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Borich v. Life Insurance Co. of North America

United States District Court, Seventh Circuit

April 25, 2013

LILLIAN BORICH Plaintiff,
v.
LIFE INSURANCE COMPANY OF NORTH AMERICA and BP LONG-TERM DISABILITY PLAN Defendants.

MEMORANDUM OPINION AND ORDER

JOHN J. THARP, Jr., District Judge.

Plaintiff Lillian Borich alleges that defendant Life Insurance Company of North America ("LINA") wrongfully denied her long-term disability ("LTD") insurance claim. Borich brings suit under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), seeking to recover LTD benefits, prejudgment interest, and attorneys' fees. Currently pending are threshold questions regarding the standard of review that the Court should employ in deciding Borich's claim and the scope of permissible discovery. For the reasons explained below, the de novo standard of review applies to this action, and Borich is entitled to discovery that directly relates to whether she is disabled under the terms of her LTD insurance policy (the "Policy"). However, Borich is not entitled to discovery relating to why LINA denied her claim or whether LINA faced a conflict of interest.

BACKGROUND[1]

Borich was an employee of BP Corporation until January 13, 2008, when she ceased working due to medical impairments. LINA issued the Policy that funded BP's LTD insurance plan (the "Plan"), which provides benefits to current and former BP employees, including Borich.

After Borich's employment concluded, she applied to LINA for disability benefits under the Policy. Like many LTD policies, the Policy contains a two-pronged definition of disability. For the first 24 months of a claimed disability, a claimant is considered to be disabled if she is unable to perform all of the material duties of her regular occupation at BP. After 24 months a more stringent test applies; a claimant is considered to be disabled only if she is unable to perform all the material duties of any occupation for which she may reasonably become qualified. LINA initially denied Borich's disability claim, but Borich successfully appealed the denial, and LINA paid her benefits effective July 14, 2008. In 2009, LINA notified Borich that it would terminate her benefits, but Borich again successfully appealed that decision, and LINA paid a total of 24 months of LTD benefits through July 13, 2010.

On October 13, 2010, LINA informed Borich that it would not pay any benefits beyond July 13, 2010, because Borich did not meet the more restrictive definition of "disabled" that took effect on that date. Borich again appealed LINA's denial of benefits, but on December 20, 2011, LINA upheld its denial, finding that Borich was not disabled. Borich filed this lawsuit on February 2, 2012. The parties have submitted briefs on the appropriate standard of review and scope of discovery.

DISCUSSION

I. Standard of Review

In ERISA cases, "a denial of benefits... 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, in which case a deferential standard of review is appropriate." Schultz v. Aviall, Inc. Long Term Disability Plan, 670 F.3d 834, 837 (7th Cir. 2012) (internal quotation omitted). But where a plan "clearly and unequivocally state[s] that it grants discretionary authority to the administrator, " an arbitrary and capricious standard applies. Semien v. Life Ins. Co. of N. Am., 436 F.3d 805, 810 (7th Cir. 2006) (quoting Perugini-Christen v. Homestead Mortg. Co., 287 F.3d 624, 626 (7th Cir. 2002)); see also Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) ("Consistent with established principles of trust law, we hold 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.").

A. The Plan Grants LINA Discretionary Authority.

Borich argues that the Policy document itself does not grant discretionary authority to LINA. But LINA points to other plan documents that grant the insurer "the discretion to interpret the provisions of the Insurance Contract issued by such Insurer pertaining to the Benefits under the Benefit Program(s) provided by such Insurer." BP Consolidated Welfare Benefit Plan ("Consolidated Plan") (Dkt. 23-2) § 6.6. This Consolidated Plan language unequivocally grants discretionary authority to LINA, and is not rendered ineffective merely because it appears in plan documents other than the policy. Marantz v. Permanente Med. Grp., Inc. Long Term Disability Plan, 687 F.3d 320, 327 (7th Cir. 2012) ("A district court conducts de novo review of a denial of benefits under an ERISA plan unless the plan documents grant the claim fiduciary discretionary authority to construe the policy terms to decide eligibility for benefits....") (emphasis added).

The Consolidated Plan became effective on April 1, 2011, however-that is, after Borich's employment ended and LINA initially denied her claim, but before LINA rejected her final appeal. Consolidated Plan at 1. The Seventh Circuit has held that "the controlling plan will be the plan that is in effect at the time a claim for benefits accrues." Hackett v. Xerox Corp. Long-Term Disability Income Plan, 315 F.3d 771, 774 (7th Cir. 2003). The question becomes, then, when Borich's claim accrued: on October 13, 2010, when LINA denied the continuation of her disability benefits pursuant to the post-two-year disability definition, or on December 20, 2011, when it denied her appeal?

The Seventh Circuit has stated that "a claim accrues at the time benefits are denied." Id. More specifically, "a claim to recover benefits under § 502(a) accrues upon a clear and unequivocal repudiation of rights under the pension plan which has been made known to the beneficiary." Thompson v. Retirement Plan for Employees of S.C. Johnson & Son, Inc., 651 F.3d 600, 604 (7th Cir. 2011) (internal quotation omitted).

Judges in this district have interpreted this to mean that a plaintiff's "claim for denial of ERISA benefits accrue[s]... when her appeal [is] finally denied." Peltzer v. Life Ins. Co. of N. Am., No. 01 C 2585, 2002 WL 1858786, *2 (N.D. Ill. Aug. 13, 2002); see also Fleszar v. American Med. Ass'n, No. 09 C 2247, 2010 WL 1005030, *7 (N.D. Ill. Mar. 11, 2010) ("claims for benefits accrue when the plan denies a formal appeal"); Young v. Verizon's Bell Atl. Cash Balance Plan, 667 F.Supp.2d 850, 887 (N.D. Ill. 2009) ("an ERISA action logically accrues after the final administrative appeal is denied in writing"). And the Seventh Circuit has upheld that interpretation in at least one case, finding (albeit with only cursory analysis of the question) that a claimant does not receive a clear repudiation of a claim for benefits until the administrative appeal is denied. Young v. Verizon's Bell Atl. Cash Balance Plan, 615 F.3d 808, 816 (7th Cir. 2010). This interpretation makes especially good sense in a case like this one, where Borich twice successfully appealed LINA's initial denials of benefits. LINA did not clearly and ...


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