District Court Applies Fiduciary Exception Granting Plaintiff’s Motion to Compel Unum’s Legal Communications Prior To Its Final Decision on ERISA LTD Claim

In Hardy v. Unum Life Insurance Company of America, No. 23-CV-563 (JRT/JFD), 2023 WL 4841952 (D. Minn. July 28, 2023) Minnesota District Magistrate Judge John F. Docherty granted Plaintiff’s motion to compel Unum to produce documents identified in its privilege log finding, under a de novo standard of review, that the fiduciary exception to the attorney-client privilege applied in this ERISA matter.

Plaintiff, a medical malpractice attorney, suffered a fractured pelvis in 2016 at which time his doctors found he also had plasmacytoma for which surgery, radiation and chemotherapy were required. In 2019, Unum first approved Plaintiff’s partial disability claim, and in 2020 approved total disability benefits after he could no longer work due to the side-effects of chemotherapy. When Unum began reviewing his claim in August 2020 and again in October 2020, Plaintiff wrote Unum commenting on what he felt was heightened scrutiny of his claim. Unum denied any such increase in its investigation, but then terminated benefits in December 2020 and upheld its decision on appeal in May 2022. This lawsuit ensued.

Plaintiff asserted that the fiduciary exception to the attorney-client privilege applies to Unum’s communications throughout the claim. Unum argued that the fiduciary exception did not apply because the liability “exception to the exception” preserved the privilege. The liability exception to the fiduciary exception provides that communications between the fiduciary and counsel regarding the fiduciary’s defense against plan beneficiaries are protected when the relationship between fiduciary and beneficiary is adversarial. However, there must be a sufficient threat that litigation is imminent to invoke the liability exception.

Unum argued that an adversarial relationship developed between it and Plaintiff on September 21, 2020, when he sent a letter involving his firm in a manner that implicated future litigation. Plaintiff wrote: “I and my firm have always been forthcoming and transparent with Unum. Accordingly, I ask that you and Unum extend the courtesy to me of explaining why my claim is now subject to heightened scrutiny by Unum.” This letter predated the first communication Unum logged as privileged. Unum also contended that Plaintiff’s retention of counsel and letters requesting information, as well as the initial denial all occurred before the second privileged communication and further indicated an adversarial relationship had developed.

In Olsen v. Standard Ins. Co. 2013 WL 12444579 (D. Minn. Oct. 17, 2013), the Minnesota District Court outlined five factors to consider in determining whether legal advice is meant to avoid litigation or to fulfill fiduciary duties: (1) the communication in question occurred before or after the final benefits determination; (2) the threat of litigation was more than merely a possibility; (3) the interests of the beneficiary and the fiduciary had significantly diverged; (4) the documents or communications in question were necessary or relied upon in the administrative claim process; and (5) the documents relate to amending the plan and were not considered in evaluating the claim at issue.

Applying the Olsen factors to the facts of this case, the Court found that Unum failed to establish that an adversarial relationship developed with Plaintiff before the dates of the communications listed on the privilege log. First, the communications did not postdate Unum’s termination of benefits. Second, Plaintiff’s conduct did not signal a threat of litigation that is more than a mere possibility. Unlike the conduct described in Olsen, where the plaintiff invoked the use of 180 lawyers from his firm, here Plaintiff inquired about the changes in the processing of his claim by Unum and did not signal to Unum pending or imminent litigation. Finally, the Court did not accept that an adversarial relationship developed when Plaintiff retained counsel, noting that ERISA beneficiaries frequently obtain counsel to communicate with plan administrators following an initial denial of benefits. As such, the Court determined that the fiduciary exception to the attorney-client privilege applied and granted Plaintiff’s motion.

If Unum or another insurer has denied your disability insurance claim, contact us for assistance.