Rabuck v. Hartford Life and Acc. Ins. Co.

522 F.Supp.2d 844

Robert RABUCK, Plaintiff, v. HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, Defendant.

No. 1:06-cv-288.

United States District Court, W.D. Michigan, Southern Division.

October 30, 2007.

COPYRIGHT MATERIAL OMITTED

Troy W. Haney, DiIley Haney PC, Grand Rapids, MI, for Plaintiff.

Kevin J. Moody, Kelly Marie Drake, Miller Canfield Paddock & Stone PLC, Lansing, MI, for Defendant.

OPINION

JOSEPH G. SCOVILLE, United States Magistrate Judge.

This is an action for benefits brought pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461. This court has jurisdiction pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(a)(1)(B). Plaintiff seeks reinstatement of long-term disability benefits (LTD) under a policy of insurance provided by his former employer, Precision Manufacturing Group, LLC. The policy was written by Hartford Life and Accident Insurance Company (Hartford). The insurance policy (AR 797-826) contains all the operative provisions regarding payment of LTD benefits and for all intents and purposes is the ERISA plan. Hartford paid plaintiff LTD benefits under the plan from January 24, 2004 until May 2005, when Hartford terminated LTD benefit payments, finding that plaintiff was no longer disabled because he was capable of working full-time in his own occupation as a company president. Hartford denied plaintiff's appeal. On April 28, 2006, plaintiff filed this lawsuit.

Pursuant to the requirements of the case management order (docket # 13), the parties have now filed the administrative record (AR) (docket # 17) and their briefs addressed to the procedural and substantive issues involved in this case. (docket #'s 19-22). Under Wilkins v. Baptist Healthcare System, Inc., 150 F.3d 609 (6th Cir.1998), the court's review of plaintiff's claim under ERISA must be based upon the administrative record alone. The parties have consented to the dispositive jurisdiction of a magistrate judge. (See Consent and Order of Reference, docket # 14). Upon review of the administrative record, the court finds that Hartford's decision to terminate plaintiff's LTD benefits and its decision to deny plaintiff's appeal were arbitrary and capricious and cannot withstand judicial review.

Findings of Fact

A. Plaintiff's Occupation and Employer

1. Plaintiff is the former President of Precision Manufacturing Group, LLC (Precision Manufacturing), which does business under the name Servometer. The company designs and manufactures custom precision components, principally the production of precision electroformed bellows and related products. (AR 405, 407, 412-15). Mr. Rabuck became Precision Manufacturing's president in January 2001. (AR 323, 325). As company president, Mr. Rabuck reported to the company's board of directors. The company defined its president's duties and responsibilities as follows:

. Effectuate Operating Agreement;

. Direct and supervise the day to day operation of the Company;

. Preside over all meetings of the Members[;]

. Be the official spokesperson for the Company and be the person primarily responsible for conducting transactions with the Company's attorney and accountant[;]

. Sign, on behalf of the Company, such deeds, mortgages, bonds, contracts or other instruments that have been properly authorized to be executed by the Members[;]

. Establish such charges fo[r] services and products of the Company as may be necessary to provide adequate income for the efficient operation of the Company[;]

. Employ and maintain the necessary talent to effect the start up and operations of the Company and set and adjust wages and rate of pay for all personnel of the Company and shall appoint, hire and dismiss all personnel and regulate their hours of work[;]

. Have charge over the books and financial affairs of the Company and shall keep the Members advised in all matters pertaining to the operations of the Company, services rendered, operating income and financial position[;]

. Be custodian of the Company records and seal of the Company[;]

. Keep a register of the post-office address of each Member[;]

. Sign the authorization Certificates of Membership in the Company[;]

. Have general charge of the Certificate of transfer books of the Company[;] and

. Have charge and custody of all funds and securities of the Company and be responsible therefore and for the receipt and disbursement thereof.

(AR 317, 505).

B. The Plan

2. The LTD plan is embodied in a policy of group insurance issued by the Hartford, effective July 1, 2001 (AR 797-826) (hereinafter "Policy"). The Policy covered the "Active Full-time Salaried Employees" of Precision Manufacturing. (AR 801). The Policy provided for the payment of long-term disability benefits after an "Elimination Period." The Elimination Period is defined as "the period of time you must be Disabled before benefits become payable. It is the last to be satisfied of the following: 1. the first 3 consecutive month(s) of any one period of Disability; or 2. with the exception of benefits required by state law, the expiration of any Employer sponsored short term disability benefits or salary continuation program." (AR 801).

3. The Policy contains the following statement regarding interpretation of the Policy's terms and conditions:

Who interprets the terms and conditions?

We have full discretion and authority to determine eligibility for benefits and to construe and interpret all terms and provisions of the Group Insurance Policy. (AR 811). "We, us or our means the Hartford Life and Accident Insurance Company." (AR 815).

4. Disability is defined as follows:

Disability or Disabled means that during the Elimination Period and for the next 24 months you are prevented by:

1. accidental bodily injury;

2. sickness;

3. Mental Illness;

4. Substance Abuse;

* * *

from performing one or more of the Essential Duties of Your Occupation, and as a result Your Current Monthly Earnings are no more than 80% of your Indexed Pre-Disability Earnings.

After that, you must be prevented from performing one or more of the Essential Duties of Any Occupation.¹

(AR 812).

5. "Essential Duty" and "Your Occupation" are defined terms:

Essential Duty means a duty that:

1. is substantial, not incidental;

2. is fundamental or inherent to the occupation; and

3. can not be reasonably omitted or changed.

To be at work for the essential number of hours in your regularly scheduled workweek is also an Essential Duty.

(AR 812).

Your Occupation, if used in this Booklet-certificate, means your occupation as recognized in the general workplace. Your occupation does not mean the specific job you are performing for a specific employer or at a specific location.

(AR 815).

6. LTD disability benefits are payable when five conditions are met: (1) the employee becomes Disabled while insured under the Plan; (2) the employee is Disabled throughout the Elimination Period; (3) the employee remains Disabled beyond the Elimination Period; (4) during the Elimination Period the employee was under the regular care of a physician, and the employee continues under the regular care of a physician; and (5) the employee submits a satisfactory Proof of Loss, (AR 803). "Benefits accrue as of the first day after the Elimination Period and are paid monthly." (AR 803).

7. The Policy deals with "Proof of Loss" as follows: "All proof submitted must be satisfactory to us." Proof of Loss expressly includes the claimant's signed authorization for Hartford to "obtain and release: a) medical, employment and financial information; and b) any other information we may reasonably require." (AR 810). It includes Hartford's right to require the claimant to undergo an "examination":

What additional Proof of Loss are we entitled to?

We may have you examined to determine if you are Disabled. Any such examination will be:

1. at our expense; and

2. as reasonably required by us.

(AR 810).

8. The Policy specifies seven circumstances under which benefit payments would be terminated:

We will terminate benefit payment on the first to occur of:

1. the date you are no longer Disabled as defined;

2. the date you fail to furnish Proof of Loss, when requested by us;

3. the date you are no longer under the Regular Care of a Physician, or refuse a request that you submit to an examination by a Physician;

4. the date you die;

5. the date your Current Monthly Earnings exceed:

a) 80% of your Indexed Pre-disability Earnings if you are receiving benefits for being disabled from Your Occupation; or

b) an amount that is equal to the product of your Indexed Pre-disability Earnings and Benefit Percentage if you are receiving benefits for being disabled from Any Occupation;

6. the date determined from the Maximum Duration of Benefits Table shown in the Schedule of Insurance; or

7. the date no further benefits are payable under any provision in this plan that limits benefit duration.

(AR 804).

9. Hartford's Policy required that the claimant apply for social security disability benefits:

When must one apply for Social Security Benefits?

You will be required to apply for Social Security disability benefits when the duration of your Disability meets the minimum duration required to apply for such benefits. If the Social Security Administration denies your eligibility for benefits, you will be required:

1. to follow the process established by the Social Security Administration to reconsider the denial; and

2. if denied again, and we agree to pay the costs, to request a hearing before an Administrative Law Judge of the Office of Hearings and Appeals.

(AR 810).

10. Precision Manufacturing purchased Group Insurance Policy GLT-680510 (Policy) through Hartford, effective on July 1, 2001. Plaintiff was an insured under the Policy.

C. Plaintiff's Heart Attack and Heart Transplant

11. On May 8, 2002, Robert Rabuck, then 53 years old, was transported to the emergency room of the Medical College of Ohio...