231 F. Supp. 3d 10
S.D.N.Y.2017Background
- McFarlane, a former Independence Care Systems employee, sued under ERISA to recover long-term disability (LTD) benefits administered under a group policy issued by First Unum.
- Independence delegated claim- and appeal-decision authority to First Unum; First Unum determined benefits and appeals and is undisputedly an ERISA fiduciary in that role.
- First Unum initially paid LTD benefits, later discontinued them, and McFarlane appealed; First Unum reviewed the appeal.
- First Unum produced an administrative record with a privilege log identifying three communications (between in‑house counsel and Katie Doherty, First Unum’s lead appeals specialist who adjudicated McFarlane’s appeal) dated during the pendency of McFarlane’s appeal.
- McFarlane moved for in camera review and, if appropriate, production of those communications asserting the fiduciary exception to the attorney‑client privilege applies and the work‑product doctrine does not protect them.
- First Unum argued the fiduciary exception should not apply to insurers acting as claim administrators and that the documents were prepared in anticipation of litigation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the fiduciary exception to attorney‑client privilege applies to insurer acting as ERISA claim fiduciary for communications about claim administration | Fiduciary exception applies to any ERISA fiduciary, including insurers, when legal advice concerns exercise of fiduciary duties; beneficiary is the "true client" | Wachtel and similar authority: insurers differ from plan‑sponsor fiduciaries (funding, conflicts, payment of counsel) so exception should not apply | Court held fiduciary exception can apply to insurers under Second Circuit law; applicability depends on whether the advice concerned fiduciary functions |
| Whether the three communications are protected as attorney work product (prepared in anticipation of litigation) | Communications occurred during appeal and concern claim administration, so not prepared because of litigation; thus not work product | First Unum contends communications were in anticipation of litigation and protected | Court held work product protection may not apply if documents were prepared for administrative purposes; in camera review required to determine whether they were prepared because of prospective litigation |
| Whether the court should conduct an in camera review of the disputed documents | McFarlane showed facts suggesting review may reveal communications concerning fiduciary duties (fiduciary status, author was claim adjudicator, timing during appeal) | First Unum argued in camera review unnecessary | Court granted McFarlane’s request for in camera review and ordered First Unum to produce unredacted documents to the court (or else produce them to McFarlane if First Unum concedes exception does not apply) by specified date |
Key Cases Cited
- In re Long Island Lighting Co., 129 F.3d 268 (2d Cir.) (fiduciary exception applies when legal advice concerns fiduciary duties)
- United States v. Jicarilla Apache Nation, 564 U.S. 162 (Supreme Court) (discussing limits of fiduciary exception and its rationales)
- Wachtel v. Health Net, Inc., 482 F.3d 225 (3d Cir.) (refused to apply fiduciary exception to insurer‑fiduciaries)
- Asuncion v. Metropolitan Life Ins. Co., 493 F. Supp. 2d 716 (S.D.N.Y.) (applied fiduciary exception to insurer in LTD denial context)
- Hickman v. Taylor, 329 U.S. 495 (Supreme Court) (foundation of attorney work product doctrine)
- United States v. Adlman, 134 F.3d 1194 (2d Cir.) (test for whether document was prepared because of prospect of litigation)
- United States v. Zolin, 491 U.S. 554 (Supreme Court) (standards for threshold showing and court discretion to conduct in camera review)