Hannington v. Sun Life and Health Insurance
711 F.3d 226
1st Cir.2013Background
- ERISA action by Hannington against Sun over reduced disability benefits after VA benefits were deemed Other Income under Plan
- Plan provides 60% pre-disability pay; offset by Other Income defined in Part 5, including VA benefits under a similar act or law
- GE/Sun has fiduciary discretion to interpret Plan terms and findings not to be disturbed unless arbitrary or capricious
- Sun offset VA benefits after approving Plan claim; district court granted judgment for Hannington; Sun appeals
- Magistrate judge treated discretionary review as deferential but noted Sun’s structural conflict of interest; court considering de novo review for outside-the-plan interpretation
- Court ultimately affirms district court’s judgment in favor of Hannington
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review for outside-the-Plan interpretation | Sun’s interpretation relies on non-plan statutes; de novo review | Discretionary interpretation under Firestone applies; deferential review governs | De novo review applicable for outside-the-plan questions |
| Whether VA disability benefits are ‘‘Other Income’’ under the Plan | VA benefits should offset under the same framework as SSA/RRA | VA benefits are not sufficiently similar to SSA/RRA when considering substantive purpose | VA service-connected disability compensation is not Other Income; must be disallowed as offset |
| Substantive similarity between VA benefits and SSA/RRA | VA benefits are similar to SSA/RRA on features and administration | VA benefits differ fundamentally in purpose and funding | VA benefits are dissimilar in substance; not similar to SSA/RRA for purposes of the Plan’s Other Income |
| Impact of fiduciary conflict of interest on interpretation | Conflict suggests more scrutiny of fiduciary’s interpretation | Conflict is a factor but deference remains if plan grants discretion | Conflict considered but does not alter de novo conclusion for the relevant issue |
| Deferential vs. de novo standard for VA-related offset under ERISA plan | Arbitrary-and-capricious standard is inappropriate where outside law is involved | Deferential standard applies when fiduciary has discretion over plan terms | De novo standard applies to Sun’s determination that VA benefits are Other Income |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (Supreme Court 1989) (establishes deferential review when fiduciary has discretion)
- Coffin v. Bowater Inc., 501 F.3d 80 (1st Cir. 2007) (de novo review for interpretation of non-plan documents in determining eligibility)
- Riley v. Sun Life & Health Ins. Co., 657 F.3d 739 (8th Cir. 2011) (VA benefits not similar to SSA/RRA; de novo review warranted for legal interpretation)
- Johannssen v. Dist. No. 1--Pac. Coast Dist., MEBA Pens. Plan, 292 F.3d 159 (4th Cir. 2002) (when eligibility depends on questions of law, de novo review)
- Daft v. Advest, Inc., 658 F.3d 583 (6th Cir. 2011) (de novo review for legal determinations by plan administrator)
- Weil v. Retirement Plan Admin. Comm. of Terson Co., 913 F.2d 1045 (2d Cir. 1990) (de novo review for legal questions under ERISA)