The Prudential Insurance Company of America v. Chumney et al

Filing 91

OPINION. Signed by Honorable Judge Myron H. Thompson on 9/14/2012. (wcl, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, SOUTHERN DIVISION

THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA,

)
)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.
WINONA CHUMNEY, etc.,
et al.,
Defendants.

CIVIL ACTION NO.
1:08cv474-MHT
(WO)

OPINION
The final issue presented to the court is whether
decedent Christine Ann Chumney's two minor children and
her estate may recover Voluntary Accidental Death and
Dismemberment (“AD&D”) and Group Universal Life (“GUL”)
benefits they claim are due under an insurance policy
Chumney entered into with Prudential Insurance Company of
America.
of

the

As guardian of the children and representative
estate,

Chumney's

sister-in-law

has

filed

a

counterclaim on their behalf against Prudential for these
benefits.

This counterclaim, which is the only remaining

claim

this

in

litigation,

arises

under

the

Employee

Retirement

Income

Security

U.S.C. § 1132(a)(1)(B).
U.S.C. § 1132(e).

Act

(“ERISA”),

29

Jurisdiction is proper under 29

For the reasons that follow, the court

holds that Prudential is entitled to judgment in its
favor on Chumney's sister-in-law’s counterclaim.

I. BACKGROUND
A.
Chumney began working for HealthSouth Corporation in
February 2004.

At that time, Prudential provided life

insurance benefits to qualifying employees of HealthSouth
under a group contract.

As a new hire, Chumney signed up

for Basic Employee Term Life (“Basic Life”) insurance in
the amount of $ 51,000, as well as other benefits.
Although she was given the option to enroll for AD&D and
GUL benefits, she did not do so.
In October 2005, HealthSouth conducted an annual
enrollment

period

for

optional

insurance

benefits.

During that month, Chumney had the opportunity to enroll

2

in benefits for 2006 that she had not previously elected.
HealthSouth

mailed

its

employees

various

materials,

including a “FlexChoice” booklet (which explained the
available benefits options) and an “Annual Enrollment
Worksheet.”

The cover page to the enrollment worksheet

instructed employees to complete the sheet and return it
to a HealthSouth representative.

The worksheet, which

was sent to Chumney and personalized for her, stated
under the “EMPLOYEE AD&D INSURANCE” heading:
“Your current AD&D coverage is: No
coverage. This coverage will continue
in 2006 unless you make a new election.
To make a new election, mark the desired
coverage option box. Prudential will
mail an Enrollment Form to you once we
notify them of your new coverage
election.”
Record (Doc. No. 74), Exh. 1, p. 5.
Chumney

checked

coverage.

the

option

for

In the boxes below,
$

200,000

of

AD&D

Similarly, in the “EMPLOYEE GROUP UNIVERSAL

LIFE INSURANCE” section, the worksheet provided that
Chumney’s

current

coverage

was

“No

Coverage”

and

instructed: “If you request to increase your current
3

coverage, Prudential will mail an Enrollment Form and
Health Questionnaire to you once we provide them with
your enrollment request.”
p. 4.

Record (Doc. No. 74), Exh. 1,

Chumney checked the option for $ 140,000 of GUL

coverage.
The

parties

agree

that

Chumney

submitted

this

worksheet (requesting $ 200,000 of AD&D and $ 140,000 of
GUL

benefits)

to

representative,

who

the
in

elections to Prudential.

appropriate
turn

transmitted

HealthSouth
Chumney’s

The central dispute of this

case is whether Chumney’s completion and submission of
that worksheet effected her enrollment in the requested
benefits.
Representatives of both HealthSouth and Prudential
agree that completion of the worksheet was insufficient
to enroll for AD&D and GUL benefits; rather, they state
that the purpose of the sheet was to enable HealthSouth
to transmit employee enrollment requests to Prudential,
which

would

in

turn

mail

the

4

appropriate

enrollment

materials

to

the

requesting

employee.

As

described

above, the worksheet itself indicated that Prudential
would

mail

elections

additional
made

on

materials

the

after

receiving
Likewise,

worksheet.

the
the

“FlexChoice” booklet, which was mailed to employees,
provided, under the “Next Steps” heading, that additional
forms were needed to complete enrollment.
After Prudential would receive employee requests from
HealthSouth, the insurance company’s automated computer
system would generate a letter addressed to the employee;
enclose the letter and an enrollment form in an envelope;
and

have

Prudential

the

materials

performed

mailed

to

quality-assurance

the

employee.

checks

on

automated system to ensure its proper functioning.
after

Prudential

received

Chumney’s

the

Here,

requests,

it

generated such a letter for her, dated December 22, 2005.
The letter instructed Chumney to complete the enclosed
form

and

provided:

“Once

we

receive

your

completed

enrollment form, we will process your request and provide

5

confirmation of your approved coverage amounts.”
(Doc. No. 74), Exh. 3, p. 96.

Record

If Prudential’s automated

system properly functioned (which is not disputed by any
evidence in the record), the letter and form were mailed
to Chumney.

There is no evidence, however, that Chumney

ever completed the form and returned it to Prudential.
Prudential

never

received

response, from Chumney.

the

form,

or

any

other

Neither Chumney nor HealthSouth

paid any premiums to Prudential for the AD&D or GUL
benefits

that

worksheet.

Chumney

had

requested

on

the

earlier

There is no evidence that Chumney, after

submitting the worksheet to her employer, ever followed
up with either Prudential or HealthSouth.

B.
On August 14, 2007, Chumney was found dead in her
home; her body had multiple gunshot wounds.
was arrested and charged with her murder.

Her husband
Some time

later, an attorney was retained by Chumney’s sister-in-

6

law, the legal custodian of Chumney’s two minor children,
to probate Chumney’s estate.

The attorney sent a letter

to Prudential informing it of these events and of pending
interpleader litigation that had been filed in state
court by State Mutual Insurance Company to determine the
rightful owner of insurance proceeds to be distributed by
that

company.

The

attorney

participation in the litigation.

requested

Prudential’s

The letter claimed that

Chumney had enrolled with Prudential for not only Basic
Life

benefits,

but

also

for

AD&D

and

GUL

benefits

(although the letter did not explicitly use those names).
The attorney’s letter appears to be the first notice
Prudential

had

of

possible

claims

for

AD&D

and

GUL

benefits.
Prudential then filed an interpleader complaint in
this federal court, claiming that Chumney was insured for
Basic Life in the amount of $ 51,000 and the company was
prepared to pay those funds and accrued interest to the
proper

beneficiary,

the

identity

7

of

whom

would

be

determined in the litigation; the interpleader complaint
did not address AD&D or GUL benefits.

Chumney’s sister-

in-law,

children

as

guardian

for

the

minor

and

as

representative of Chumney’s estate, filed a third-party
complaint against HealthSouth and a counterclaim against
Prudential, asserting, in short, that $ 140,000 of GUL
benefits were due and that the two companies had violated
fiduciary

duties

owed

to

Chumney.

The

third-party

complaint against HealthSouth was dismissed and Chumney's
sister-in-law elected to pursue Prudential alone.

The

counterclaim against Prudential was later amended to
state that both AD&D and GUL benefits were due.

The

counterclaim asserts a single cause of action under 29
U.S.C. § 1132(a)(1)(B).1

1.
Prudential paid into court $ 60,148.58, which
represented the undisputed Basic Life benefits due plus
interest.
Prudential was discharged from further
liability with respect to those benefits. Discharge and
Disbursement Order (Doc. No. 78). Only the AD&D and GUL
benefits are disputed in this litigation.
8

C.
By agreement of Prudential and Chumney's sister-inlaw, the dispute over whether Chumney’s children and
estate

are

submitted

entitled

to

the

to

court

AD&D
for

and

GUL

resolution

benefits
on

a

was

jointly

prepared record, without a trial, but after briefing.

II. DISCUSSION
A.
The

parties

dedicate

significant

space

in

their

briefs to the proper standard of review for this court to
apply in adjudicating Prudential’s denial of AD&D and GUL
benefits.

The dispute centers around the Supreme Court’s

decision in Firestone Tire & Rubber Co. v. Bruch, 489
U.S. 101, 109 (1989).

There, the Court held that, in an

ERISA action under § 1132(a)(1)(B), an employee-benefit
plan

administrator’s

denial

of

benefits

“is

to

be

reviewed under a de novo standard unless the benefit plan
gives

the

administrator

or

9

fiduciary

discretionary

authority to determine eligibility for benefits or to
construe the terms of the plan,” in which case, the
arbitrary-and-capricious
Id. at 115.

standard

is

applied

instead.

Chumney's sister-in-law asks this court to

conduct de novo review, while Prudential argues for the
deferential arbitrary-and-capricious standard.
There is no question that the plan at issue expressly
grants Prudential “as Claims Administrator ... the sole
discretion to interpret the terms of the Group Contract,
to make factual findings, and to determine eligibility
for benefits.”

Record (Doc. No. 74), Exh. 2, pt. 2, pp.

44 (AD&D) & 80 (GUL).
decision

of

the

The plan further states that, “The

Claims

Administrator

shall

overturned unless arbitrary and capricious.”

not
Id.

be
On

first appearance, this explicit grant of discretion would
seem plainly to invoke arbitrary-and-capricious review.
However, the unique posture of this case distinguishes it
from the typical action under § 1132(a)(1)(B) and muddies
the waters to some extent.

In a typical case, a claimant

10

seeking benefits due under an employee-benefit plan will,
first, before resorting to judicial remedies, utilize
administrative procedures outlined in the plan.

Through

this claims procedure, the administrator creates a record
of factual findings and legal conclusions (for example,
interpretations of the plan).

In the ordinary case, a

judicial action is filed only after the administrator has
made a final decision to deny benefits.

The court will

then, after determining that the arbitrary-and-capricious
standard is appropriate, apply it to the administrator’s
record.
Here, unlike the typical case, no claim was ever
submitted

to

administrative

Prudential
appeal

under
was

the

made.

plan,
The

and

no

plan’s

administrative procedures were simply disregarded by both
parties.

It

appears

that,

after

Chumney’s

death,

Prudential was first made aware of possible claims for
AD&D and GUL benefits on April 15, 2008, when Chumney's
sister-in-law’s counsel wrote a letter to Prudential (and

11

others) raising the possibility.2 There is no evidence in
the record that Prudential requested use of the plan’s
administrative procedures.

Instead, Prudential filed an

interpleader complaint asserting only that Chumney was
insured
$

for

51,000.

Basic
The

Life

record

benefits
makes

in

clear

the
that

amount
the

of

plan’s

administrative procedures were never used.
It appears then that, when Prudential asks this court
to apply the arbitrary-and-capricious standard of review,
it contemplates the court’s deferring to its litigation
position, as opposed to conclusions embodied in a record

2. Chumney's sister-in-law now argues that the
attorney’s letter constitutes a claim under the plan’s
administrative procedures that went unanswered.
That
argument cannot be correct. The plan clearly requires
that a “claim form” be used and the “instructions on the
form” be followed, neither of which occurred here.
Record (Doc. No. 74), Exh. 2, pt. 2, pp. 15 (AD&D) & 57
(GUL). Moreover, the attorney’s letter did not assert
that benefits were owed to any particular beneficiary,
but rather requested that “any benefits to be paid due to
Mrs. Chumney’s death be interpled into” pending
litigation for the purpose of determining the proper
beneficiaries. Record (Doc. No. 74), Exh. 3, p. 24-25.
The attorney’s letter plainly does not constitute a claim
under the plan’s administrative procedures.
12

made in the course of ordinary claim administration, as
such a record does not exist in this case.
cites no law supporting this argument.

Prudential

There appears to

be no clear binding precedent in this circuit on the
appropriate standard of review to be applied where the
parties jointly bypass administrative procedures in favor
of litigation, although other circuits have wrestled with
similar situations.

See Nat’l Auto. Dealers and Assoc.

Ret. Trust v. Arbeitman, 89 F.3d 496, 498 (8th Cir. 1996)
(applying de novo review where the administrator filed an
interpleader action before rendering a determination on
entitlement to benefits); compare Alliant Techsystems,
Inc.

v.

(applying

Marks,
the

465

F.3d

864,

870

abuse-of-discretion

(8th

standard

Cir.

2006)

where

the

administrator first made an initial determination but
subsequently filed an interpleader action). Fortunately,
this court need not decide the appropriate standard of
review, because whether it conducts de novo review or
defers to the conclusions of Prudential, the outcome is

13

the same: Chumney did not properly enroll for AD&D and
GUL benefits.

B.
It is well-settled that the party bringing an action
for benefits under § 1132(a)(1)(B) bears the burden of
proving entitlement.

Horton v. Reliance Standard Life

Ins. Co., 141 F.3d 1038, 1040 (11th Cir. 1998).

To

determine whether a party is properly enrolled in a
benefits plan and is entitled to benefits, the court must
turn to the terms of the plan itself.
Here,

the

group

contract

between

Prudential

and

HealthSouth provides that, “All of the provisions of the
Group Insurance Certificate(s) ... apply to the Group
Contract as if fully set forth in the Group Contract.”
Record (Doc. No. 74), Exh. 3, p. 83.

Group insurance

certificates, which were created by Prudential for each
individual HealthSouth employee, consist of two separate
documents:

the

booklet

and

14

certificate

of

coverage.

Therefore, the language of the booklet and certificate of
coverage controls as to entitlement to benefits.
The

part

of

the

booklet

addressing

AD&D

(specifically, the “Schedule of Benefits” section, which
describes the options for amounts of coverage employees
can elect) provides: “The option for which you enroll
will be reported to Prudential.”
Exh. 2, pt. 2, p. 13.

Record (Doc. No. 74),

Citing this language, Chumney's

sister-in-law argues that the

plan impliedly envisions

AD&D enrollees completing the full enrollment process
with

HealthSouth

(presumably

on

forms

provided

by

HealthSouth), and then having their elections, already
operable,

reported

to

Prudential.

Although

that

interpretation is plausible, it is clearly incorrect when
the clause is read in light of the rest of the booklet.
The “When You Become Insured” section of the booklet
provides that an employee is not insured until she has
“enrolled”

and

that,

“For

Contributory

Insurance”

(including AD&D) “you must enroll on a form approved by
Prudential ....”

Record (Doc. No. 74), Exh. 2, pt. 2, p.
15

18) (emphasis added).

Chumney's sister-in-law argues

that the enrollment worksheet, created by HealthSouth and
completed by Chumney, constituted such an approved form.
As both HealthSouth and Prudential representatives agree,
it did not.

It is irrelevant that Chumney successfully

enrolled for Basic Life benefits without completing a
form from Prudential, for, as the booklet makes clear,
contributory

insurance

(for

example,

AD&D)

requires

enrollment “on a form approved by Prudential,” while noncontributory insurance (for example, Basic Life) does
not.

The only form approved by Prudential for AD&D

enrollment was the one sent to Chumney, which Chumney did
not complete.

Therefore, she did not enroll for AD&D

benefits.
As to GUL benefits, the conclusion is the same.
The part of the booklet addressing GUL likewise provides
that an employee is not enrolled until she has “enrolled
on a form approved by Prudential ....”
74), Exh. 2, pt. 2, p. 60.

Record (Doc. No.

That form would be the one

16

sent to Chumney, but which she did not complete.

Chumney

did not enroll for GUL benefits either.
Chumney's sister-in-law next argues that some form of
relief

is

due

because

Prudential

breached

fiduciary

duties by maintaining a confusing enrollment process or
by failing to follow up with Chumney after she did not
return

the

proper

enrollment

forms.

ERISA

imposes

fiduciary duties that prohibit administrators from making
affirmative misrepresentations; require them to provide
complete

and

accurate

information

in

response

to

participants’ questions; and, generally speaking, demand
that

they

act

participants.

in

best

interests

of

the

plan

See, e.g., Varity Corp. v. Howe, 516 U.S.

489, 506 (1996)
administrator

the

(finding a violation where the plan
“knowingly

and

significantly

...

deceiv[ed]” beneficiaries); Jones v. American General,
370 F.3d 1065, 1072 (11th Cir. 2004) (collecting cases).
Here, the facts do not make out a breach of fiduciary
duties.

The evidence reveals that Chumney was provided

ample written notice that, after completing the October
17

2005 worksheet, additional forms would be required before
she would be properly enrolled for AD&D and GUL benefits.
The worksheet itself clearly stated so in the respective
AD&D

and

GUL

sections.

Similarly,

the

“FlexChoice”

booklet that was mailed to Chumney provided, under the
“Next Steps” heading, that additional forms were needed
to complete enrollment.

As to the process for enrolling

in AD&D and GUL benefits, there is no evidence in the
record

demonstrating

misrepresentations

or

inquiries from Chumney.

that
failed

Prudential
to

answer

made
properly

any
any

On the other hand, it is also

true that after Chumney used the worksheet to clearly
express her intent to enroll for AD&D and GUL benefits,
not once did Prudential follow up with Chumney to find
out why she had not done so, despite having nearly two
years to make an inquiry.

Indeed, it is Prudential’s

ordinary practice not to make such inquiries.

While this

practice may reflect poor customer service, there is no
basis in the law for finding that it rose to the level of
breaching a fiduciary duty.
18

*

*

*

The evidence reflects that, because Chumney did not
return the enrollment “forms” which Prudential sent to
her, she did not properly enroll for the benefits claimed
by her sister-in-law; merely completing and submitting a
“worksheet” was not enough.
that

Prudential

Chumney.
and

violated

There is also no evidence
a

fiduciary

duty

owed

to

An appropriate judgment in favor of Prudential

against

Chumney's

sister-in-law,

as

guardian

of

Chumeny's children and representative of her estate, will
be entered.
DONE, this the 14th day of September, 2012.

/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE