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Marszalek v. Marszalek & Marszalek Plan

April 30, 2007

JOHN E. MARSZALEK, PLAINTIFF,
v.
MARSZALEK & MARSZALEK PLAN, A NON-LEGAL ENTITY (OR LEGAL FICTION) DEFENDANT.



The opinion of the court was delivered by: Mag. Judge Michael T. Mason

Judge Charles R. Norgle

MEMORANDUM OPINION AND ORDER

Before the Court is defendant Long Term Disability Insurance's (incorrectly named as Marszalek & Marszalek Plan, referred to herein as "defendant" or "the Plan"), motion in limine for a declaration of the standard of review and for a protective order. Defendant asks this Court to declare that the applicable standard of review for this ERISA matter is the arbitrary and capricious standard. Defendant also asks this Court to enter a protective order precluding plaintiff from engaging in oral or written discovery. This matter was referred to this Court by Judge Norgle in accordance with 28 U.S.C. § 636(b)(1)(A) and Local Rule 72.1. For the reasons set forth below, the Plan's motion in limine and for a protective order is granted.

BACKGROUND

Plaintiff, John E. Marszalek ("plaintiff"), brought this action for disability insurance benefits against the Plan, pursuant to 29 U.S.C. 1132(a)(1)(B). Plaintiff challenges the plan administrator's calculation of his monthly benefits. He alleges that he is entitled to the maximum monthly benefit of six thousand dollars under the policy as a result of his disability. The issue is not whether plaintiff is disabled. Rather, the issue in this case is whether the Plan correctly determined the amount of plaintiff's monthly benefits. For purposes of this motion, we must determine the appropriate standard of review for this ERISA matter and whether to permit plaintiff to engage in discovery outside of the administrative record.

ANALYSIS

I. The Appropriate Standard of Review

Under ERISA, judicial review of a plan administrator's benefits determination is de novo unless the plan grants discretionary authority to the administrator. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Where the plan gives the administrator discretionary authority, the court reviews the decision under the arbitrary and capricious standard. Hackett v. Xerox Corp., 315 F.3d 771, 773 (7th Cir. 2003). In order to determine whether the administrator has discretionary authority, courts look to the language of the plan. Postma v. Paul Revere Life Ins. Co., 223 F.3d 533, 538 (7th Cir. 2000).

In Herzberger v. Standard Insurance Co., the Seventh Circuit formulated a general rule to determine whether or not the language of a benefits plan conferred discretionary authority. 205 F.3d 327, 330 (7th Cir. 2000). The court stated that "the mere fact that a plan requires a determination of eligibility or entitlement by the administrator, or requires proof or satisfactory proof of the applicant's claim, or requires both a determination and proof (or satisfactory proof) does not give the employee adequate notice that the plan administrator is to make a judgment largely insulated from judicial review by reason of being discretionary." Id. at 332. Therefore, the court suggested that employers seeking to reserve discretionary authority for the administrator of their benefits plan, include a safe harbor clause stating that "benefits under this plan will be paid only if the plan administrator decides in his discretion that the applicant is entitled to them." The Seventh Circuit reasoned that this clause would put employees on notice of an administrator's discretion and guarantee plan providers that their decisions would be reviewed under the "arbitrary and capricious" standard. Id. at 331. However, the Herzberger court also noted that there are no "magic words" for determining the scope of judicial review of a benefits determination. Id. Accordingly, the court recognized that less explicit language may still have the "requisite if minimum clarity" to confer discretionary authority to the administrator. Id.

Since Herzberger, the Seventh Circuit has stated that in determining which standard of review is appropriate, "the critical question is whether the plan gives the employee adequate notice that the plan administrator is to make a judgment within the confines of pre-set standards, or if it has the latitude to shape the application, interpretation, and content of the rules in each case." Diaz v. Prudential Ins. Co. of Am., 424 F.3d 635, 640 (7th Cir. 2005).

Here, the insurance policy contains an allocation of authority provision which provides as follows:

ALLOCATION OF AUTHORITY

Except for those functions which the Policy and the Summary of Insurance Benefits specifically reserves to the Policyowner or Employer, the Company [Northwestern Mutual] has full and exclusive authority to control and manage the Policy and Summary of Insurance Benefits, to administer claims, and to interpret the Policy and the Summary of Insurance Benefits and resolve all questions arising in ...


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