District Court Finds Insurer Had No Discretionary Authority Over Disability Claim and Was Not an ERISA Fiduciary

In Shea v. Unum Life Insurance Company of America, et al., No. 24-CV-10402-ADB, 2024 WL 4593525 (D. Mass. Oct. 28, 2024), Massachusetts District Judge Allison D. Burroughs granted Unum Life Insurance Company of America’s 12(b)(6) Motion to Dismiss Plaintiff’s claim for long-term disability benefits without prejudice, finding that Unum, as the claims administrator on an employer-funded benefit plan, without any discretionary authority to deny claims, was not a fiduciary within the meaning of ERISA.

Plaintiff was employed by Massachusetts General Hospital from 1978 until she ceased working on December 21, 2021, and submitted a claim for LTD benefits. Unum denied Plaintiff’s claim and upheld its decision on appeal. Thereafter, Plaintiff appealed the denial to Mass General, who also upheld the denial based on the same information in Unum’s possession when it rendered its decision. The instant action followed, naming as defendants Unum, Mass General, and the group LTD Plan.

Unum brought an FRCP Rule 12(b)(6) Motion to Dismiss asserting that as the claims administrator under an Administrative Services Agreement (“ASO”) with Mass General, it was neither a named fiduciary nor a functional fiduciary and ERISA does not authorize actions against non-fiduciaries of an ERISA Plan. The Court took judicial notice of both ASO and the LTD Summary Plan Description as each was referenced in the Complaint. The ASO states that Unum is responsible for providing “the following nondiscretionary, non-fiduciary administrative services relative to the receipt, management, record keeping, and processing of Claims under the Plan.” If further states: Upon our receipt of a Claim, Unum shall promptly process the Claim consistent with Customer’s [Mass General’s] general or specific direction and Customer’s interpretation of the Plan …” “Unless and until Customer exercises its right to object to these recommendations Customer will pay Claims in accordance with Unum’s recommendations.” Finally, the ASO states “Unum shall have no authority to deny Claims but shall advise Customer when it recommends that a Claim be denied.”

In opposition, Plaintiff conceded that Unum was not a named fiduciary of the Plan. However, she argued that Unum was a functional fiduciary because it was Unum and not Mass General that denied Plaintiff’s claim, upheld that denial, and conducted some medical analyses to reach those decisions. Plaintiff argued that a person/entity can become a “functional fiduciary” by exercising any discretionary authority or discretionary control respecting management and administration of a plan. The Court found that these acts were all contemplated by the ASO, which makes clear that Unum undertakes these administration and management functions consistent with Mass General’s general or specific direction and interpretation of the Plan. The Court concluded that these actions, without more to evidence Unum exercising discretion in actual practice, amounted to merely “nondiscretionary administrative functions,” which are insufficient to confer fiduciary status.

The Court further noted that while Plaintiff argued for the first time in opposition to the Motion, that Unum did not follow the process outlined in the ASO and other relevant Plan documents, and rendered its decision independently without Mass General’s input, it could not address whether those allegations are sufficient to confer functional fiduciary status on Unum because a Motion to Dismiss is not the place for new factual allegations. Accordingly, the Court granted Unum’s Motion to Dismiss without prejudice.

If Unum or your insurer has denied or otherwise limited your life, AD&D or disability insurance claim, contact us for assistance.