Section 502(a)(1)(B) of ERISA (29 U.S.C. § 1132 (a)(1)(B)). Following discovery, Ehrman filed a Motion For Summary Judgment (# 21) in November 2001.

II. Standard of Review

The Court grants summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The party seeking summary judgment bears the initial burden of demonstrating the absence of any genuine issue of material fact. Id. at 322-23, 106 S.Ct. 2548. The party opposing the motion must then make a showing sufficient to demonstrate the existence of a material issue for trial. Id.

When reviewing an employee benefit claim decision brought under Section 1132(a)(1)(B) of ERISA, the court applies a plenary or de novo standard of review unless the benefit plan or insurer has clearly reserved discretion to determine benefit eligibility. Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). De novo review is the default rule, and thus any uncertain language concerning the scope of judicial review must be construed as favoring de novo review. Herzberger v. Standard Insurance Co., 205 F.3d 327, 330 (7th Cir. 2000).

In Herzberger, the Seventh Circuit formulated a two-step analysis for determining whether an ERISA plan confers the necessary discretion to the plan administrator. First, a court must determine whether the ERISA plan uses the safe harbor language as established in Herzberger. Id. at 331. The safe harbor language is as follows: "Benefits under this plan will be paid only if the plan administrator decides in his discretion that the applicant is entitled to them." Id. If the language does track the Seventh Circuit's safe harbor language, then de novo review is foreclosed. However, if the language does not follow the safe harbor, the court must determine whether the ERISA plan made "reasonably clear that the plan administrator is to exercise discretion." Id.

Prudential claims that de novo review is improper, and that the Court should apply the "arbitrary and capricious" standard when interpreting the LTD plan. Prudential claims that language contained in their LTD plan confers the necessary discretion to determine benefit eligibility because it makes reference to "when Prudential determines" the conditions are met. This language is followed by what Prudential calls "subjective elements" that they ...


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