Brubaker v. Hartford Life & Accident Insurance Co.

          MEMORANDUM OPINION AND ORDER

          GARY FEINERMAN JUDGE

         Kathleen A. Brubaker brought this suit under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., against Hartford Life and Accident Insurance Company, challenging its termination of long-term disability benefits allegedly due to her under an employer-sponsored plan. Doc. 1. Brubaker moves the court to (1) determine the standard that will govern its review of Hartford's termination decision and (2) grant her leave to take discovery. Doc. 14. The court will apply the arbitrary and capricious standard, and Brubaker will be permitted to take limited discovery concerning what she alleges is the conflict of interest that infected Hartford's decision.

         Background

          Brubaker worked for Quad Graphics, Inc., until early May 2015. Doc. 1 at ¶ 16. At all relevant times, Brubaker's workplace and residence were in Illinois. Doc. 14 at ¶ 5. Quad Graphics is headquartered and incorporated in Wisconsin and maintains offices throughout the world. Doc. 16 at 5.

         Brubaker was insured for disability benefits under the Quad Graphics disability plan (“the Plan”). Doc. 1 at ¶ 12. The insurance policy (“the Policy”) by which the Plan was issued to Quad Graphics included a clause providing that Hartford would “have full discretion and authority to determine eligibility for benefits and to construe and interpret all terms and provisions of The Policy.” Doc. 16-1 at 22. The Policy listed the “Policyholder” as Quad Graphics and the “Place of Delivery” as Wisconsin, and it covered all Quad Graphics employees who were citizens or permanent residents of the United States. Id. at 8, 10, 43. Hartford issued and paid benefits under the Policy, and it administered the Policy as well. Doc. 1 at ¶ 15.

         Upon ceasing work, Brubaker filed a claim for long-term disability benefits, which Hartford approved in August 2015. Id. at ¶ 17. Hartford paid long-term disability benefits to Brubaker from August 2015 through August 2017, at which point it terminated the benefits. Id. at ¶ 18. Brubaker asked Hartford to reconsider, id. at ¶ 19, and Hartford denied her appeal in March 2018, Doc. 17 at 6.

         Discussion

         I. Standard of Review

         Settled precedent holds that the “denial of benefits challenged under [29 U.S.C.] § 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, ” in which case “a deferential standard of review” is applied. Conkright v. Frommert, 559 U.S. 506, 512 (2010) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). Under deferential review, “the plan's decision must be sustained unless arbitrary and capricious, ” with the court's review “limited to the administrative record.” Krolnik v. Prudential Ins. Co. of Am., 570 F.3d 841, 843 (7th Cir. 2009).

         Brubaker does not dispute that the Policy has a discretionary clause. Doc. 15 at 2. This ordinarily would result in deferential review of Hartford's termination decision. But the matter is complicated by the fact that an Illinois regulation prohibits discretionary clauses in disability plans and other health insurance contracts that are “offered or issued in this State”:

No policy, contract, certificate, endorsement, rider application or agreement offered or issued in this State, by a health carrier, to provide, deliver, arrange for, pay for or reimburse any of the costs of health care services or of a disability may contain a provision purporting to reserve discretion to the health carrier to interpret the terms of the contract, or to provide standards of interpretation or review that are inconsistent with the laws of this State.

50 Ill. Admin. Code § 2001.3 (2010). The express purpose of § 2001.3 is to ensure that courts apply a de novo standard in ERISA cases where the denial of benefits is challenged. See 29 Ill. Reg. 10172, 10173 (“The legal effect of discretionary clauses is to change the standard for judicial review of benefit determinations from one of reasonableness to arbitrary and capricious. By prohibiting such clauses, the amendments aid the consumer by ensuring that benefit determinations are made under the reasonableness standard.”); see also Fontaine v. Metro. Life Ins. Co., 800 F.3d 883, 886-91 (7th Cir. 2015) (holding that ERISA does not preempt § 2001.3). So, if the Policy was “offered or issued in” Illinois, § 2003.1 would govern and require the court to review de novo Hartford's termination decision. Cf. Krolnik, 570 F.3d at 843 (observing that “‘de novo review' is a misleading phrase, ” and suggesting that it be replaced by “‘independent decision'”).

         The Policy, however, was not “offered or issued in” Illinois. The Policy's named policyholder is Quad Graphics, which is headquartered and incorporated in Wisconsin. Doc. 16-1 at 8, 35. The Policy lists its “Place of Delivery” as Wisconsin. Id. at 43. Given these undisputed facts and the ordinary meaning of the words “offer, ” “issue, ” and “in, ” it cannot be said that Hartford “offered or issued” the Policy “in” Illinois. See Meyer v. Group Long Term Disability Plan for Emps. of Edward D. Jones & Co., L.P., 2018 WL 3186923, at *2 (C.D. Ill. June 28, 2018) (holding that § 2001.3 did not govern a policy that was issued and delivered to the employee policyholder in Missouri); Nasalroad v. Standard Ins. Co., 182 F.Supp.3d 879, 880-81 (S.D. Ill. 2016) (same, where the policy was delivered to the employer policyholder in Pennsylvania); Rogers v. Reliance Standard Life Ins. Co., 2015 WL 2148406, at *7 (N.D. Ill. May 6, 2015) (same, where the policy stated it was delivered in Texas to the Texas-based employer policyholder).

         True enough, the Policy broadly provides coverage to Quad Graphics employees “who are citizens or legal residents of the United States, ” Doc. 16-1 at 10, 42, including Brubaker, who resided in Illinois and worked at a Quad Graphics facility in Illinois, Doc. 1 at ¶ 11; Doc. 15 at 3. But the mere fact that the Policy covered an employee who lived and worked in Illinois does not mean that it was “offered or issued in” Illinois, particularly given that “[t]here is nothing in the record before the Court suggesting that any of the negotiations or policy decisions regarding the policy at issue occurred in Illinois.” Meyer, 2018 WL 3186923, at *2; see also Nasalroad, 182 F.Supp.3d at 880-81 (similar); Rogers, 2015 WL 2148406, at *7 (rejecting the proposition that § 2001.3 ...