The Prudential Insurance Company of America v. Chumney et al
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,
WINONA CHUMNEY, etc.,
CIVIL ACTION NO.
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
As guardian of the children and representative
counterclaim on their behalf against Prudential for these
This counterclaim, which is the only remaining
U.S.C. § 1132(a)(1)(B).
U.S.C. § 1132(e).
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.
Chumney began working for HealthSouth Corporation in
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
During that month, Chumney had the opportunity to enroll
in benefits for 2006 that she had not previously elected.
including a “FlexChoice” booklet (which explained the
available benefits options) and an “Annual Enrollment
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
Record (Doc. No. 74), Exh. 1, p. 5.
In the boxes below,
Similarly, in the “EMPLOYEE GROUP UNIVERSAL
LIFE INSURANCE” section, the worksheet provided that
instructed: “If you request to increase your current
coverage, Prudential will mail an Enrollment Form and
Health Questionnaire to you once we provide them with
your enrollment request.”
Record (Doc. No. 74), Exh. 1,
Chumney checked the option for $ 140,000 of GUL
worksheet (requesting $ 200,000 of AD&D and $ 140,000 of
elections to Prudential.
The central dispute of this
case is whether Chumney’s completion and submission of
that worksheet effected her enrollment in the requested
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,
above, the worksheet itself indicated that Prudential
“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;
automated system to ensure its proper functioning.
generated such a letter for her, dated December 22, 2005.
The letter instructed Chumney to complete the enclosed
enrollment form, we will process your request and provide
confirmation of your approved coverage amounts.”
(Doc. No. 74), Exh. 3, p. 96.
If Prudential’s automated
system properly functioned (which is not disputed by any
evidence in the record), the letter and form were mailed
There is no evidence, however, that Chumney
ever completed the form and returned it to Prudential.
response, from Chumney.
Neither Chumney nor HealthSouth
paid any premiums to Prudential for the AD&D or GUL
There is no evidence that Chumney, after
submitting the worksheet to her employer, ever followed
up with either Prudential or HealthSouth.
On August 14, 2007, Chumney was found dead in her
home; her body had multiple gunshot wounds.
was arrested and charged with her murder.
later, an attorney was retained by Chumney’s sister-in-
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
participation in the litigation.
The letter claimed that
Chumney had enrolled with Prudential for not only Basic
(although the letter did not explicitly use those names).
The attorney’s letter appears to be the first notice
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
determined in the litigation; the interpleader complaint
did not address AD&D or GUL benefits.
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
complaint against HealthSouth was dismissed and Chumney's
sister-in-law elected to pursue Prudential alone.
counterclaim against Prudential was later amended to
state that both AD&D and GUL benefits were due.
counterclaim asserts a single cause of action under 29
U.S.C. § 1132(a)(1)(B).1
Prudential paid into court $ 60,148.58, which
represented the undisputed Basic Life benefits due plus
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.
By agreement of Prudential and Chumney's sister-inlaw, the dispute over whether Chumney’s children and
prepared record, without a trial, but after briefing.
briefs to the proper standard of review for this court to
apply in adjudicating Prudential’s denial of AD&D and GUL
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
reviewed under a de novo standard unless the benefit plan
authority to determine eligibility for benefits or to
construe the terms of the plan,” in which case, the
Id. at 115.
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
Record (Doc. No. 74), Exh. 2, pt. 2, pp.
44 (AD&D) & 80 (GUL).
The plan further states that, “The
overturned unless arbitrary and capricious.”
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
seeking benefits due under an employee-benefit plan will,
first, before resorting to judicial remedies, utilize
administrative procedures outlined in the plan.
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
Here, unlike the typical case, no claim was ever
administrative procedures were simply disregarded by both
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
others) raising the possibility.2 There is no evidence in
the record that Prudential requested use of the plan’s
Instead, Prudential filed an
interpleader complaint asserting only that Chumney was
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.
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.
made in the course of ordinary claim administration, as
such a record does not exist in this case.
cites no law supporting this argument.
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
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,
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
the same: Chumney did not properly enroll for AD&D and
It is well-settled that the party bringing an action
for benefits under § 1132(a)(1)(B) bears the burden of
Horton v. Reliance Standard Life
Ins. Co., 141 F.3d 1038, 1040 (11th Cir. 1998).
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.
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.
certificates, which were created by Prudential for each
individual HealthSouth employee, consist of two separate
Therefore, the language of the booklet and certificate of
coverage controls as to entitlement to benefits.
(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
HealthSouth), and then having their elections, already
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
(including AD&D) “you must enroll on a form approved by
Record (Doc. No. 74), Exh. 2, pt. 2, p.
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,
enrollment “on a form approved by Prudential,” while noncontributory insurance (for example, Basic Life) does
The only form approved by Prudential for AD&D
enrollment was the one sent to Chumney, which Chumney did
Therefore, she did not enroll for AD&D
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
sent to Chumney, but which she did not complete.
did not enroll for GUL benefits either.
Chumney's sister-in-law next argues that some form of
duties by maintaining a confusing enrollment process or
by failing to follow up with Chumney after she did not
fiduciary duties that prohibit administrators from making
affirmative misrepresentations; require them to provide
participants’ questions; and, generally speaking, demand
See, e.g., Varity Corp. v. Howe, 516 U.S.
489, 506 (1996)
(finding a violation where the plan
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
The evidence reveals that Chumney was provided
ample written notice that, after completing the October
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
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
inquiries from Chumney.
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.
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.
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.
There is also no evidence
An appropriate judgment in favor of Prudential
Chumeny's children and representative of her estate, will
DONE, this the 14th day of September, 2012.
/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE
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