Insurance – Long-Term Disability – ERISA – Benefits Denial – Standard of Review – Delegation of Fiduciary Authority

Belheimer v. Federal Express Corp. Long Term Disability Plan (Lawyers Weekly No. 002-195-12, 12 pp.) (G. Ross Anderson Jr., Sr.J.) 6:12-cv-00383; D.S.C.

Holding: The defendant-plan did not give Federal Express the authority to delegate its fiduciary duties. Although the plan gave Federal Express the authority to appoint an appeals committee, the plan did not allow Federal Express to outsource the entire process to its third-party administrator.

Plaintiff’s motion for partial summary judgment is granted. The court will review the denial of plaintiff’s claim for long-term disability benefits under a de novo standard of review.

If a plan grants its administrator discretion in construing the plan, this court reviews the administrator’s decisions under an abuse of discretion standard. If the plan does not grant discretion to the administrator, the court reviews the administrator’s decisions under a de novo standard.

Here, the plan grants discretionary authority to Federal Express “to determine eligibility for benefits or to construe the terms of the plan.” However, Federal Express did not make the final decision on plaintiff’s claim. Instead, this determination was made by the Aetna Review Committee, a committee appointed by Aetna Life Insurance Co. (Aetna), a company hired by Federal Express to administer the plan.

This court must determine whether the plan vested Federal Express with the right to delegate its discretionary authority to Aetna.

Aetna was a named fiduciary under the plan and was responsible for making the initial determination regarding a claimant’s eligibility. Federal Express was responsible for appointing an appeal committee to make final decisions on claims. Section 5.3(d) of the plan gives this appeal committee the power “to interpret the Plan’s provisions in its sole and exclusive discretion in accordance with its terms….”

Federal Express’s Investment Board “reviewed a proposal from the Federal Express Corporation Benefits Appeals group to outsource remaining long-term disability appeals…. Following a thorough discussion, the Investment Board voted to approve the recommendation.”

This amendment did not modify the plan to allow for delegation of authority, nor does it set out a procedure for delegation; rather, it simply outsourced the appeals process to Aetna.

The service agreement between Federal Express and Aetna explicitly delegates authority to Aetna; however, the plan does not authorize such a delegation. Since the plan was not properly modified to allow for delegation, delegation remains improper.

The plan does not specify how the administrator will appoint the appeals committee. Nevertheless, the plan vests Federal Express with the right to appoint an appeal committee, not the right to outsource the entire process to a third party.

Section 6.1 of the plan says, “Nothing contained in this section shall prevent the Administrator from delegating non-fiduciary administrative duties to the Claims Paying Administrator or others as described in this Plan….” However, the plan does not say that the administrator can delegate fiduciary duties to Aetna, the Claims Paying Administrator.

The plan did not grant Federal Express the authority to delegate. While Federal Express could have appointed an Aetna entity to serve as the appeal committee, that did not occur in this case. Instead, Federal Express improperly delegated the power of appointment to Aetna.

Partial summary judgment for plaintiff.