Opinion
Civil Action No. 01-CV-11365-RGS
August 2, 2002
MEMORANDUM AND ORDER ON THE MAGISTRATE JUDGE'S RECOMMENDATION TO REMAND
On February 22, 2000, Marvin Lane filed this complaint against the Director of Employee Benefits of his former employer, Gannett Company, Inc. (Gannett), claiming that his long term disability (LTD) benefits under Gannett's LTD Plan (the Plan) were wrongful terminated. On July 11, 2002, Magistrate Judge Dein, after a referral by this court, issued a Report recommending that Lane's restyled motion for judgment on the pleadings be allowed as to liability, and that his claim be remanded to the Director of Employee Benefits for a review of the benefits termination decision. On July 25, 2002, Gannett filed an objection to the Report.
The case was referred to the Magistrate Judge for a determination of whether a de novo standard of review should be applied, thus permitting Lane to supplement the administrative record. Magistrate Judge Dein converted Lane's "supplement to the position statement" into a motion for judgment on the pleadings.
The Gannett Plan is administered by a third party insurer, The Prudential Life Insurance Company (Prudential), and not by Gannett itself. Notwithstanding this arrangement, the Magistrate Judge found that Gannett was obligated by the terms of the Plan to independently review Prudential's decision to deny Lane LTD benefits. The Magistrate Judge based her remand recommendation on the Plan's Claims Procedure clause and its distinct use of the terms "Plan Administrator" and "Claims Administrator." The Claims Procedure clause states:
The claims administrator shall maintain a procedure under which any participant or beneficiary (called "claimant") shall be able to file a claim for benefits under this Plan. Any claimant whose claim for benefits is denied in while or in part shall receive written notice which clearly sets forth the specific reason or reasons for such denial . . . and an explanation of the Plan's claim review procedures. Such review procedure shall allow a claimant at least 60 days after his or her receipt of the written notice of denial to request a review of such denied claim by the plan administrator who shall decide, based on such review, within 60 days . . . of receipt of the request for review. The decision on review shall be written and shall clearly describe the reasons for the decision.
Because the clause specifically designates the Plan Administrator as the reviewer of appeals of benefits claims denials, the Magistrate Judge reasoned that Lane was entitled to an independent review by Gannett's Director of Employee Benefits (the Plan's designated administrator and fiduciary). While this interpretation of the clause is certainly plausible, I believe that the Claims Procedure clause must be read in conjunction with the Plan's Delegation clause.
The Delegation clause, which can be found in the Plan's administrative section, states:
The named fiduciary and plan administrator of the Plan is the Director, Employee Benefits of the Company. The named fiduciary possesses the authority to control and manage the operation of the Plan, to construe and interpret the terms of the Plan, and to delegate and allocate responsibilities for the operation and administration of the Plan to others. It is expected that the plan administrator will delegate the claims administration of the Plan to an insurance company or similar organization with expertise in such matters, and in such event the plan administrator will notify the employees by means of the summary plan description or otherwise of the delegate and of the necessary procedures for claiming benefits.
According to the Summary Plan Description, the Plan Administrator had "delegated authority to The Prudential Insurance Company of America to provide claim processing, claim investigation, claim control and daily administration of the Plan."
The decision of the Plan Administrator to delegate the "operation and administration of the Plan" to Prudential is not surprising, given the typical corporate fiduciary's lack of expertise in Plan administration and benefits determinations. Given the breadth of the delegation of oversight authority to Prudential, Gannett has no independent obligation under the Plan to provide a second layer of review of a benefits decision over and above the review process provided by Prudential itself.
Given that the language of the Plan grants the Plan Administrator, or its designee, broad discretion in "constru[ing] and interpret[ing] the terms of the Plan," the decision to deny LTD benefits is to be reviewed for an abuse of discretion (reasonableness) based on the record before the ERISA decisionmaker. Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); cf. Doe v. Travelers Ins. Co., 167 F.3d 53, 57-58 (1st Cir. 1999); Recupero v. New England Tel. Tel. Co., 118 F.3d 820, 827 (1st Cir. 1997). The parties shall have twenty-one days from the date of this Order to file dispositive motions with fourteen days thereafter to file oppositions.
SO ORDERED.