Opinion
Case No. 1:21-cv-694-CLM
2022-08-22
Robin L. BREWER, Plaintiff, v. UNUM GROUP CORPORATION, and Unum Life Insurance Company of America, Defendants.
Miles Clayborn Williams, The Martin Law Group, LLC, Tuscaloosa, AL, for Plaintiff. Alyse Nicole Windsor, James S. Williams, Kristen S. Cross, Dentons Sirote PC, Birmingham, AL, for Defendants.
Miles Clayborn Williams, The Martin Law Group, LLC, Tuscaloosa, AL, for Plaintiff. Alyse Nicole Windsor, James S. Williams, Kristen S. Cross, Dentons Sirote PC, Birmingham, AL, for Defendants. MEMORANDUM OPINION AND ORDER COREY L. MAZE, UNITED STATES DISTRICT JUDGE
Robin Brewer sued Unum Group Corporation and Unum Life Insurance Company of America (together, "Unum") under the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. ("ERISA"), alleging that Unum wrongfully denied her application for long-term disability benefits. Brewer has moved for partial summary judgment on the standard of review. (Doc. 16). Brewer contends that this Court must decide her claim de novo (rather than under an arbitrary-and-capricious standard) because Unum didn't timely decide her administrative appeal.
The Court agrees with Brewer. First, Unum failed to timely decide Brewer's administrative appeal from the denial of benefits. See 29 C.F.R. § 2560.503-1(i). Second, in what seems to be a matter of first impression in this Circuit, the Court holds that the recently amended claims-procedure regulation mandates that courts review untimely decisions de novo. See id. § 2560.503-1(l)(2)(i). So the Court GRANTS Brewer's motion for partial summary judgment (doc. 16), meaning the Court will review her claim for LTD benefits de novo.
BACKGROUND
The regulatory and procedural background of this case is dense. So the Court starts by laying out the four pillars of its ruling to put that background into context:
1. De novo is the baseline standard for reviewing the denial of benefits. The Court applies the deferential arbitrary-and-capricious standard only if "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, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989).Points #1 and #2 are not in dispute. But the parties hotly debate points #3 and #4. So the Court starts by explaining ERISA's timing and exhaustion frameworks, then it jumps into the specifics of Brewer's case.
2. Brewer's benefit plan gave Unum the authority to determine Brewer's eligibility for benefits and to construe the plan's terms, meaning this Court would have to review Unum's decisions under the arbitrary-and-capricious standard. But the plan also required Unum to follow all ERISA regulations and procedures and said that Unum's failure to do so could entitle Brewer to seek judicial review immediately under a regulatory provision (effective April 2018) that strips Unum's discretionary authority.
3. Unum failed to issue a ruling on administrative review within the time allowed by ERISA claims-procedure regulation.
4. Unum's failure to issue a timely ruling allowed Brewer to sue under the new regulatory provision that forces the Court to consider Brewer's appeal "denied on review without the exercise of discretion by an appropriate fiduciary." 29 C.F.R. § 2560.503-1(l)(2)(i). Coming full circle, stripping Unum of its discretionary authority reverts us back to the baseline standard of de novo review. See Point #1.
I. ERISA's timing and exhaustion frameworks for administrative appeals of disability-benefits claims
Congress passed ERISA to "promote the interests of employees and their beneficiaries in employee benefit plans" and "protect contractually defined benefits." Firestone, 489 U.S. at 113, 109 S.Ct. 948 (citations and quotation marks omitted). In ERISA, Congress authorized the Secretary of Labor to promulgate rules and regulations governing claims procedures. 29 U.S.C. § 1135. And Congress mandated that plan administrators, "[i]n accordance with regulations of the Secretary," "afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim." 29 U.S.C. § 1133(2).
As instructed, the Secretary of Labor promulgated (and has periodically amended) a claims-procedure regulation that "sets forth minimum requirements for employee benefit plan procedures pertaining to claims for benefits." See 29 C.F.R. § 2560.503-1(a).
A. Timing
The regulation creates this timing framework for appealing an adverse disability benefit determination:
• The plan administrator must give the claimant at least 60 days to appeal, id. § 2560.503-1(h)(2)(i); and
• The plan administrator must issue a decision "not later than" 45 days after receiving the request for review, id. §§ 2560.503-1(i)(1)(i); 2560.503-1(i)(3)(i).
Three mechanisms can prolong the 45-day decision deadline.
The regulation provides different timing procedures non-disability-benefits claims, 29 C.F.R. § 2560.503-1(i)(1)(i), for plans that use a committee or board of trustees as the fiduciary, id. § 2560.503-1(i)(1)(ii), and for group health plans, id. § 2560.503-1(i)(2). Those procedures aren't relevant here.
First, and most relevant here, the plan administrator can unilaterally add 45 days to the original 45 days (bringing the total to 90) if "the plan administrator determines that special circumstances (such as the need to hold a hearing, if the plan's procedures provide for a hearing) require an extension of time for processing the claim." Id. § 2560.503-1(i)(1)(i); id. § 2560.503-1(i)(3)(i). But to do so, the plan administrator must provide "written notice" that "indicate[s] the special circumstances requiring an extension of time and the date by which the plan expects to render the determination on review." Id. And "[i]n no event" can this extension exceed 45 days for disability claims. Id.
Second, during a special-circumstances-extension period, the regulation tolls the deadline to protect the plan administrator from claimant-caused delay. Id. § 2560.503-1(i)(4) ("In the event that a period of time is extended as permitted pursuant to paragraph (i)(1) . . . due to a claimant's failure to submit information necessary to decide a claim, the period for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information."). The tolling provision is not relevant here.
Third, the plan administrator and claimant may push the deadline further by agreement. See ERISA Rules and Regulations for Administration and Enforcement; Claims Procedure, 65 Fed. Reg. 70,246, 70,250 n.21 (Nov. 21, 2000) ("The plan may take only the extensions described in the regulation . . . and may not further extend the time for making its decision unless the claimant agrees to a further extension.").
The parties do not contest the Secretary of Labor's extension-by-agreement interpretation of the regulation. So the Court assumes that the parties may agree to an extension.
B. Exhaustion
Generally, the claimant must exhaust administrative remedies (like pursuing an administrative appeal) before challenging an adverse-benefit determination in federal court. See Bickley v. Caremark RX, Inc., 461 F.3d 1325, 1328 (11th Cir. 2006). But in 2016, the Secretary amended subsection (l), which governs cases in which the plan administrator violates the claims-procedure regulation. Because this seems to be the first case in this circuit to require an interpretation of the 2016 amendment, which took effect on April 1, 2018, the Court quotes it in full:
(l) Failure to establish and follow reasonable claims procedures.
(1) In general. Except as provided in paragraph (l)(2) of this section, in the case of the failure of a plan to establish or follow claims procedures consistent with the requirements of this section, a claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim.
(2) Plans providing disability benefits.
See 29 C.F.R. § 2560.503-1(l). Relevant here, subsection (l)(2)(i) says that the plan administrator's failure to "strictly adhere to all the requirements" of the regulation (a) allows the claimant to sue under section 502(a) and (b) requires the reviewing court to consider the claimant's claim or appeal to have been "denied on review without the exercise of discretion by an appropriate fiduciary."(i) In the case of a claim for disability benefits, if the plan fails to strictly adhere to all the requirements of this section with respect to a claim, the claimant is deemed to have exhausted the administrative remedies available under the plan, except as provided in paragraph (l)(2)(ii) of this section. Accordingly, the claimant is entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. If a claimant chooses to pursue remedies under section 502(a) of the Act under such circumstances, the claim or appeal is deemed denied on review without the exercise of discretion by an appropriate fiduciary.
(ii) Notwithstanding paragraph (l)(2)(i) of this section, the administrative remedies available under a plan with respect to claims for disability benefits will not be deemed exhausted based on de minimis violations that do not cause, and are not likely to cause, prejudice or harm to the claimant so long as the plan demonstrates that the violation was for good cause or due to matters beyond the control of the plan and that the violation occurred in the context of an ongoing, good faith exchange of information between the plan and the claimant. This exception is not available if the violation is part of a pattern or practice of violations by the plan. The claimant may request a written explanation of the violation from the plan, and the plan must provide such explanation within 10 days, including a specific description of its bases, if any, for asserting that the violation should not cause the administrative remedies available under the plan to be deemed exhausted. If a court rejects the claimant's request for immediate review under paragraph (l)(2)(i) of this section on the basis that the plan met the standards for the exception under this paragraph (l)(2)(ii), the claim shall be considered as re-filed on appeal upon the plan's receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the plan shall provide the claimant with notice of the resubmission.
With the legal backdrop behind us, the Court turns to the facts here. II. Brewer's administrative appeal
The Court draws the facts from the summary-judgment record. At this stage, "[a]ll evidence and factual inferences are viewed in the light most favorable to the non-moving party, and all reasonable doubts about the facts are resolved in favor of the non-moving party." Hardigree v. Lofton, 992 F.3d 1216, 1223 (11th Cir. 2021).
Robin Brewer worked as a store manager for CVS. (Doc. 17-9 at 3). She participated in the CVS Caremark Welfare Benefits Plan, which provides short-term and long-term disability benefits through Unum Life Insurance Company of America. (Doc. 16-1 at 3-4 ¶¶ 1-2). The Plan named Unum Life the Claims Administrator and vested Unum Life with "the sole discretionary authority to construe the terms of the Plan and all facts surrounding claims under the Plan" and said that Unum Life "shall determine all questions arising in the administration, interpretation and application of the Plan." (Doc. 17-10 at 3, 43).
After years of struggling with back, neck and other issues, Brewer applied for short-term disability (STD) benefits, which Unum paid in full. (Doc. 17-9 at 4). But when Brewer later applied for long-term disability (LTD) benefits, Unum denied her claim. (Doc. 17-1 at 2).
Brewer submitted an administrative appeal in February 2021. (Doc 17-1). In her letter requesting review, Brewer contended that Unum's denial of her LTD claim was, among other things, "a clear example of arbitrary and unprincipled outcome-based decision-making." (Id. at 3). In that letter, Brewer also explained that she hadn't received her STD claim file and informed Unum that "it may consider its time for deciding this appeal to be tolled under Department of Labor regulations until we receive that file and are able to review it to see whether additional arguments exist that need to be raised here." (Id.).
Brewer sent Unum a letter on March 18 confirming that she received her STD claim file. (Doc. 16-1 at 4-5 ¶¶ 5-6). The parties agreed that the 45-day clock began to run on March 18, (id. at 4-5 ¶ 6), meaning that May 2 was Unum's 45-day decision deadline.
On March 19, Unum sent a letter to Brewer that confirmed the March 18 start date and said, "We are committed to making an appeal decision within 45 days of receiving your client's written appeal. There may be special circumstances in which the review can take longer. We will notify you if more time is needed." (Doc. 17-4 at 2).
Around April 28, Unum left Brewer's attorney a voicemail asking about an extension. (Doc. 17-5). Brewer's attorney responded in writing:
As a gesture of good will, Ms. Brewer is agreeable to allowing UNUM to have the benefit of an additional 14 days from today's date to issue a written decision. Ms. Brewer [is] amenable to allowing more time under Department of Labor Regulations and Plan terms, provided that we are first able to consider UNUM's reasons for an extension. Thus far, we are not sure what those are, other than a pursuit of medical review, which is not a truly special or exceptional circumstance. If you could provide us with reasons why UNUM needs additional time, I will discuss those with Ms. Brewer. Because time remains of the
essence where her claim is concerned, we must ensure that regulations and plan terms governing the timeline for issuing a decision (extensions included) are strictly applied according to their spirit and intent and Ms. Brewer's long-standing expectations.(Doc. 17-5). Brewer's agreement to 14 extra days, in her view, extended Unum's deadline until May 12. (Doc. 16-1 at 5-6 ¶ 8).
On April 30, Unum sent Brewer's attorney a letter and an enclosure containing "new information" (new reviews of Brewer's medical records) that Unum considered in reviewing Brewer's appeal. (Doc. 17-6). Unum cited the new information as a reason to extend the deadline by 45 days:
Unum's April 30 letter did not state that the "new information" was more medical reviews. (Doc. 17-6). And neither side has provided the enclosure to the Court. But Brewer's responses to the letter, (docs. 17-7, 17-8), as well as the parties' briefing, (doc. 16-1 at 6 ¶ 9; doc. 23 at 4 ¶ 9), make clear that the "new information" was more medical reviews.
Before we make a final decision on your client's disability claim, you have a right to review and respond to this new information and/or rationale. Your response must be received by us no later than May 14, 2021.(Doc. 17-6) (emphasis in original).
Thank you for allowing us to have a 14 day extension. At this time, we are taking our 45 day extension by right. We need this extension to provide you with an opportunity to review and respond to the enclosed information and to allow us time to review any relevant information you submit.
The extension will begin on the earlier of the date you provide any additional information or on May 14, 2021 if we do not receive a response from you.
Attorney Williams, if you do not wish to respond to this information and would prefer we make a final decision immediately, please contact me.
Brewer's attorney responded with two letters. First, on May 5, Brewer's attorney responded to Unum's April 30 claim of an extension:
As I indicated in my previous letter, obtaining a medical review is not a "special circumstance" as contemplated by Department of Labor's regulations or plan rules.(Doc. 17-7). Then on May 7, Brewer's attorney sent a strongly worded rebuke of Unum's new information. (Doc. 17-8). And that letter ended: "I look forward to receiving Unum's written decision on this claim within the 14-day extension to which I agreed as indicated in my correspondence dated May 5, 2021." (Id. at 5.).
. . .
Nevertheless, based on what I thought was a valid request, I had previously agreed to extend your time for making a decision by 14 days and I will stand by that. However, I cannot and will not agree to an extension beyond that time frame.
So the lines were drawn: Brewer considered May 12 the decision deadline, and Unum considered June 21 the deadline (that is, 45 days from Brewer's May 7 response to the new information). (Doc. 23 at 5 ¶ 11).
May 12 passed without a decision. So Brewer sued Unum on May 18. (Doc. 1). Unum issued a written decision upholding the denial of Brewer's request for LTD benefits three days later. (Doc. 17-9). III. Court Proceedings
Brewer moved for partial summary judgment on the standard of review. (Doc. 16). She says that Unum blew the May 12 deadline for issuing a decision and that the Court, as a result, must review her claim de novo. (Doc. 16-1). Unum responds that it triggered a special-circumstances extension and thus issued a timely decision. (Doc. 23). And Unum says that, even if its decision was untimely, the decision is still entitled to deferential review under the arbitrary-and-capricious standard.
The parties' summary-judgment briefs focused on cases that predated subsection (l)(2), which took effect in April 2018. Under the old regulation, several circuits split on whether an untimely decision triggered de novo review, and the Eleventh Circuit had not chosen its side. See Torres v. Pittston Co., 346 F.3d 1324, 1332-33 (11th Cir. 2003) (recognizing the split but remanding the issue). So the Court ordered the parties to submit supplemental briefing on:
1. Whether the [post-April] 2018 version of the claims-[procedure] regulation applies (as opposed to an earlier version);(Doc. 39). The parties filed supplemental briefs. (Docs. 40, 41). And the Court heard arguments. (Doc. 42).
2. Assuming that the [post-April] 2018 version applies, whether Subsection (l)(2)(i) triggers de novo review of the denial of Brewer's claim for long-term disability benefits; and
3. If the answers to the first two questions are both "yes," whether Unum has satisfied the exception set forth in Subsection (l)(2)(ii).
As for the Court's first question, everyone agrees that the amended version of subsection (l) applies. In fact, Brewer's policy includes an addendum that explains how the Secretary's 2016 amendments affect claims filed after April 1, 2018. (Doc. 17-10 at 49). Relevant here, the Addendum informed Brewer that: "Should the plan fail to establish or follow ERISA required disability claims procedures, you may be entitled to pursue legal remedies under section 502(a) of the Act without exhausting your administrative remedies, as more completely set forth in section 503-1(l)." (Id.). The Addendum does not say what effect the act of filing suit and the operation of subsection (l) has on the standard of review, meaning the Court must decide the issue.
STANDARD OF REVIEW
Summary judgment is appropriate only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is material if its resolution "might affect the outcome of the suit." Id. At the summary-judgment stage, "all evidence and factual inferences are to be viewed in the light most favorable to the non-moving party, and all reasonable doubts about the facts are resolved in favor of the non-moving party." Hardigree, 992 F.3d at 1223.
DISCUSSION
Again, the parties agree that de novo review is the baseline and that the plan gave Unum the discretionary authority (which usually triggers to arbitrary-and-capricious review). See Firestone, 489 U.S. at 115, 109 S.Ct. 948. But the parties disagree about: (a) whether Unum failed to issue a timely decision under the regulation and, if it did, (b) whether Unum's failure to comply with the regulation stripped Unum of its discretionary authority under the Plan, meaning that the standard of review reverts to de novo.
The court answers these questions in turn.
I. Unum's decision was untimely because Unum didn't trigger a special-circumstances extension
Unum says it triggered a 45-day extension for special circumstances in its April 30 letter. (Doc. 17-6). But the Court finds that the reasons Unum cited were not "special circumstances" under the plain meaning of 29 C.F.R. § 2560.503-1(i)(1)(i), and it was unreasonable to assume that they were. So Unum didn't trigger the 45-day extension. Its deadline remained May 12, and its May 21 decision was untimely.
A. Standard of review for the extension determination
The Eleventh Circuit hasn't decided what standard of review a court must apply to a plan administrator's determination that "special circumstances" warrant extension. See 29 C.F.R. § 2560.503-1(i)(1)(i). And other courts have reached somewhat competing conclusions.
The claim-procedure regulation says that a plan administrator must decide the disability-benefits claimant's administrative appeal within 45 days unless "the plan administrator determines that special circumstances . . . require an extension of time for processing the claim." 29 C.F.R. § 2560.503-1(i)(1)(i); id. § 2560.503-1(i)(3)(i).
The Tenth Circuit held that the arbitrary-and-capricious standard applies because "ERISA's regulations governing extensions of time and calculating time periods on review place with the plan administrator the sole discretion to determine whether special circumstances exist requiring an extension of time for decision." Holmes v. Colorado Coal. for Homeless Long Term Dis. Plan, 762 F.3d 1195, 1206 (10th Cir. 2014). By contrast, the Second Circuit held generally that courts "owe the plan administrators no deference" when "called on to judge the [plan administrator's] compliance with the applicable statute and regulations." Wilkins v. Mason Tenders Dist. Council Pension Fund, 445 F.3d 572, 581 (2d Cir. 2006); see also Aitken v. Aetna Life Ins. Co., No. 16 Civ. 4606 (PGG), 2018 WL 4608217, at *12 n.3 (S.D.N.Y. Sept. 25, 2018) (following Wilkins in holding that de novo review applies to a special-circumstances determination under 29 C.F.R. § 2560.503-1(i)(1)(i)).
For its part, the Eleventh Circuit in an unpublished opinion followed Wilkins in reviewing de novo "whether a plan administrator has satisfied the necessary 'minimum procedural requirements' or provided a full and fair review." Boysen v. Ill. Tool Works Inc. Separation Pay Plan, 767 F. App'x 799, 806 (11th Cir. 2019). In that case, the claimant argued that the plan failed to afford "full and fair review" because the plan administrator "did not compile or review a complete record." Id. at 807. In rejecting deference, the Circuit emphasized that the question was "not whether the plan administrator erred in interpreting or applying the plan." Id. at 806 (emphasis added).
All that said, this Court need not resolve the standard-of-review issue because Unum's claim of "special circumstances" does not survive de novo or arbitrary-and-capricious review. "In ERISA cases, the phrases 'arbitrary and capricious' and 'abuse of discretion' are used interchangeably." Blankenship v. Metro. Life Ins. Co., 644 F.3d 1350, 1355 n.5 (11th Cir. 2011). So a decision of a plan administrator is not arbitrary and capricious if it is "reasonable." Id. at 1355. But as shown below, no reasonable grounds supported Unum's determination that "special circumstances" warranted an extension. So Unum's decision to invoke the extension was arbitrary and capricious.
B. Interpretation of the regulation
The regulation says that a plan administrator may trigger a 45-day extension if both:
(1) "the plan administrator determines that special circumstances (such as the need to hold a hearing, if the plan's procedures provide for a hearing) require an extension of time for processing the claim," and29 C.F.R. § 2560.503-1(i)(1)(i); id. § 2560.503-1(i)(3)(i). On top of that, the written notice must "indicate the special circumstances requiring an extension of time and the date by which the plan expects to render the determination on review." Id. § 2560.503-1(i)(1)(i).
(2) the plan administrator provides "written notice of the extension . . . prior to the termination of the initial [45]-day period."
1. Defining "Special Circumstances": The regulation does not define "special circumstances." But it suggests two examples. The first is "the need to hold a hearing, if the plan's procedures provide for a hearing." Id. The second appears in the tolling provision: "a claimant's failure to submit information necessary to decide a claim." Id. § 2560.503-1(i)(4).
So to define "special circumstances," the Court looks for a common understanding of the phrase then considers whether the regulation's examples support that common understanding. "Special" commonly refers to something "unusual" or "out of the ordinary." 2 Shorter Oxford English Dictionary 2945 (5th ed. 2002). In other words, something is "special" if it arises outside the ordinary course of events. So based on the regulation's text and context, a circumstance is "special" and therefore warrants an extension only if the circumstance is unusual to, or uncommon in, the ordinary administrative appeal from the denial of benefits. And the regulation's examples support this reading, given that (1) hearings on appeal are rare, and (2) the tolling provision seeks to prevent improper gamesmanship by claimants.
See also Random House Webster's Unabridged Dictionary 1831 (2d ed. 2001) ("distinguished or different from what is ordinary or usual"); Merriam-Webster's Collegiate Dictionary 1124 (10th ed. 2000) ("distinguished by some unusual quality").
The Court finds this interpretation of a "special circumstance" to be plain, rather than genuinely ambiguous. So the Court needn't defer to the Secretary of Labor's interpretation of the phrase. See Kisor v. Wilkie, — U.S. —, 139 S. Ct. 2400, 2415, 204 L.Ed.2d 841 (2019). That said, the Court notes that its interpretation aligns with the Secretary's:
The Department emphasizes that the time periods for decisionmaking are generally maximum periods, not automatic entitlements. If a specific claim presents no difficulty whatsoever, it may be unreasonable to delay in deciding that claim until the end of the maximum period; similarly, an extension may be imposed only for reasons beyond the control of the plan. For example, the Department would not view delays caused by cyclical or seasonal fluctuations in claims volume to be matters beyond the control of the plan that would justify an extension.65 Fed. Reg. at 70,250. So it doesn't matter whether you consider the phrase "special circumstance" to be plain or ambiguous. Either way, the answer is the same: a circumstance cannot be special if it is common or expected during the appeals process.
2. Unum's stated circumstances: The regulation requires Unum to name the special circumstance in the written notice that claimed the extension. 29 C.F.R. § 2560.503-1(i)(1)(i). Unum's April 30 letter was the only written notice claiming an extension before the May 12 deadline, so that letter must identify the "special circumstances" Unum relied on for the extension. In that letter, Unum said:
Before we make a final decision on your client's disability claim, you have a right to review and respond to this new information and/or rationale. Your response must be received by us no later than May 14, 2021.(Doc. 17-6) (emphasis in original) (bracketed language added by the Court). So Unum's stated reasons for its 45-day extension were (a) to give Brewer "an opportunity to review and respond" to the information Unum gathered for its appellate review and (b) "to allow [Unum] time to review any relevant information [Brewer] submit[s]" in response. (Id.).
Thank you for allowing us to have a 14 day extension. At this time, we are taking our 45 day extension by right. We need this extension to provide you with an opportunity to review and respond to the enclosed information [that is, the additional medical reviews] and to allow us time to review any relevant information you submit.
The new medical reviews were a vocational review, a nurse review and a review of Brewer's medical records by a doctor. (Doc. 17-8).
At the outset, the Court notes that Unum did not claim that procurement of the new information warranted an extension. Nor would that reason constitute a "special circumstance, as "virtually every appeal of the denial of a disability benefits claim will require 'physician and vocational review.' " Salisbury v. Prudential Ins. Co. of Am., 238 F. Supp. 3d 444, 450 (S.D.N.Y. 2017); see Bustetter v. Standard Ins. Co., 529 F. Supp. 3d 693, 701 (E.D. Ky. 2021) (holding that the plan administrator's reason for extending the deadline—that it needed more time to conduct a medical review—was not satisfactory under the regulations). So the Court moves on to the reasons Unum did cite as warranting an extension.
These courts, among others, deferred to (or otherwise relied on) the Secretary of Labor's interpretation of its regulation. See 65 Fed. Reg. at 70,246. But deference to the DOL's interpretation is permissible only when "the regulation is genuinely ambiguous." Kisor, 139 S. Ct. at 2415. This Court sees no ambiguity.
First, allowing Brewer to review and respond to new information isn't special. The regulation requires plan administrators to give claimants a chance to respond to "any new or additional evidence considered, relied upon, or generated by the plan . . . as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i) of this section to give the claimant a reasonable opportunity to respond prior to that date." 29 C.F.R. § 2560.503-1(h)(4)(i). The plan says essentially the same thing: "Prior to a final decision being made on an appeal, you will have the opportunity to review and respond to any new or additional rationale or evidence considered, relied upon, or generated by the plan in connection with your claim." (Doc. 17-10 at 49). In other words, both the regulation and the plan make the claimant's review of, and response to, new information standard practice. If a practice is standard, it cannot be "special." So it was unreasonable for Unum to claim that a review-and-respond period was a special circumstance.
Second, Unum's need to review Brewer's response to the new information falls short for the same reason. There is nothing unexpected or out of the ordinary about a plan administrator reviewing the claimant's response to new information. So it cannot be a special circumstance either.
In fact, Unum agreed at the hearing that "the concept of Unum sending a medical review and a vocational review back to the plaintiff is not 'unusual' in terms of a disability claim." (Doc. 42 at 45). So there is little doubt that the reasons Unum cited in its April 30 letter failed to constitute a special circumstance.
Perhaps sensing this outcome, Unum argued at the hearing that "[t]he underlying facts of this case are extremely unusual." (Id.). As Unum explained, when Brewer submitted her appeal, she also submitted about 800 pages of new information. (Id. at 11). And Unum argued that "the nature of the size of the file and all of the extra things that were submitted on appeal for the first time" makes her appeal unusual—and thus a special circumstance. (Id. at 45).
Unum may be right; a claimant adding an unusually large amount of information to her file on review may constitute a special circumstance in the right case. But it cannot this case because the regulation requires the plan administrator to "indicate the special circumstances requiring an extension of time" in the written notice that claims the extension. 29 C.F.R. § 2560.503-1(i)(1)(i). Unum did not say that the nature and size of Brewer's file was a special circumstance that required extension in its April 30 letter. So the Court cannot consider this circumstance.
3. The Limits of Unum's broad discretion: Unum has not offered a competing construction of "special circumstances," (see docs. 23 (briefing), 42 (hearing)), and as quoted above, Unum agreed that "the concept of Unum sending a medical review and a vocational review back to the plaintiff is not 'unusual' in terms of a disability claim." (Doc. 42 at 45).
Unum instead emphasizes that the regulation grants it "broad discretion to determine whether an extension is warranted," (doc. 23 at 13), and that "[n]o basis exists for second guessing Unum's use of its discretion to invoke its right to a 45-day extension," (id. at 14). To support the breadth of its discretion, Unum relies on the Tenth Circuit's decision in Holmes, 762 F.3d at 1206-07.
But Holmes doesn't reach as far as Unum wants. This Court agrees with the Holmes court's explanation that plan administrators have "broad discretion" to determine whether "special circumstances" exist. Id. at 1207. But "broad" doesn't mean "plenary." A plan administrator cannot cite any circumstance and expect deference. The cited circumstance must be contextually "special." See 29 C.F.R. § 2560.503-1(i)(1)(i). And in that regard, Unum's discretion has limits.
Plus, the cited circumstance in Holmes was "special" in a way Unum's reasons were not. In Holmes, the consulted physician said she needed "a complete set of medical records" from three of Holmes' doctors, and the administrator cited Holmes' need to submit those documents as a special circumstance. See id. at 1205-06. That reason fits comfortably within the regulation's example of "a claimant's failure to submit information necessary to decide a claim." 29 C.F.R. § 2560.503-1(i)(4).
This case is materially different. Unum didn't ask Brewer for more records on April 30. To the contrary, Unum gave Brewer documents that it said supported the initial denial. (Doc. 17-6). Unum said that it "need[ed] this extension" to give Brewer time to review those documents. But as previously noted, both the regulation and the plan expect this review period in all cases. In fact, the regulation required Unum to provide that opportunity within the initial 45-day period. 29 C.F.R. § 2560.503-1(h)(4)(i). So Holmes has no reach here.
Moreover, Unum's April 30 letter conceded that Brewer's response was unnecessary to deciding her claim: "Attorney Williams, if you do not wish to respond to this information and would prefer we make a final decision immediately, please contact me." (Doc. 17-6).
To sum up, the Court would have to read the word "special'' out of the regulation to find that Unum timely triggered the 45-day exemption. But that power belongs to Congress and the Secretary, not the Court. Because Unum did not cite a special circumstance in its April 30 letter, the Court finds that Unum's claim of a special-circumstances extension was arbitrary and capricious. That means that the decision deadline remained May 12, and Unum missed it by issuing its decision on May 21. So Unum violated the timing framework of the claims-procedure regulation. 29 C.F.R. § 2560.503-1(i)(1)(i); id. § 2560.503-1(i)(3)(i).
II. The Court gives no deference to Unum's untimely decision
Unum issued its decision after the regulatory deadline and after Brewer sued Unum. Under these circumstances, the Court holds that Unum's decision gets no deference.
A. Deference requires the exercise of discretionary authority
Before getting into the details of this case, the Court expounds on the general principles it mentioned in the Background section.
"ERISA itself provides no standard for courts reviewing the benefits decisions of plan administrators or fiduciaries." Blankenship, 644 F.3d at 1354. So it's up to the courts to decide. In Firestone, the Supreme Court applied principles of trust law to hold that de novo review is the baseline 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." 489 U.S. at 115, 109 S.Ct. 948. But it's not enough for the plan to give discretionary authority to the fiduciary. The fiduciary must exercise its power within the granted authority. Id. at 111, 109 S.Ct. 948 ("[t]rust principles make a deferential standard of review appropriate when a trustee exercises discretionary powers").
So de novo review is required unless the Administrator validly exercises authority that the plan gives it. See Fessenden v. Reliance Standard Life Ins. Co., 927 F.3d 998, 1001 (7th Cir. 2019) ("But when an administrator fails to render a final decision, there is no valid exercise of discretion to which the court can defer, and it decides de novo whether the insured is entitled to benefits."); Nichols v. Prudential Ins. Co. of Am., 406 F.3d 98, 109 (2d Cir. 2005) ("[W]e conclude that we may give deferential review only to actual exercises of discretion."); Gilbertson v. Allied Signal, Inc., 328 F.3d 625, 631 (10th Cir. 2003) ("Therefore, to be entitled to deferential review, not only must the administrator be given discretion by the plan, but the administrator's decision in a given case must be a valid exercise of that discretion."); Gritzer v. CBS, Inc., 275 F.3d 291, 296 (3d Cir. 2002) ("Where a trustee fails to act or to exercise his or her discretion, de novo review is appropriate because the trustee has forfeited the privilege to apply his or her discretion; it is the trustee's analysis, not his or her right to use discretion or a mere arbitrary denial, to which a court should defer.").
This Court acknowledges that some circuits have resolved the issue differently (under previous versions of the regulation). See McIntyre v. Reliance Standard Life Ins. Co., 972 F.3d 955, 965 (8th Cir. 2020) (holding that an "administrator's delay in deciding an appeal is not a trigger for de novo review," but it instead "a factor to be considered by the district court when reviewing the administrator's decision for an abuse of discretion"); S. Farm Bureau Life Ins. Co. v. Moore, 993 F.2d 98, 101 (5th Cir. 1993) ("In our view, the standard of review is no different whether the claim is actually denied or is deemed denied."); Daniel v. Eaton Corp., 839 F.2d 263, 267 (6th Cir. 1988) (same). But the conclusion that deference requires an actual (and valid) exercise of discretion better aligns with the trust principles that underlie ERISA standard-of-review analysis. See Firestone, 489 U.S. at 111, 109 S.Ct. 948 ("Trust principles make a deferential standard of review appropriate when a trustee exercises discretionary powers.").
Here, the plan granted the necessary discretion to Unum. (See Doc. 17-10 at 14 ("When making a benefit determination under the policy, Unum has discretionary authority to determine your eligibility for benefits and to interpret the terms and provisions of this policy."); id. at 43 (giving Unum "the sole discretionary authority to construe the terms of the Plan and all facts surrounding claims under the Plan" and saying that Unum "shall determine all questions arising in the administration, interpretation and application of the Plan.")). So under Firestone, Unum's decisions about Brewer's entitlement to benefits under the plan trigger deference under the arbitrary and capricious standard, as long as Unum validly exercised the discretion that it received in the plan.
Brewer questions whether Unum Group Corporation's employees (who administered the plan) are entitled to deference under the plan granting discretionary authority to "Unum Life Insurance Company of America." (Docs. 16-1 at 18-19, 17-10 at 14). But that question is not before the Court at this stage.
B. Unum's failure to issue a timely decision means that it failed to exercise the discretion that CVS gave it
So far, so good for Unum. The plan gave it discretionary authority to claim extensions and to deny claims. And it appeared to exercise both powers here. But the 2016 amendment to § 2560.503-1 requires the Court to hold that Unum failed to exercise the authority the plan gave Unum to deny Brewer's claim if Unum failed to follow the regulation's requirements:
(2) Plans providing disability benefits.
29 C.F.R. § 2560.503-1(l)(2)(i). By its plain language, the regulation requires the court to assume that Unum denied Brewer's claim "without the exercise of discretion by an appropriate fiduciary"—and thus to strip Unum of Firestone deference—if (a) Unum failed "to strictly adhere to all the requirements of this section," (b) Brewer pursued a remedy "under section 502(a) of the Act" and (c) subsection (l)(2)(ii) does not save Unum from subsection (l)(2)(i).(i) In the case of a claim for disability benefits, if the plan fails to strictly adhere to all the requirements of this section with respect to a claim, the claimant is deemed to have exhausted the administrative remedies available under the plan, except as provided in paragraph (l)(2)(ii) of this section. Accordingly, the claimant is entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. If a claimant chooses to pursue remedies under section 502(a) of the Act under such circumstances, the claim or appeal is deemed denied on review without the exercise of discretion by an appropriate fiduciary.
The Secretary's use of the phrase "deemed denied on review without the exercise of discretion by an appropriate fiduciary" in subsection (l)(2)(i) plainly refers to the Firestone standard for deference. The reference is unambiguous. So the Court need not and does not rely on the Secretary's comments about the regulation to interpret § 2560.503-1(l)(2). With that caveat, the Court notes that the Secretary knew that courts could interpret the provision like this Court has and decided to leave it as written: "The legal effect of the definition may be that a court would conclude that de novo review is appropriate because of the regulation that determines as a matter of law that no fiduciary discretion was exercised in denying the claim." Claims Procedure for Plans Providing Disability Benefits, 81 Fed. Reg. 92,316, 92,328 (Dec. 19, 2016).
The first two requirements are met. In Part I, the Court found that Unum failed to issue a timely decision, meaning that Unum failed "to strictly adhere to all requirements of this section [29 C.F.R. § 2560.503-1]." And Brewer sued Unum under section 502(a) of ERISA (codified at 29 U.S.C. § 1132(a)) six days after Unum failed to meet its deadline. (See doc. 1 at 2 ¶ 1).
So the Court must assume that Unum denied Brewer's claim without the exercise of discretion—and thus review the claim de novo—unless subsection (l)(2)(ii) saves Unum from the effect of subsection (l)(2)(i).
C. Subsection (l)(2)(ii) does not save Unum from the effect of subsection (l)(2)(i)
Section 2560.503-1(l)(2)(ii) says:
(ii) Notwithstanding paragraph (l)(2)(i) of this section, the administrative remedies available under a plan with respect to claims for disability benefits will not be deemed exhausted based on de minimis violations that do not cause, and are not likely to cause, prejudice or harm to the claimant so long as the plan demonstrates that the violation was for good cause or due to matters beyond the control of the plan and that the violation occurred in the context of an ongoing, good faith exchange of information between the plan and the claimant. This exception is not available if the violation is part of a pattern or practice of violations by the plan. The claimant may request a written explanation of the violation from the plan, and the plan must provide such explanation within 10 days, including a specific description of its bases, if any, for asserting that the violation should not cause the administrative remedies available under the plan to be deemed exhausted. If a court rejects the claimant's request for immediate review under paragraph (l)(2)(i) of this section on the basis that the plan met the standards for the exception under this paragraph (l)(2)(ii), the claim shall be considered as re-filed on appeal upon the plan's receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the plan shall provide the claimant with notice of the resubmission.29 C.F.R. § 2560.503-1(l)(2)(ii). This subsection is written in the conjunctive so, to save Unum from forfeiting discretion, five things must be true: (1) the violation was "de minimis"; (2) the violation did not cause, and is unlikely to cause, "prejudice or harm to the claimant"; (3) Unum "demonstrates that the violation was for good cause or due to matters beyond the control of the plan"; (4) Unum demonstrates "that the violation occurred in the context of an ongoing, good faith exchange of information between the plan and the claimant"; and (5) the violation was not "part of a pattern or practice of violations by the plan." Id.
The Court finds that two of the five necessary elements do not exist: (1) Unum's failure to issue a timely decision was not a de-minimis violation; and (2) Unum has not "demonstrate[d] that the violation was for good cause or due to matters beyond the control of the plan." Id.
1. Unum's untimeliness was not de minimis
"The very point of a deadline is to impose a hard stop." Fessenden, 927 F.3d at 1004. And the claims-procedure regulation imposes a strict deadline on plan administrators deciding appeals from adverse-benefit determinations. For a disability claim, the plan administrator "shall" issue a decision "not later than" 45 days after receiving the request for review. 29 C.F.R. § 2560.503-1(i)(1)(i); id. § 2560.503-1(i)(3)(i). And none of the exceptions—special-circumstances, tolling, or consent—extended the deadline here. So for the Court to excuse Unum's untimeliness by calling it de minimis would be to ignore the deadline and thus the regulation itself.
The Secretary of Labor, in a recent amicus brief, argued that "the abject failure to issue a benefit determination on review is not 'de minimis,' but rather goes to the very heart of the claims process." Corrected Brief for the U.S. Sec'y of Lab. as Amicus Curiae at 31, McQuillin v. Hartford Life and Accident Ins. Co., 36 F.4th 416 (2d Cir. 2022) (No. 21-1514). In McQuillin, the plan administrator issued a timely decision, but the decision didn't "determine whether [the] claimant is entitled to benefits." 36 F.4th at 419. Here, by contrast, Unum issued a benefits determination but only after its deadline passed (and after Brewer sued). Despite McQuillin being the inverse of this case, the core of the Secretary's argument rings true here. A plan administrator's failure to issue a timely decision also goes to the heart of the claims process.
An agency's position in a legal brief is a permissible source of an agency's interpretation of its own regulation. See Chase Bank USA, N.A. v. McCoy, 562 U.S. 195, 208, 131 S.Ct. 871, 178 L.Ed.2d 716 (2011). But "a court should not afford Auer deference unless the regulation is genuinely ambiguous." Kisor, 139 S. Ct. at 2415. Here, the Court need not defer to the Secretary of Labor's interpretation of the claims-procedure regulation to decide this case. As it has in other parts of the opinion, the Court simply notes that the Secretary's view aligns with this Court's view.
The conclusion that Unum's untimeliness is not de minimis follows the context of the timing framework within the claims-procedure regulation. "ERISA represents a careful balancing between ensuring fair and prompt enforcement of rights under a plan and the encouragement of the creation of such plans." Conkright v. Frommert, 559 U.S. 506, 517, 130 S.Ct. 1640, 176 L.Ed.2d 469 (2010) (citation and quotation marks omitted). But interpreting untimeliness to be de minimis would encourage plan administrators to (1) blow the deadline, (2) wait for the claimant to file suit, (3) issue an untimely decision, and then (4) argue that its untimeliness was de minimis and that, as a result, the claimant had not exhausted her administrative resources when she filed suit. See 29 C.F.R. § 2560.503-1(l)(2)(i). Forgiving late decisions would also encourage plan administrators to "sandbag" the claimant by "issuing a decision tailored to combat her complaint." Fessenden, 927 F.3d at 1005. The Court's interpretation avoids these problems.
"It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme." Home Depot U. S. A., Inc. v. Jackson, — U.S. —, 139 S. Ct. 1743, 1748, 204 L.Ed.2d 34 (2019). And statutory context "includes the purpose of the text," as much as it is evident from the text. See A. Scalia & B. Garner, Reading Law 56 (2012). The same principles apply to this Court's interpretation of the regulation here: the statutory purpose of the ERISA statute and the claims-procedure regulation are relevant to the Court's interpretation.
2. Unum has not shown that its violation was for "good cause or due to matters beyond the control of the plan"
First, good cause. The Court has already determined that the "special circumstances" Unum claimed lacked a textual basis. And Unum should have known this, as it admitted at the hearing that "the concept of Unum sending a medical review and a vocational review back to the plaintiff is not 'unusual' in terms of a disability claim." (Doc. 42 at 45). Plus, Brewer's attorney persistently told Unum that he intended to enforce the May 12 deadline, so Unum cannot say it was caught off guard.
Second, Unum didn't blow the deadline for reasons beyond its control. Unum controlled the timing of sending new information to Brewer, not vice versa. As for the size of Brewer's file—that is, the argument that Unum cited at the hearing (doc. 42 at 45)—the Court finds that Unum forfeited this argument by not mentioning it in its letters to Brewer. But even if Unum preserved this argument, the Court would not find that it excused Unum's untimeliness. During the hearing, Unum explained that Brewer's claim file on appeal was roughly 1,400 pages, which included the new information Brewer submitted on appeal. (Id. at 14-15). But counsel later conceded that claim files are often that size or larger. (Id. at 77 ("Another one has over 12,000 pages in the file. This one has about 2400 pages. 2,000 to 2,500 pages is a pretty normal-ish size."); at 78 (explaining that the average size of a file at the end of the litigated appeal is "between 1500 and 2500 pages")). So without more evidence of the size of Brewer's file as compared to other files, the Court could not find that the timing of Unum's decision was due to matters outside of Unum's control.
Plus, Unum told Brewer's counsel on April 30 to contact Unum if Brewer "does not wish to respond to this information and would prefer we make a final decision immediately." (Doc. 17-6). Unum's suggestion that it could make an immediate decision 12 days before the May 12 deadline undercuts any argument that Unum's failure to issue a decision until May 21 was outside of its control.
To sum up, subsection (l)(2)(i) requires the Court to assume that, because Unum violated the regulation's timeliness requirement, Unum acted without discretionary authority when it denied Brewer's claim. And Unum fails to show that subsection (l)(2)(ii) saves its authority. Because the Court must assume that Unum failed to exercise discretionary authority when it denied Brewer's claim, Firestone requires the Court to apply de novo review to its decision.
D. The Court cannot ignore the regulation because of negative implications
Unum offered the weighty argument at the hearing that a strict reading of the regulation could have dire consequences. As counsel put it, limiting Unum and other plan administrators to 45 days unless the claimant consents to an extension would encourage claimants' attorneys to turn administrative review into "a game of gotcha" and could trigger "a race to the courthouse." (Doc. 42 at 25, 29). Unum may be right; claimants might try to use a strict reading of the 2016 amendment to game the system, thereby increasing the cost of administering plans and clogging federal courts with more lawsuits.
But plan administrators must direct these practical arguments to Congress who writes the law, or the Secretary who writes the regulation, not the Courts who merely interpret them. And "a number of commenters" did raise these concerns to the Secretary; they supposed that the draft of subsection (l)(2) "encourages claimants to circumvent a plan's claims and appeals process, to seek remedies in court in the case of insignificant missteps in claims management practices that have no impact on claim outcomes, and, therefore, will result in increased litigation." 81 Fed. Reg. at 92,328. The Secretary gave "careful consideration" to these concerns and "decided to retain the deemed exhaustion provisions as proposed." Id.
The Court cannot second guess the Secretary's decision. If the Court's strict adherence to the regulation's text results in the outcome that Unum fears, then it can ask Congress or the Secretary for relief. Those entities can re-write ERISA or its regulations; the Court cannot.
* * *
For the reasons above, the Court finds that Unum failed to exercise discretionary authority when it denied Brewer's claim. So the Court GRANTS Brewer's motion for partial summary judgment (doc. 16) and will review her claim for LTD benefits de novo.
Done and Ordered on August 22, 2022.