Davis v. Unum Life Insurance Company of America
ORDER granting 20 Ms. Davis's motion to dismiss with prejudice her claim based on the parties' representations in her motion; granting Unum's 12 motion to dismiss Count II of Ms. Scoggins' complaint; denying 16 Ms. Scoggins' motion to amend her complaint; and directing the parties to submit a Rule 26(f) report within 14 days of the entry of this Order. Signed by Judge Kristine G. Baker on 03/22/2016. (rhm)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
MARY DAVIS and NITA SCOGGINS, on behalf
of herself and all others similarly situated
Case No. 4:14-cv-00640-KGB
UNUM LIFE INSURANCE COMPANY OF AMERICA
Before the Court is defendant Unum Life Insurance Company of America’s (“Unum”)
motion to dismiss plaintiffs’ “exercise of discretion” claim pursuant to Rule 12(b)(6) (Dkt. No.
12). Plaintiffs Mary Davis and Nita Scoggins have responded in opposition to the motion to
dismiss and move to amend their complaint (Dkt. No. 16). Unum opposes Ms. Davis and Ms.
Scoggins’ motion to amend their complaint (Dkt. No. 18). Recently, Ms. Davis filed a motion to
dismiss, representing to the Court that her individual claim has been settled, that the parties agree
her claim should be dismissed with prejudice, and that each party should bear her or its own fees
and costs (Dkt. No. 20). The Court grants Ms. Davis’s motion to dismiss with prejudice her
claim (Dkt. No. 20). For the following reasons, the Court also grants Unum’s motion to dismiss
and denies Ms. Scoggins’ pending motion to amend.
Unless otherwise noted, the following alleged facts are taken from Ms. Scoggins’
amended complaint (Dkt. No. 4). Ms. Scoggins is a former employee of Regions Bank, where
she participated in employer-provided disability insurance benefit plan underwritten by Unum.
The Regions Bank plan provided that Unum would act as the administrator for any claims made
for benefits. Ms. Scoggins alleges that Unum wrongly denied her claim for LTD benefits.
In addition to an individual breach of contract claim, Ms. Scoggins brings a class action
claim against Unum, alleging that by denying long term disability benefits, Unum “exercised
discretion in the interpretation of said policies in a manner that violates the law” (Dkt. No. 4, ¶
12). Ms. Scoggins seeks to represent under all three categories of Rule 23(b) a class consisting
of “all persons, who within three years prior to the filing of this lawsuit have been denied
benefits by the Defendant under a policy governed by Arkansas law.” (Dkt. No. 4, ¶ 10).
Standard of Review
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible “when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “While a complaint attacked
by a [Federal] Rule [of Civil Procedure] 12(b)(6) motion to dismiss does not need detailed
factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’
requires more than labels and conclusions, and a formulaic recitation of the elements of a cause
of action will not do.” Twombly, 550 U.S. at 555 (alteration in original) (citations omitted).
“[T]he complaint must contain facts which state a claim as a matter of law and must not be
conclusory.” Briehl v. General Motors Corp., 172 F.3d 623, 627 (8th Cir. 1999). “When ruling
on a motion to dismiss, the district court must accept the allegations contained in the complaint
as true and all reasonable inferences from the complaint must be drawn in favor of the
nonmoving party.” Young v. City of St. Charles, 244 F.3d 623, 627 (8th Cir. 2001).
The Regions Bank policy contains language giving the claims administrator discretionary
authority. The policy provides that, “[w]hen making a benefit determination under the policy,
Unum has discretionary authority to determine your eligibility for benefits and to interpret the
terms and provisions of the policy” (Dkt. No 12-1, at 12). This language is commonly referred
to as a discretionary clause.
Ms. Scoggins makes two contentions regarding the discretionary clauses included in the
Regions policy. First, she contends that Unum’s authority to grant or deny claims for benefits
under the policies was derived from these discretionary clauses. 1 Second, she contends that
these discretionary clauses violate Arkansas Department of Insurance Rule 101, which provides
No policy, contract, certificate or agreement offered or issued in this State
providing for disability income protection coverage may contain a provision
purporting to reserve discretion to the insurer to interpret the terms of the contract,
or to provide standards of interpretation or review that are inconsistent with the
laws of this State.
(Dkt. No. 13, at 7; No. 4, ¶ 6; No. 16, ¶ 2); see also Ark. Admin. Code 054.00.101-4. Based on
these two contentions, Ms. Scoggins argues that Unum’s “exercise of discretion” in denying her
claim for long term disability benefits was unlawful (Dkt. No. 4, ¶ 15). She seeks to represent a
class of all persons who, within the last three years, were denied benefits by Unum under a
policy governed by Arkansas law (Dkt. No. 4, ¶ 10).
Unum moves to dismiss Ms. Scoggins’ class claim, arguing that her allegation “that
Unum ‘exercised discretion’ does not state any claim for relief” (Dkt. No. 13, at 3). The Court
This assertion is inartfully plead. The clearest statement of this theory comes from Ms.
Scoggins’ response to Unum’s motion to dismiss. Citing to the Regions Bank policy, she claims
that the discretionary clause “demonstrates Unum has discretionary authority to determine
eligibility for benefits and to interpret the terms and provisions of the policy” (Dkt. No. 16, ¶ 1).
agrees that Count II of the amended complaint fails to state a claim. This conclusion is best
explained by reviewing the history and purpose of discretionary clauses in health and disability
Development Of Discretionary Clauses
In 1974, Congress enacted the Employee Retirement Income Security Act, 29 U.S.C. §§
1001, et seq. (“ERISA”), which “permits a person denied benefits under an employee benefit
plan to challenge that denial in federal court.” Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 108
ERISA does not establish what standard of review courts should use for actions
challenging benefit eligibility determinations. Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 109 (1989). Federal courts initially adopted an arbitrary and capricious standard developed
under a provision of the Labor Management Relations Act of 1947 for ERISA actions. Id.
(citing Struble v. New Jersey Brewery Employees' Welfare Trust Fund, 732 F.2d 325, 333 (3rd
Cir. 1984); Bayles v. Central States, Southeast and Southwest Areas Pension Fund, 602 F.2d 97,
99-100, and n. 3 (5th Cir. 1979)). However, in Firestone Tire and Rubber Co. v. Brunch, the
Supreme Court found that “the wholesale importation of the arbitrary and capricious standard
into ERISA is unwarranted” and held that “a denial of benefits challenged under [ERISA] is to
be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary
discretionary authority to determine eligibility for benefits or to construe the terms of the plan.”
Id. at 109, 115 (emphasis in original). If a plan governed by ERISA does give the administrator
or fiduciary discretionary authority, courts review the denial of benefits under the much more
deferential abuse of discretion standard. Butts v. Cont'l Cas. Co., 357 F.3d 835, 838 (8th Cir.
Following the Supreme Court’s Firestone decision, “plan administrators, including
insurers that underwrite health, life and disability insurance plans subject to ERISA, have been
able to insulate their decisions from exacting judicial scrutiny by including ‘discretionary
clauses’ in their plans.” Jo-el Meyer & Mark DeBofsky, Discretionary Clauses in ERISA Health
http://www.debofsky.com/What-s-New/Discretionary-Clauses-in-ERISA-Health-and-DisabilityPlans-Are-They-Still-Viable.pdf. Stated differently, plan administrators include discretionary
clauses in ERISA governed benefit plans so that any challenge to their decisions will be
reviewed under the abuse of discretion standard, rather than the more exacting de novo standard.
Reaction To Firestone And The Use Of Discretionary Clauses
Discretionary clauses are generally honored, but they are controversial. See Tussey v.
ABB, Inc., 746 F.3d 327, 333 (8th Cir.) cert. denied, 135 S. Ct. 477, 190 L. Ed. 2d 358 (2014)
(recognizing that the district court should review the denial of benefits under an abuse of
discretion standard, because the benefit plan contained a discretionary clause). In 2002, the
National Association of Insurance Commissioners (“NAIC”) “promulgated Model Act 42,
entitled ‘Prohibition on the Use of Discretionary Clauses Model Act,’ which, as its name implies,
urges states to adopt legislation that prohibits discretionary clauses in health insurance
contracts.” Joshua Foster, ERISA, Trust Law, and the Appropriate Standard of Review: A De
Novo Review of Why the Elimination of Discretionary Clauses Would Be an Abuse of Discretion,
The Firestone Court also noted that “[i]f ‘a benefit plan gives discretion to an
administrator or fiduciary who is operating under a conflict of interest, that conflict must be
weighed as a ‘factor in determining whether there is an abuse of discretion.’” Metro. Life, 554
U.S. at 111 (emphasis in original) (quoting Firestone, 489 U.S. at 115).
82 St. John's L. Rev. 735, 745 (2008). “As of 2015 . . . nearly 25 states either have or are in the
process of banning discretionary clauses in insurance policies subject to ERISA.” Jo-el Meyer &
Mark DeBofsky, Discretionary Clauses in ERISA Health and Disability Plans—Are They Still
While courts have
consistently recognized the legitimacy of discretionary clauses, they have also consistently
upheld state efforts to ban them. Id.; see also Standard Ins. Co. v. Morrison, 584 F.3d 837, 849
(9th Cir. 2009) (“Accordingly, we agree with the district court that the Commissioner’s practice
of disapproving discretionary clauses is not preempted by ERISA’s exclusive remedial
On December 19, 2012, the Arkansas Department of Insurance adopted Rule 101, which
prohibits the use of discretionary clauses in disability income policies. The language of the rule
is derived from the NAIC’s Model Act 42.
The Effect Of Rule 101 And How It Impacts This Case
Rule 101 prohibits the inclusion of discretionary clauses in “all disability income policies
issued in [Arkansas] which are issued or renewed on and after March 1, 2013.” Ark. Admin.
Code 054.00.101-7. Ms. Scoggins argues that the Regions Bank disability policy is subject to
the Rule (Dkt. No. 16, ¶¶ 2; 3). Accordingly, Ms. Scoggins contends that the policy violates
Arkansas law because it contains a discretionary clause. Taking this argument further, Ms.
Scoggins argues that, in denying disability claims, Unum “exercised discretion” (Dkt. No. 4, ¶
15). As the discretionary clauses included in the policies violated Arkansas law, she claims that
this “exercise of discretion” was actionable conduct.
Ms. Scoggins’ “exercise of discretion” claim is based on a misunderstanding of the
purpose of discretionary clauses and the effect of Rule 101. Even assuming that the Regions
Bank policy included a discretionary clause in violation of Arkansas law at the time that Unum
denied Ms. Scoggins’ claim, the Court concludes this “exercise of discretion” is not actionable
conduct. A plan administrator’s authority to grant or deny benefit claims is not derived from
discretionary clauses. Discretionary clauses are included in disability policies to ensure that
courts reviewing their denial of benefits will use a more lenient level of scrutiny. Accordingly,
Rule 101 does not prohibit plan administrators from granting or denying benefit claims; it merely
bars the inclusion of discretionary clauses in disability policies so that, under Firestone, the
Court reviewing a challenge to an administrator’s decision must use a de novo standard of
review. Count II of Ms. Scoggins’ amended complaint fails to state a claim upon which relief
can be granted. The Court grants Unum’s motion to dismiss this claim (Dkt. No. 12).
Ms. Scoggins’ proposed second amended complaint, which changes the relief requested
for the class claim, does not correct the defects included in the amended complaint. The Court
finds that this amendment would be futile and denies the motion to amend (Dkt. No. 16). See
Popoalii v. Corr. Med. Servs., 512 F.3d 488, 497 (8th Cir. 2008) (“A district court should freely
give leave to a party to amend its pleadings when justice so requires, Fed.R.Civ.P. 15(a);
however, it may properly deny a party's motion to amend its complaint when such amendment
would unduly prejudice the non-moving party or would be futile.”).
The Court grants Ms. Davis’s motion to dismiss with prejudice her claim based on the
parties’ representations in her motion (Dkt. No. 20). The Court grants Unum’s motion to dismiss
Count II of Ms. Scoggins’ complaint (Dkt. No. 12). The Court denies Ms. Scoggins’ motion to
amend her complaint (Dkt. No. 16). Ms. Scoggins’ individual claim for breach of contract
On August 4, 2015, the Court held a Rule 16 Conference related to a dispute over class
discovery (Dkt. No. 15). After hearing argument from counsel, the Court took the matter under
advisement. As the Court, through this Order, dismisses Ms. Scoggins’ class action claim, there
is no longer any need for class discovery. Accordingly, the Court finds that this discovery
dispute is moot and directs the parties to submit a Rule 26(f) report within 14 days of the entry of
So ordered this the 22nd day of March, 2016.
Kristine G. Baker
United States District Judge
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