The 1st U.S. Circuit Court of Appeals said it cannot find that the plan administrator’s denial of benefits was arbitrary, capricious or an abuse of discretion because the claim of benefits for Lorna Hutcheon is largely based on speculation and hearsay, and because of the scarcity of evidence as to Hutcheon’s eligibility under the plan, the plan’s demonstrated effort in researching the claim, and its plausible explanation for Hutcheon’s ineligibility. The appellate court affirmed a lower court’s grant of summary judgment in favor of Marsh & McLennan.
The 1st Circuit found the plan administrator’s decision to deny the claim was measured and well considered; the plan exerted substantial effort researching the claim and searching for evidence of Hutcheon’s purported entitlement, as evidenced by the correspondence between Marsh & McLennan and Joan Kingsbury, Hutcheon’s sister, and her husband, and it received and considered evidence from the Kingsburys supporting Hutcheon’s entitlement. Joan Kingsbury argued that there is no conclusive evidence supporting the plan’s determination, but the court said it is not surprising that the plan does not have any documentation some 30 years after Hutcheon ceased employment, indicating that either she no longer was eligible for benefits, or never was eligible in the first place.
Joan Kingsbury cited statutory authority to support her argument that the plan, as a fiduciary, was required to maintain complete and accurate records, but, according to the court, that statute requires a plan to maintain certain records relating to plan participants for only six years. Moreover, the plan enumerated many reasons why Hutcheon may not have a current entitlement to benefits; for example, she may have already received a distribution of her plan contributions or benefits. “Notably, none of the competent evidence presented by the Kingsburys establishes that Hutcheon was eligible to participate in the plan, was vested in the plan, was entitled to a plan benefit at any point, or had not already received any benefit due to her,” the court said in its opinion.
In October 2007, Joan Kingsbury's husband, Richard Kingsbury, in favor of whom Hutcheon had executed a power of attorney, contacted Marsh & McLennan in writing regarding Hutcheon's eligibility for benefits under the plan. Hutcheon had fallen ill and the Kingsburys believed Hutcheon was entitled to benefits under the plan because, according to the Kingsburys, she had worked for Marsh & McLennan for over 20 years, the plan was non-contributory (i.e., the only requirement for plan membership was that the employee be a salaried employee) with vesting after 10 years of qualified service, and eligible participants were entitled to benefits shortly after obtaining sixty-five years of age, which Hutcheon accomplished on July 5, 2000.
According to the court opinion, the Kingsburys and Marsh & McLennan exchanged correspondence over the next year and a half, debating Hutcheon's benefit eligibility under the plan. During this process, the plan scoured its records for information on Hutcheon, but nothing surfaced. At the plan's request for more information, Joan Kingsbury produced, among other things, a ledger from the Social Security Administration indicating that Hutcheon worked for Marsh & McLennan between 1956 and 1977, an affidavit by Hutcheon attesting that she had been employed by Marsh & McLennan from May 1956 to February 1977, and an affidavit by Richard Kingsbury reciting his conversations with Hutcheon and other past and current Marsh & McLennan employees about Hutcheon's eligibility for benefits. Hutcheon died in April 2008, and Joan Kingsbury purports to be her sole heir.
In July 2009, Joan Kingsbury submitted what the plan construed as a formal claim for benefits on Hutcheon's behalf, and on January 15, 2010, the plan issued a letter denying the claim. The letter stated that the plan does not maintain records for individuals who do not have a current or potential entitlement to benefits under the plan and that it does not maintain records affirmatively evidencing that a person does not have a current or potential entitlement. The letter also stated that Marsh & McLennan maintains controls to ensure the accuracy and reliability of its records. The letter further noted that Joan Kingsbury failed to come forward with any additional information or documents. Finally, the letter described several circumstances under which a former employee would not be entitled to benefits under the plan.
Joan Kingsbury appealed the denial to the plan's benefits determination committee, which also denied her claim, adopting the analysis set forth in the earlier denial letter. She then sought judicial review.
The opinion in Kingsbury v. Marsh & McLennan Companies, Inc. Retirement Plan is here.