Browdy v. Hartford Life and Accident Insurance Company et al
Filing
70
RULING granting 44 Motion for Summary Judgment filed by the Defendants and denying Plaintiff's 50 Motion for Summary Judgment. The 55 Motion in Limine filed by Hartford is DENIED without prejudice as moot. Judgment shall be entered accordingly. Signed by Judge Shelly D. Dick on 10/30/2014. (LLH)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
CAROLE K. BROWDY, M.D.
CIVIL ACTION
VERSUS
NO. 11-818-SDD-SCR
HARTFORD LIFE AND ACCIDENT
INSURANCE COMPANY, et al.
RULING
This matter is before the Court on the Cross Motions for Summary Judgment filed
by the
Defendant, Hartford Life & Accident Insurance Company (“Hartford” or
“Defendant”)1 and Plaintiff, Carole K. Browdy, M.D. (“Plaintiff”).2 Both parties have filed
Oppositions3 and Replies4 to the motions. For the reasons which follow, the Court finds
that the Defendant’s motion should be GRANTED, and Plaintiff’s motion should be
DENIED.
I.
FACTUAL BACKGROUND
From October 1, 2006 until August 30, 2007, Plaintiff was employed as a physician
by Comprehensive Occupational Resources, L.L.C. (“CORE”) to serve support personnel
at the Arnold Air Force Base in Tennessee. CORE was a subcontractor of Aerospace
1
Rec. Doc. No. 44. The Plan is also a Defendant in this case; however, for reasons set forth herein, the
parties concede that the Plan is a nominal Defendant and should be dismissed. Thus, when the Court refers
to the Defendant in this motion singularly, the Court is referring to Hartford.
2
Rec. Doc. No. 50.
3
Rec. Doc. Nos. 49 & 54.
4
Rec. Doc. Nos. 54 & 64.
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Testing Alliance which provided to its employees a group disability benefit plan identified
as the “Group Short Term Disability and Long Term Disability Plan for Employees of
Aerospace Testing Alliance-Salaried” (the “Plan”). The Plan is funded by and incorporates
an insurance policy issued by Hartford. Specifically, Hartford Policy GRH/GLT-675502
provided several types of coverage, including short term disability (“STD”) and long term
disability (“LTD”) benefits to Plaintiff who was a beneficiary of the Plan. Plaintiff contends
CORE paid the premiums for her LTD benefits and she paid the premiums for her STD
benefits.5
The Policy sets forth detailed claim procedures for the administration of handling
claims and decisions. The Policy explicitly provides that Hartford has full discretion and
authority to determine eligibility for benefits and to construe and interpret all terms and
provisions of the Policy.6 The Policy provides that the amount of any weekly short term
disability benefit payable “shall be reduced by the total amount of all Other Income Benefits,
including any amount for which you could collect but did not apply.”7 Likewise, the Policy
provides that any “Other Income Benefits” will also be deducted from any long-term
monthly disability benefit.8
In 2007, Plaintiff’s physicians determined that her degenerative disc disease was
worsening and a scooter was medically necessary to continue her normal daily activities.9
5
Rec. Doc. No. 49-5, p. 155 (Bates No. 000210).
6
Rec. Doc. No. 44-1, p. 62 (Bates No. 0000049) & p. 65 (Bates No. 000052).
7
Id. at p. 31 (Bates No. 000018).
8
Id. at p. 46 (Bates No. 000033).
9
Id. at p. 112 (Bates No. 000167).
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Plaintiff’s medical records indicate that she had developed numbness, pain, and decreased
reflexes due to her back disease and resulting radiculopathy, which was evidence of
worsening nerve damage.10 Dr. Katharine Rathbun, Plaintiff’s primary care physician,
issued a report on Plaintiff’s medical condition on August 21, 2007, outlining a plethora of
conditions which Dr. Rathbun found to severely limit Plaintiff’s ability to work.11 Dr. Rathbun
ultimately determined that Plaintiff’s employer could no longer adequately accommodate
her medical problems in a manner that would allow her to continue practicing medicine.12
Plaintiff initiated her disability claim by telephone in September of 2007 and provided
detailed information to Hartford regarding her medical conditions and inability to work.
Plaintiff contends that her claim for benefits was initially approved by Hartford on
September 28, 2007;13 however, she also claims that Hartford’s Claims Manager continued
to request information that had already been provided. On February 14, 2008, Hartford
denied Plaintiff’s disability claim, finding that she was not an active employee at the time
she became disabled and was thus ineligible to receive short term disability benefits.14
Hartford notes that it was more than 180 days after it denied Plaintiff’s STD benefits and
over 60 days after Plaintiff’s election to receive pension benefits that Plaintiff appealed
Hartford’s coverage decision.
10
Id. at p. 175 (Bates No. 000230).
11
Id. at pp. 177-179 (Bates Nos. 000232-234). These conditions included: degenerative disc disease,
inflammatory arthritis, osteoarthritis, morbid obesity, sleep apnea, asthma, migraine headaches, pituitary
tumor, pernicious anemia, and urinary incontinence.
12
Id.
13
Rec. Doc. No. 49-6, p. 69 (Bates No. 00361).
14
Rec. Doc. No. 49-5, pp. 133-135 (Bates Nos. 000188-190).
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Following this denial of benefits, Plaintiff claims that she was forced to sell stock at
a low point in the market, incur the expense of an attorney to obtain her disability benefits,
apply for early payment of benefits from a pension plan from her previous employer, Dow
Chemical Company (“Dow”) (thereby incurring penalties for early withdrawal), and
preparing her home to be sold at a significant loss.15 Plaintiff received her first retirement
distribution from the Dow pension plan on October 1, 2008. On October 24, 2008, Plaintiff
appealed Hartford’s denial of her disability benefits. Hartford advised Plaintiff on December
9, 2008, that it had reversed its denial of STD benefits, finding that Plaintiff was, in fact,
eligible for STD benefits at the time she became totally disabled.16 Hartford contends that,
with her appeal, Plaintiff submitted additional information including, but not limited to, an
Affidavit executed by Plaintiff regarding the date of her disability and employment
termination date.17 Hartford also claims that Plaintiff’s employer was interviewed again
regarding the effective date of her termination, and, based on additional information
obtained, Hartford reversed the original claims decision.
On January 19, 2009, in possession of the Pension Questionnaire which was
completed by Plaintiff, Hartford requested additional information relating to Plaintiff’s
retirement benefit that might be subject to reduction under the “Other Income Benefits”
provision of the policy.18 On April 16, 2009, Hartford determined that Plaintiff was entitled
15
Rec. Doc. No. 49-1, pp. 7-8, ¶ 20.
16
Rec. Doc. No. 49-5, p. 92 (Bates No. 000147).
17
Rec. Doc. No. 44-4, p. 6, ¶ 19, citing Rec. Doc. No. 49-5, pp. 93-98 (Bates Nos. 000148-153).
18
Rec. Doc. No. 49-7, p. 173 (Bates No. 000685).
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to LTD benefits as well.19 Plaintiff claims this letter was accompanied by a “LTD Benefit
Calculation” showing that Plaintiff’s gross monthly LTD benefits would be reduced only by
social security disability benefits and not by the Dow pension.20 Hartford contends it had
no knowledge that Plaintiff was receiving funds from the Dow pension until January 9,
2009.
On October 21, 2009, Hartford advised Plaintiff that she owed Hartford $64,884.12
based on its overpayment of LTD benefits after application of the “Other Income Benefits”
provision of the policy which provided for an offset of the pension benefits Plaintiff had
received. Hartford requested this reimbursement within fifteen (15) days.21 Through her
counsel, Plaintiff challenged Hartford’s request for overpayment recovery on the basis that
Hartford’s “improper withholding and denial of disability benefits” was the reason Plaintiff
withdrew from the Dow pension.22 On March 21, 2011, Hartford responded that, after
review, its request for overpayment recovery was “proper and in accordance with the Policy
provisions.”23 When Plaintiff failed to refund the contested overpayment, Hartford applied
future benefits otherwise payable to Plaintiff to the reduction of the overpayment,
retroactive to the date Plaintiff’s entitlement to pension benefits began.
Dissatisfied with this result, Plaintiff filed this lawsuit on December 6, 2011, pursuant
19
Id. at p. 11 (Bates No. 000523).
20
Id. at p. 14 (Bates No. 000526).
21
Rec. Doc. No. 49-5, pp. 56-58 (Bates Nos. 000111-113).
22
Rec. Doc. No. 49-6, pp. 179-80 (Bates Nos. 000471-472).
23
Rec. Doc. No. 49-5, p. 39 (Bates No. 000094).
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to 29 U.S.C. § 1132(e)(1) of the Employment Retirement Income Security Act of 1974
(“ERISA”). In summary, Plaintiff claims that she did not receive her STD payments until
she appealed Hartford’s initial decision with the assistance of counsel, and over a year and
a half after the benefits were due. Plaintiff further claims that she was forced to withdraw
her retirement funds due to the erroneous denial. Hartford reversed its decision and
approved Plaintiff’s STD benefits; however, Plaintiff contends that the reversal was based
on no new facts or evidence. Plaintiff also contends that the retirement funds Hartford
offset were not withdrawn “because of disability” but rather because of Hartford’s “admitted
wrongful withholding of STD payments.”24
The parties have filed cross-motions for summary judgment. The Court now turns
to a discussion of the applicable law governing this case.
II.
LAW AND ANALYSIS
A.
Summary Judgment Standard
Summary judgment should be granted if the record, taken as a whole, "together with
the affidavits, if any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."25 The Supreme Court has
interpreted the plain language of Rule 56© to mandate "the entry of summary judgment,
after adequate time for discovery and upon motion, against a party who fails to make a
showing sufficient to establish the existence of an element essential to that party's case,
24
Rec. Doc. No. 49-1, p. 13, ¶ 33.
25
Fed. R. Civ. P. 56(c); New York Life Ins. Co. v. Travelers Ins. Co., 92 F.3d 336, 338 (5th Cir. 1996); Rogers
v. Int'l Marine Terminals, Inc., 87 F.3d 755, 758 (5th Cir. 1996).
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and on which that party will bear the burden of proof at trial."26 A party moving for summary
judgment "must 'demonstrate the absence of a genuine issue of material fact,' but need not
negate the elements of the nonmovant's case."27 If the moving party "fails to meet this
initial burden, the motion must be denied, regardless of the nonmovant's response."28
If the moving party meets this burden, Rule 56© requires the nonmovant to go
beyond the pleadings and show by affidavits, depositions, answers to interrogatories,
admissions on file, or other admissible evidence that specific facts exist over which there
is a genuine issue for trial.29 The nonmovant's burden may not be satisfied by conclusory
allegations, unsubstantiated assertions, metaphysical doubt as to the facts, or a scintilla
of evidence.30 Factual controversies are to be resolved in favor of the nonmovant, "but only
when there is an actual controversy, that is, when both parties have submitted evidence
of contradictory facts."31 The Court will not, "in the absence of any proof, assume that the
nonmoving party could or would prove the necessary facts."32 Unless there is sufficient
evidence for a jury to return a verdict in the nonmovant's favor, there is no genuine issue
26
Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). See also
Gunaca v. Texas, 65 F.3d 467, 469 (5th Cir. 1995).
27
Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (quoting Celotex, 477 U.S. at 323-25,
106 S.Ct. at 2552).
28
Id. at 1075.
29
Wallace v. Texas Tech Univ., 80 F.3d 1042, 1046-47 (5th Cir. 1996).
30
Little, 37 F.3d at 1075; Wallace, 80 F.3d at 1047.
31
Wallace, 80 F.3d at 1048 (quoting Little, 37 F.3d at 1075). See also S.W.S. Erectors, Inc. v. Infax, Inc., 72
F.3d 489, 494 (5th Cir. 1996).
32
McCallum Highlands v. Washington Capital Dus, Inc., 66 F.3d 89, 92 (5th Cir. 1995), as revised on denial
of rehearing, 70 F.3d 26 (5th Cir. 1995).
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for trial.33
B.
ERISA
ERISA regulates any “employee welfare benefit plan” which, under the terms of
ERISA, is defined in pertinent part, as follows:
The terms “employee welfare benefit plan” and “welfare plan” mean any plan,
fund, or program which was heretofore or is hereafter established or
maintained by an employer or by an employee organization, or by both, to
the extent that such plan, fund, or program was established or is maintained
for the purpose of providing for its participants or their beneficiaries, through
the purchase of insurance or otherwise, (A) medical, surgical, or hospital care
or benefits, or benefits in the event of sickness, accident, disability, death or
unemployment, or vacation benefits, apprenticeship or other training
programs, or day care centers, scholarship funds, or prepaid legal services,
...34
It is undisputed that ERISA governs Plaintiff’s claims and the Policy and Plan at
issue. It is also undisputed that the Plan vests Hartford with discretionary authority to
determine eligibility for benefits. “Standard summary judgment rules control in ERISA
cases.”35 Summary judgment is appropriate “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”36
1.
ERISA Section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B)37
Plaintiff’s Complaint states a claim under Section 1132(a)(1)(B) to recover benefits
33
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-51, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).
34
29 U.S.C. § 1002(1).
35
Cooper v. Hewlett–Packard Co., 592 F.3d 645, 651 (5th Cir. 2009) (quoting Vercher v. Alexander &
Alexander Inc., 379 F.3d 222, 225 (5th Cir. 2004)).
36
Fed. R. Civ. P. 56(a).
37
Plaintiff refers to ERISA Sections 502(a)(1)(B) and 502(a)(3) while Defendant refers to 29 U.S.C. §§
1132(a)(1)(B) and 1132(a)(3). The Court will sometimes refer these corresponding sections interchangeably.
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she claims are due under the terms of the Plan. However, in her Memorandum in
Opposition to the Defendant’s Motion for Summary Judgment and Incorporated
Memorandum in Support of Plaintiff’s Cross-Motion for Summary Judgment, Plaintiff
concedes that she “does not have a valid ERISA § 504(a)(1)(B) claim.”38 Rather, Plaintiff
proceeds to argue a claim under ERISA § 502(a)(3) for Hartford’s alleged breach of
fiduciary duty for its alleged misrepresentation to Plaintiff that she was ineligible for STD
benefits when she was in fact eligible, and Hartford’s failure to timely approve the payment
of these benefits, which resulted in Plaintiff’s early withdrawal of her Dow pension benefits.
Hartford responds that Plaintiff’s only appropriate avenue of relief is under Section
1132(a)(1)(B), and she is foreclosed by law from asserting a duplicative claim for equitable
relief under Section 1132(a)(3). Hartford objects to Plaintiff’s alleged attempt to “repackage” her benefits claim as one for equitable relief now that it is clear she cannot prevail
under the original theory. Hartford also maintains that, because this claim was not alleged
in the Complaint but only asserted in her opposition to a summary judgment motion, this
claim is not properly before the Court.
Plaintiff counters that she is not pursuing simultaneous remedies but, rather, is
requesting equitable relief as her only available remedy under ERISA: “Hartford actually
paid Dr. Browdy the benefits for which she was entitled under the plan, despite the
mishandling of the claims, misrepresentations, and the unreasonable delay. Instead, Dr.
Browdy brings these claims to obtain disgorgement or to prevent unjust enrichment as a
38
Rec. Doc. No. 49, p. 14.
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result of Hartford’s bad acts.”39 Plaintiff also maintains that, while she did not directly cite
to Section 502(a)(3), she did clearly allege a breach of fiduciary duty “to the extent not
preempted by federal law,” and also pled factual allegations to support such a claim in her
Complaint.40 Because courts must focus on the substance of the relief sought and the
allegations pleaded, not on the label used,41 the Court will consider this claim to be properly
before the Court.
2.
Equitable Relief under Section 502(a)(3), 29 U.S.C. § 1132(a)(3)
Until recently, controlling jurisprudence was clear that, in the Fifth Circuit, “there
[was] also no cause of action for extra-contractual damages under § 1132(a)(3).”42 The
damages Plaintiff seeks for the reduced value of her pension have been held to be such
extra-contractual damages.43 There was likewise no recovery available for the “economic
side effects”44 which resulted from an adverse benefits determination which would have
applied to Plaintiff’s claims regarding selling stock at a low point in the market, hiring an
attorney, and selling her home at a loss. However, following the Supreme Court’s decision
39
Rec. Doc. No. 62, p. 6.
40
Rec. Doc. No. 1, ¶ 60.
41
See Gearlds v. Entergy Services, Incorp., 709 F.3d 448, 452 (5th Cir. 2013), citing Edwards v. City of
Houston, 78 F.3d 983, 995 (5th Cir. 1996).
42
Harrell v. Fidelity Sec. Life Ins. Co., No. 07-1439, 2008 WL 170269, at *3 (E.D. La. Jan. 16, 2008), citing
Sommers Drug Stores Co. Employee Profit Sharing Trust v. Corrigan Enters., Inc., 793 F.2d 1456, 1464 (5th
Cir.1986); Corcoran v. United Health Care Inc., No. 90-4303, 1991 WL 353841 (E.D.La. Apr. 3, 1991).
43
See Gates v. Hartford Life Group Insurance Company, No. H-06-1835, 2006 WL 2981191, at *4 (S.D. Tex.
Oct. 16, 2006)(In a case where plaintiff sought to recover, among other things, the lost value/reduction in his
pension benefits, the court held that “the mental and economic side effects for the benefits termination
amounts to a claim for extracontractual compensatory damages” which was precluded by ERISA).
44
Id.
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in CIGNA Corp. v. Amara45 and the Fifth Circuit’s decision in Gearlds v. Entergy Services,
Inc.,46 the Court finds that Plaintiff may have a viable claim for equitable relief.
In Amara, a group of employees sued their employer and their pension plan because
the employer misled the employees about the conversion of a defined benefit retirement
plan into a cash benefit plan with less generous benefits.47 After finding that the defendant
had intentionally misled the employees, the district court reformed the terms of the plan,
requiring the plan administrator to pay to the already retired beneficiaries money owed to
them under the plan as reformed.48 The Supreme Court held that Section 1132(a)(1)(B)
did not authorize the relief awarded by the district court because it did not allow the plan
to be reformed.49 Nevertheless, the Court held that relief could be available under Section
1132(a)(3) because, even though the district court's remedy was in the form of money
damages, such relief was not beyond the scope of equity since “[e]quity courts possessed
the power to provide relief in the form of monetary ‘compensation’ for a loss resulting from
a trustee's breach of duty, or to prevent the trustee's unjust enrichment.”50 The Court noted
that this relief was commonly known as “surcharge.” Observing that defendant's position
as a fiduciary was analogous to a trustee, the Court held that “an award of make-whole
45
— U.S. —, 131 S.Ct. 1866, 179 L.Ed.2d 843 (2011).
46
709 F.3d 448 (5th Cir. 2013).
47
Cigna, 131 S.Ct. at 1870.
48
Id. at 1874-76, 1879-80.
49
Id. at 1876-77.
50
Id. at 1880.
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relief” in the form of surcharge was within the scope of “appropriate equitable relief” under
Section 1132(a)(3).51
In Gearlds, the Fifth Circuit considered whether a district court erred in dismissing
a claim for breach of fiduciary duty under Section 502(a)(3) because the plaintiff sought
only monetary damages, which the district court concluded was not an available equitable
remedy under section 502(a)(3).52 The plaintiff in Gearlds was on long-term disability for
several years, but those benefits ended because he was no longer deemed disabled.53 His
employer did not officially terminate his employment after his long-term disability ended,
but it did not pay him either. Three years later, the plaintiff took early retirement. When his
employer calculated his early retirement benefits under their plan, it erroneously believed
that the plaintiff had been receiving long-term disability benefits for the previous three
years. Under this incorrect assumption, the employer determined that the plaintiff was
entitled to medical coverage as part of his early retirement package. If the three years had
not been included, the plaintiff would not have been entitled to medical coverage.54 When
the employer realized there was an error, it advised the plaintiff that his medical coverage
would cease.55 The plaintiff filed suit under section 502(a)(3) of ERISA, seeking past and
future medical expenses, interest, attorneys' fees, costs, and any other relief to which he
51
Id.
52
Gearlds, 709 F.3d at 449-50.
53
Id. at 449.
54
Id.
55
Id. at 450.
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was entitled.56 The district court determined that the monetary damages the plaintiff sought
were not available under section 502(a)(3). On appeal, the Fifth Circuit noted that, until
Amara, it had generally been accepted that monetary damages were not within the scope
of section 502(a)(3).57 The Fifth Circuit stated that following Amara, a determination of
whether the damages sought are monetary “is not the end of the inquiry into equity” with
regard to section 502(a)(3).58 The Fifth Circuit concluded that even though the plaintiff did
not expressly plead “surcharge,” the plaintiff had, in seeking equitable relief to which he
was entitled, stated a plausible claim for relief.59 The court remanded the case to the
district court so that it could determine whether the plaintiff could prevail on the merits of
his breach of fiduciary duty claim.60
While the Amara and Gearlds decisions clearly changed the landscape of many
Section 502(a)(3) claims, “neither case changes the general rule that if relief is available
under Section 502(a)(1)(B), equitable relief is not available under section 502(a)(3).”61 In
this case, Hartford contends that Plaintiff’s claim under Section 502(a)(3) is merely a repackaged claim for the same relief available under Section 502(a)(1)(B). The Court is
inclined to agree, particularly since the Court’s evaluation of Plaintiff’s claims requires the
56
Id.
57
Id.
58
Id. at 452.
59
Id.
60
Id.
61
Lopez v. Liberty Life Assurance Company of Boston, No. H-13-2460, 2013 WL 5774878, at *4 (S.D. Tex.
Oct. 24, 2013).
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determination of whether Hartford abused its discretion in the original denial which is
necessarily a Section 502(a)(1)(B) analysis. However, Plaintiff has conceded that she
cannot make a claim for benefits due under Section 502(a)(1)(B) because, in fact, she has
received the benefits due under the terms of the Plan. Essentially, the claim now before
the Court is not one to recover plan benefits but rather consists of requested equitable relief
in the form of compensatory money damages for alleged losses Plaintiff sustained as a
result of the alleged breach of fiduciary duty by Hartford. Mindful of the changes in the law,
and out of an abundance of caution, the Court will evaluate the merits of Plaintiff’s breach
of fiduciary duty claim under Section 502(a)(3).
3.
Breach of Fiduciary Duty under ERISA
ERISA § 404(a) requires that “a fiduciary shall discharge his duties with respect to
a plan solely in the interest of the participants and beneficiaries” and “for the exclusive
purpose of providing benefits to participants and their beneficiaries....” The fiduciary must
act “with the care, skill, prudence, and diligence under the circumstances then prevailing
that a prudent man acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims....”62 The fiduciary must also
act “in accordance with the documents and instruments governing the plan insofar as such
documents and instruments are consistent with the provisions of this subchapter....”63 The
Seventh Circuit has emphasized that the fiduciary duty imposed by ERISA “is far more
62
29 U.S.C. § 1104(a)(1)(B).
63
29 U.S.C. § 1104(a).
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exacting than the duty imposed by tort law not to mislead a stranger.”64 In other words, the
burden of proving fraud is heavier than that of proving a breach of fiduciary
duty.... Such a breach might consist [of] imprudent management (for
example, failure to diversify), mistake, self-dealing and other conflicts of
interest, or failure to remedy breaches of a fiduciary duty by a co-fiduciary-all
examples of misfeasance rather than malfeasance, involving no
misrepresentations, and in short, falling short of fraud.65
In this case, Plaintiff claims that Hartford failed to discharge its duties in the sole
interest of Plan participants and beneficiaries, and failed to exercise the care, skill,
prudence, and diligence required by ERISA in handling her claim. Hartford disputes all of
Plaintiff’s claims under a theory of breach of fiduciary duty.
a.
Fiduciary Status
First, Hartford contends it is not a fiduciary owing any duty to Plaintiff because it is
not the Plan Administrator under the Policy, which clearly provides that Aerospace Testing
Alliance-Salaried is the Plan Administrator.66
Plaintiff counters that Hartford’s own
statements in this case acknowledge its authority to grant or deny benefits claims under the
Plan at issue. As such, Plaintiff argues Hartford is a fiduciary as contemplated by ERISA
and does owe a fiduciary duty to Plaintiff.
ERISA defines a fiduciary as follows:
[A] person is a fiduciary with respect to a plan to the extent (i) he exercises
any discretionary authority or discretionary control respecting management
of such plan or exercises any authority or control respecting management or
disposition of its assets, (ii) he renders investment advice for a fee or other
64
Harzewski v. Guidant Corp., 489 F.3d 799, 805-06 (7th Cir. 2007).
65
Id. at 805.
66
See Rec. Doc. No. 44-1, p. 62 (Bates No. 000049).
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compensation, direct or indirect, with respect to any moneys or other property
of such plan, or has any authority or responsibility to do so, or (iii) he has any
discretionary authority or discretionary responsibility in the administration of
such plan.67
ERISA requires every employee benefit plan to be established pursuant to a written
instrument containing the names of one or more plan fiduciaries.68 However, a person or
entity not named in the plan may become a “functional fiduciary” by exercising
decision-making authority or control over the plan.69 Thus, a person not named in the plan
may become a fiduciary by managing or administering the plan.70
Nonetheless, a person is only considered a fiduciary when acting in a fiduciary
capacity.71 Thus, “fiduciary status is to be determined ... not only by reference to particular
titles such as ‘plan administrator,’ ... but also by considering the authority which a particular
person or entity exercises over the employee benefit plan at issue.”72 A defendant's
fiduciary status is therefore “correlative with the scope of [its] duties.”73
The Fifth Circuit has stated that, “[w]e recognize, of course, that ‘[a]n entity which
67
29 U.S.C. § 1002(21)(A).
68
29 U.S.C. § 1102(a)(1).
69
In re Dynegy, Inc. ERISA Litig., 309 F.Supp.2d 861, 872–73 (S.D.Tex. 2004); see also Kirschbaum v.
Reliant Energy, Inc., 526 F.3d 243, 251 (5th Cir. 2008) (“Fiduciary duties may thus arise either from the terms
of the governing plan or from acts and practices in carrying it out.”).
70
See Varity Corp. v. Howe, 516 U.S. 489, 502, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996).
71
See Landry v. Air Line Pilots Ass'n Int'l AFL–CIO, 901 F.2d 404, 418 (5th Cir.1990).
72
Id.
73
Kirschbaum, 526 F.3d at 251.
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assumes discretionary authority or control over plan assets will not be considered a
fiduciary if that discretion is sufficiently limited by a pre-existing framework of policies,
practices and procedures.’”74 A third-party administrator who merely performs ministerial
duties or processes claims is not a fiduciary.75 The authority to grant, deny, or review
denied claims can, however, make one a fiduciary.76
Hartford’s Statement of Undisputed Material Facts In Support of Motion for Summary
Judgment contains the following statement: “By its explicit terms, the Policy provides that
Hartford has ‘full discretion and authority to determine eligibility for benefits and to construe
and interpret all terms and provisions of the [Policy].’”77 Additionally, Hartford claims that
it “was designated with claims administration responsibilities under the Policy and rendered
the decisions with respect to Plaintiff’s claim for disability benefits.”78 Nowhere does
Hartford argue or contend that its discretion is sufficiently limited by any pre-existing
framework of policies, practices, or procedures, or that it merely performs ministerial duties.
Rather, the scope of Hartford’s authority appears to be that of great discretion especially
74
Reich v. Lancaster, 55 F.3d 1034, 1047 (5th Cir. 1995)(quoting Useden v. Acker, 947 F.2d 1563, 1575 (11th
Cir. 1991), cert. denied, 508 U.S. 959, 113 S.Ct. 2927, 124 L.Ed.2d 678 (1993).
75
Kyle Rys. v. Pacific Admin. Serv. Inc., 990 F.2d 513, 516 (9th Cir.1993).
76
Id. at 517–18; Pacificare Inc. v. Martin, 34 F.3d 834, 837–38 (9th Cir. 1994)(ERISA plan health insurer who
had discretionary authority to approve or deny claims could bring action pursuant to ERISA); Tregoning v.
American Community Mut. Ins. Co., 12 F.3d 79, 83 (6th Cir.1993) (employer who had sole authority under plan
documents to determine the benefits to which insured person may be entitled was fiduciary; employer's
authority to grant or deny claims was crucial factor that made it fiduciary within § 1002(21)(A)(iii)), cert. denied,
511 U.S. 1082, 114 S.Ct. 1832, 128 L.Ed.2d 461 (1994).
77
Rec. Doc. No. 44-4, p. 2, ¶ 4.
78
Id. at ¶ 5.
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considering Hartford’s statements above. Thus, the Court finds that Hartford is a fiduciary
for the purposes of ERISA.
b.
Misrepresentation
Plaintiff contends that Hartford breached its fiduciary duty by making a material
misrepresentation to the Plaintiff that she was ineligible for STD benefits when Plaintiff
claims there was evidence in Hartford’s possession showing that she was clearly eligible.
Plaintiff claims this misrepresentation violated Hartford’s duty of loyalty as it denied her
claim for STD benefits without using the necessary care and skill required by ERISA.
Hartford again insists that Plaintiff’s misrepresentation claim is merely a “re-packaged
benefits claim” because it is based on the fact that Hartford originally denied Plaintiff’s STD
benefits claim. As such, Hartford argues that the alleged wrongful denial of benefits is
squarely covered by Section 1132(a)(1)(B) as a true benefits claim which precludes Plaintiff
from bringing a Section 1132(a)(3) breach of fiduciary duty claim as a matter of law.
Substantively, Hartford claims that simply because it reversed its decision regarding STD
benefits eligibility on appeal, clearly based on new information before it on appeal, does not
constitute a misrepresentation as opposed to simply being incorrect. Additionally, Hartford
contends that it never denied benefits on the finding that Plaintiff was not disabled; rather,
the denial was based solely on her eligibility.79
Hartford maintains that its initial
determination was justified by the administrative record before it at the time, and, although
arguably disputable, it was not an arbitrary or capricious decision or an abuse of discretion
79
Rec. Doc. No. 54, p. 25, n 33.
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but a proper application of the terms of the Policy.
The Court finds that there is no evidence in the record to support Plaintiff’s claim that
Hartford made a misrepresentation in bad faith regarding Plaintiff’s eligibility for benefits.
Simply reversing a previous decision on appeal does not constitute misrepresentation, and
Plaintiff has not submitted, and the Court not found any binding or persuasive authority to
suggest that it does. Plaintiff has cited to no specific evidence in the record demonstrating
bad faith; rather, Plaintiff bases this claim on the simple fact that Hartford initially denied
her STD benefits and later reversed this decision. Plaintiff contends there was no new
information before Hartford at the time of the appeal;80 however, Hartford has pointed to
evidence in the record that new information and evidence prompted the reversal.
Specifically, Hartford based its reversal on both Plaintiff’s Affidavit submitted during the
appeal process and Hartford’s subsequent interview with Plaintiff’s employer regarding her
termination date.81 Hartford contends this new information justified reversal of its initial
determination and required awarding Plaintiff STD benefits. Moreover, the Court notes
that, even if the initial denial was erroneous, “while there is a duty to provide accurate
information under ERISA, negligence in fulfilling that duty is not actionable.”82
Further, the Court finds that this case is factually distinguishable from both Amara
and Gearlds due to a lack of bad faith and intentional misrepresentation of Plan terms. In
80
Despite Plaintiff’s insistence that this evidence was already in Hartford’s possession, she never directs the
Court to the specific documentation in the Administrative Record that would establish this point.
81
See Rec. Doc. No. 49-6, pp. 58-60 (Bates Nos. 000350-352).
82
Vallone v. CNA Fin. Corp., 375 F.3d 623, 642 (7th Cir. 2004).
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Amara, the employer misled the employees about the terms of their retirement plan
benefits. In Gearlds, the plaintiff retired early based on the written and oral assurances
from his employer that his medical benefits would continue, and his medical benefits were
discontinued five years later. Both cases involved actual bad faith and/or intentional
misrepresentations of Plan terms, and stand for the proposition that misrepresentations can
form the basis for breach of fiduciary duty claims. Unlike Amara and Gearlds, here, the
Plaintiff has not alleged that Hartford misrepresented Plan terms to her; instead, she
argues that the claims determination itself of her ineligibility was a misrepresentation
because she was later found to be eligible. The foundation for all of Plaintiff’s claims is the
initial denial of STD benefits, which, quite frankly, supports Hartford’s argument that the
adequate remedy for these claims falls under Section 1132(a)(1)(B). In any event, Plaintiff
has failed to carry her burden on summary judgment of showing that Hartford’s initial denial
constituted a misrepresentation. Hartford is entitled to summary judgment on this claim.
c.
Conflict of Interest and Unjust Enrichment
Plaintiff also claims that Hartford has a “clear structural conflict of interest” in this
case because it is the entity that both evaluates and pays benefits under the terms of the
Plan. Thus, Plaintiff contends that Hartford’s initial denial of her STD benefits was driven
by this conflict of interest that resulted in Hartford’s best financial interests. Specifically,
Plaintiff claims that it was in Hartford’s best economic interests to deny her claim because
it compelled Plaintiff to withdraw her pension benefits and ultimately benefitted Hartford by
allowing it to offset the amounts drawn from the pension. Plaintiff further argues that
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Hartford was unjustly enriched by its alleged misrepresentation that she was ineligible for
benefits based on the $64,884.12 overpayment amount later charged to Plaintiff.
Hartford counters that the structural conflict of interest in this case played no
significance in its initial denial of Plaintiff’s STD benefits. Hartford further contends its
original denial was supported by the administrative record and the application of the Policy
terms to the facts of the case as understood by Hartford at that time. Furthermore, Hartford
argues that it was unaware of Plaintiff’s Dow pension at the time of the denial; thus, it is
impossible to impute bad faith to Hartford for knowledge it did not have.83 Hartford also
argues Plaintiff has presented no evidence to support her contention that any conflict of
interest played a role in the initial denial of her claim. With respect to Plaintiff’s unjust
enrichment claim, Hartford contends that this argument lacks merit because Hartford was
entitled to offset Plaintiff’s Dow pension under the express terms of the “Other Income
Benefits” provision of the Policy whether she had applied for those benefits or not under
the Other Income Benefits language of the Policy. Therefore, Hartford argues it did not
have to withhold Plaintiff’s STD benefits in order to allegedly force Plaintiff to draw on her
Dow pension since Hartford clearly had the right to offset the STD benefits by the amount
available from the pension even if she had never applied for them.
Where, as here, the insurance carrier is also the claims administrator, courts have
recognized that an inherent conflict of interests exists. However, following the Supreme
83
See Rec. Doc. No. 49-5, pp. 56-58 (Bates Nos. 000111-113).
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Court’s decision in Metropolitan Life Insurance Co. v. Glenn,84 the Fifth Circuit joined the
majority of the other circuits in repudiating application of a “sliding scale” standard of review
of discretionary plan determinations where a possible conflict exists, and adopted the
unitary abuse of discretion standard, weighing any conflict as a factor in that
determination.85 The Fifth Circuit has explained that, “[i]n deciding how much weight to
afford the apparent conflict here, we are guided by our decisions in Holland and
Schexnayder v. Hartford Life & Accident Ins. Co., 600 F.3d 465 (5th Cir. 2010).86 In
Schexnayder, we explained our application of the Glenn test:
In reviewing the plan administrator's decision, we take into account ... several
different considerations. These factors are case-specific and must be
weighed together before determining whether a plan administrator abused
its discretion in denying benefits. Any one factor may act as a tiebreaker
when the other factors are closely balanced, the degree of closeness
necessary depending upon the tiebreaking factor's inherent or case-specific
importance.
The interaction between the factors and the substantial evidence test is a
relatively new issue after the Supreme Court's decision in Glenn. We have
considered the interplay in only one prior published decision—Holland—in
which we found that the conflict of interest was a minimal factor and that the
evidence was more than sufficient to support the denial of benefits.
However, a reviewing court may give more weight to a conflict of interest,
where the circumstances surrounding the plan administrator's decision
suggest “procedural unreasonableness.”87
84
85
86
554 U.S. 105, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008).
Holland v. Int'l Paper Co. Ret. Plan, 576 F.3d 240, 247 n. 3 (5th Cir. 2009).
Crowell v. CIGNA Group Ins., 410 F. App’x 788, 793-94 (5th Cir. Nov. 7, 2011).
87
Id. at 793, quoting Schexnayder v. Hartford Life & Accident Ins. Co., 600 F.3d 465, 469(5th Cir. 2010)
(citations and internal quotation marks omitted).
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With these guidelines in mind, the Court finds that Plaintiff has failed to show that the
structural conflict of interest played a role in the original denial of her STD benefits,
especially in light of Hartford’s reversal and award of these benefits after new information
was presented on appeal.
Furthermore, the Court agrees that Hartford was not unjustly enriched because,
under the clear language of the Policy’s Benefits section, Hartford was entitled to an offset
of the Dow pension whether Plaintiff applied for those funds or not. This provision reads:
“The amount of any Weekly Benefit payable shall be reduced by the total amount of all
Other Income Benefits, including any amount for which you could collect but did not
apply.”88 Moreover, the Dow pension met the Policy’s definition of a Retirement Plan that
could be subject to this offset.89 Thus, Hartford was not unjustly enriched by initially
denying Plaintiff’s claim for STD benefits because it could have offset the Dow pension
funds whether Plaintiff applied for them or not. Notably, Plaintiff has not pointed to any
summary judgment evidence to suggest that Hartford had any knowledge of the Dow
pension at the time of the initial denial of STD benefits. The Court finds that both Plaintiff’s
claims of unjust enrichment and that a conflict of interest formed the basis for the initial
denial are without merit and unsupported by the record. Accordingly, Hartford is entitled
to summary judgment on these claims.
88
Rec. Doc. No. 44-1, p. 31 (Bates No. 000018).
89
Id. at p. 59 (Bates No. 000046).
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d.
Failure to Timely Approve and Pay STD Benefits
Plaintiff also claims that Hartford breached its fiduciary duty by failing to timely
approve and pay her STD benefits. Plaintiff cites 29 C.F.R. § 2560.503-1(f)(3) to support
her claim that Hartford had only forty-five (45) days to make a determination of her claim,
and could only extend this period by two, thirty (30) day periods after notifying Plaintiff of
such extension. Plaintiff alleges that Hartford took approximately one hundred and sixty
(160) days to render a determination regarding her STD benefits, which was fifty-five (55)
days past the maximum 105 day period permitted. In addition, Plaintiff contends Hartford
never notified her of its intention to exceed the original forty-five (45) day period.
Hartford does not appear to challenge Plaintiff’s calculations in this regard, but
argues that there is no cause of action for alleged untimely processing and payment of
claims as a matter of law pursuant to the United States Supreme Court’s decision in
Massachusetts Mutual Life Insurance Co. v. Russell.90 The Court agrees.
In Russell, the Supreme Court held that “[n]othing in [29 C.F.R. § 2560.503–1] or
[ERISA § 503] ... expressly provides for a recovery from either the plan itself or from its
administrators if greater time is required to determine the merits of an application for
benefits. Rather, the regulations merely state that a claim may be treated as having been
denied after the [time] period has elapsed.”91 Because monetary damages are not
available under this federal regulation, Plaintiff's claims for monetary damages associated
90
473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985).
91
Id. at 144.
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with Hartford’s alleged time violation must be dismissed.
4.
State Law Claims are Preempted
Section 1144(a) of ERISA provides that the statute “shall supersede any and all
State laws insofar as they may now or hereafter relate to any employer benefit plan.”92 The
Fifth Circuit applies a two part test when determining whether a state law claim is
preempted by ERISA.93 First, the court determines “whether the benefit plan at issue
constitutes an ERISA plan.”94 Second, the court determines whether the state law claims
“ ‘relate to’ the plan.”95 In general, a state law relates to an ERISA plan “whenever it has
‘a connection with or reference to such a plan.’”96 Furthermore, the United States Supreme
Court has found that ERISA preempts state law tort and contract claims for improper
processing of a claim for benefits.97 “The language of the ERISA preemption clause is
deliberately expansive, and has been construed broadly by federal courts.”98
In her Complaint, Plaintiff asserts, “to the extent not preempted by federal law,
claims of breach of contract, breach of fiduciary duty, bad faith, and unfair trade practices
92
29 U.S.C. § 1144(a).
93
Hernandez v. Jobe Concrete Prods., 282 F.3d 360, 362 n. 3 (5th Cir. 2002).
94
Id.
95
Id.
96
Hubbard v. Blue Cross & Blue Shield Ass' n, 42 F.3d 942, 945 (5th Cir.1995) (quoting Corcoran v. United
Healthcare, Inc., 965 F.2d 1321, 1328-29 (5th Cir. 1992), abrogated on other grounds by Mertens v. Hewitt
Assoc., 508 U.S. 248, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993))).
97
98
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 57, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987).
Hubbard, 42 F.3d at 945 (citing Corcoran, 965 F.2d at 1328–29).
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against Hartford...”99 Despite this, Plaintiff fails to argue in any memoranda that she is
entitled to relief under these claims and that they are not preempted by ERISA. Therefore,
summary judgment is granted in favor of Hartford on all state law contract and tort claims
asserted.
5.
The Plan is dismissed as a Defendant
Hartford also contends the Plan is only a nominal defendant in this case and should
be dismissed with prejudice as Plaintiff’s Complaint makes no allegations against the Plan
itself. Plaintiff concedes that summary judgment in favor of the Plan is appropriate since
she has abandoned her claim under Section 1132(a)(1)(B).100 Accordingly, summary
judgment is granted in favor of the Plan, and the Plan is dismissed with prejudice from this
action.
99
Rec. Doc. No. 1, p. 19, ¶ 60.
100
Rec. Doc. No. 62, p. 8.
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III.
CONCLUSION
For the reasons set forth above, Motion for Summary Judgment101 by the
Defendants102 is GRANTED, and Plaintiff’s Motion for Summary Judgment103 is DENIED.
Hartford’s Motion in Limine104 is DENIED without prejudice as moot.
Judgment shall be entered accordingly.
IT IS SO ORDERED.
Signed in Baton Rouge, Louisiana, on October 30, 2014.
S
JUDGE SHELLY D. DICK
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
101
Rec. Doc. No. 44.
102
The Court is referring to Hartford and the Plan.
103
Rec. Doc. No. 50.
104
Rec. Doc. No. 55.
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