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Ted Baxter v. Sun Life Assurance Company ) of Canada

June 7, 2011

TED BAXTER, PLAINTIFF,
v.
SUN LIFE ASSURANCE COMPANY ) OF CANADA, DEFENDANT.



The opinion of the court was delivered by: Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

Plaintiff Ted Baxter seeks judicial review of the final decision of Defendant Sun Life Assurance Company of Canada to offset Plaintiff's long-term disability benefits with a malpractice settlement that Baxter received from Evanston Hospital. The question before the Court is whether Sun Life's decision to offset Plaintiff's long term disability ("LTD") benefits by a portion of his tort settlement was arbitrary and capricious. For the reasons set forth below, the Court finds that Sun Life's decision was not reasonable in light of the plain language of Plaintiff's long-term disability policy. Therefore, the Court denies Defendant's motion for judgment under Federal Rule of Civil Procedure 52 [27] and enters judgment in favor of Plaintiff Ted Baxter.

I. Standard of Review

Plaintiff's claim is governed by the Employee Retirement Income Security Act

("ERISA"), 29 U.S.C. § 1001, et seq., which was "enacted to promote the interests of employees and their beneficiaries in employee benefit plans, and to protect contractually defined benefits." Black & Decker Disability Plan v. Nord, 538 U.S. 822, 829 (2003) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113 (1989)). The statute permits a person who is denied benefits under an ERISA employee benefit plan to challenge that denial in federal court. Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 108 (2008); see also 29 U.S.C. § 1132(a)(1)(B). Both parties ask the Court to determine the question of Plaintiff's eligibility for benefits based on the case file reviewed by the Administrator and the proffered Program documents, as well as the deposition of Otis Robert Goodall, the claim consultant employed by Sun Life who adjudicated Plaintiff's claim.*fn1 See, e.g., Cook Inc. v. Boston Scientific Corp., 333 F.3d 737, 741-42 (7th Cir. 2003) ("'Sometimes both parties move for summary judgment because they do not want to bear the expense of trial but instead want the trial judge to treat the record of the summary judgment proceeding as if it were the trial record. In effect, the judge is asked to decide the case as if there had been a bench trial in which the evidence was the depositions and other materials gathered in pretrial discovery."') (quoting May v. Evansville-Vanderburgh Sch. Corp., 787 F.2d 1105, 1115 (7th Cir. 1986)); Hess v. Hartford Life & Accident Ins. Co., 274 F.3d 456, 461 (7th Cir. 2001) (deciding, in an ERISA case, that the applicable standard of review was the one found in Rule 52(a), where the parties stipulated to the facts that made up the administrative record, and "the procedure the parties followed * * * [was] more akin to a bench trial than to a summary judgment ruling."); Akhtar v. Cont'l Cas. Co., 2002 WL 500544, at *1 (N.D. Ill. Apr. 1, 2002) (entering findings of fact and conclusions of law under Rule 52(a) in an ERISA case involving benefits eligibility). Thus, the Court will conduct a "paper" trial in which the Court reviews the record, and, in accordance with Rule 52 of the Federal Rules of Civil Procedure, enters findings of fact and conclusions of law. See, e.g., Hess v. Hartford, 274 F.3d 456, 461 (7th Cir. 2001) (describing procedure as "akin to a bench trial"). Generally, "[t]he standard of review of a Plan Administrator's decisions regarding

benefits depends on whether the Plan Administrator was given the discretion to make those decisions." Vallone v. CNA Fin. Corp., 375 F.3d 623, 629 (7th Cir. 2004). The Supreme Court has held that "a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). In ruling on Plaintiff's motion to compel, the Court concluded that the language included in Plaintiff's policy-indicating that Sun Life's decisions are "conclusive and binding" and that judicial review will be subject to an "arbitrary and capricious" standard-gave Baxter adequate notice that the plan administrator had discretionary authority to determine eligibility for benefits or to construe the terms of the plan. Thus, the Court determined that the appropriate standard for its review of Sun Life's benefits determination would be whether the plan administrator's decision was arbitrary and capricious.

II. Factual Findings*fn2

On April 21, 2005, Plaintiff Ted Baxter, then a global controller at Citadel Investment Group, LLC ("Citadel"), became disabled as a result of brain damage following a cerebrovascular accident (a stroke). At the time that Plaintiff became disabled, he was insured under a group long term disability ("LTD") insurance policy provided by his employer and insured and underwritten by Defendant Sun Life Assurance Company of Canada. The policy promises to pay benefits based on an employee's past earnings minus any applicable offsets, so long as an employee remains disabled under the terms of the policy. Pursuant to the policy, total disability benefits are calculated by subtracting "Other Income Benefits" from the monthly benefit amount. The pertinent part of the policy regarding "Other Income Benefits" states:

Other Income Benefits are those benefits provided or available to the Employee while a Long Term Disability Benefit is payable. These Other Income Benefits, other than retirement benefits, must be provided as a result of the same Total or Partial Disability payable under this Policy. Other Income Benefits include:

1. The amount the Employee is eligible for under:

a. Workers' Compensation Law; or

b. Occupational Disease Law; or

c. Unemployment Compensation Law; or

d. Compulsory Benefit Act or Law; or

e. an automobile no-fault insurance plan; or

f. any other act or law of like intent.

2. The Railroad Retirement Act (including any dependant benefits).

3. Any labor management trustee, union or employee benefit plans that are funded in whole or ...


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