Leach v. Aetna Life Insurance Company et al

Filing 17

MEMORANDUM. Signed by Judge William M Nickerson on 2/5/2014. (aos, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

GLORIA LEACH
v.
AETNA LIFE INSURANCE COMPANY
et al.
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Civil Action No. WMN-13-2757

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MEMORANDUM
Before the Court is a motion to dismiss filed by Defendant
Aetna Life Insurance Company (Aetna).
ripe.

ECF No. 7.

The motion is

Upon review of the filings and the applicable case law,

the Court determines that no hearing is necessary, Local Rule
105.6, and that the motion will be granted in part and denied in
part.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Gloria Leach was the wife of Mr. Kenneth Leach, a
now-deceased, former employee of Defendant Owens Corning
Corporation (Owens Corning).

This case relates to a group life

insurance policy, contract number 600195, purchased by Mr. Leach
while an employee of Owens Corning and administered by Defendant
Aetna.

The relevant facts as alleged in the Complaint are as

follows.
The policy provides $20,000 in basic life insurance
coverage and Mr. Leach named Plaintiff as the beneficiary under

the policy.

Although the policy generally provided coverage

only for employees while employed by Owens Corning, it also
provided that coverage would continue for an eligible employee
if, upon retirement, the employee had reached an age of 55 and
had completed 10 years of employment with Owens Corning.

Mr.

Leach retired in February 2003 at the age of 61 after having
worked for Owens Corning for over 20 years.

Plaintiff also

alleges that, under the terms of the policy, Owens Corning was
required to advise Aetna of any change in Mr. Leach’s employment
status, and Mr. Leach was entitled to advanced, written notice
if his retirement would result in termination of the policy.
Plaintiff states that Mr. Leach did not receive any such notice
when he retired.
Six years after retirement, Mr. Leach contacted Aetna to
confirm his coverage under the policy.

Aetna responded with a

letter, dated September 10, 2009, verifying that its records
showed that Mr. Leach had $20,000 in Basic Life under Group
Contract Number 600195.

ECF No. 2-1.

After receiving that

verification, Mr. Leach cancelled another life insurance policy
that had been purchased on his behalf.
Mr. Leach died on November 9, 2012.

On or about November

12, 2012, Plaintiff submitted a claim to Aetna, seeking to
recover the life insurance benefits she believed were owed to
her.

Aetna responded with a letter dated February 21, 2013,
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denying Plaintiff any benefits under the policy.

ECF No. 7-3.

Aetna stated that Mr. Leach’s coverage terminated in February
2003 when he retired.

Aetna also stated that, while Owens

Corning should have informed Aetna when Mr. Leach’s employment
ceased, it failed to do so and, therefore, Mr. Leach was
erroneously kept in Aetna’s system as an active employee until
the date of his death.

This would appear to be the reason that

Aetna indicated in its 2009 letter that the policy remained in
force.
Aetna’s February 21, 2013, letter denying coverage also
stated that, if Plaintiff had any additional information which
she believed would assist Aetna in evaluating her claim, she was
to forward that information to Aetna for its consideration
within 60 days of her receipt of that letter.

Aetna

specifically requested documentation that would establish that
Mr. Leach continued in active employment until the date of his
death, id. at 2, documentation that Plaintiff obviously could
not provide.

The letter further stated,

If you disagree with this determination of benefits,
you have a right to a review of the decision and to
bring a civil action under Section 502(a) of the
Employee Retirement Income Security Act of 1974
(ERISA) if the denial is upheld on an appeal. . . .
To obtain a review, please submit a written request to
Aetna’s Life Claim Service Center. . . . You may also
receive, upon request and free of charge, reasonable
access to and copies of all documents, records, and
other information relevant to your claim for benefits.
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The request for review must be mailed or delivered
within 60 days following receipt of this explanation.
Ordinarily, you will receive notification of the final
determination within 60 days following receipt of your
request. If special circumstances require an
extension of time, you will be notified of such
extension during the 60 days following receipt of the
request.
Id. at 2-3.
Plaintiff apparently did not submit a written request for
review and what actions she did take are not entirely clear from
the Complaint.

She states that she “advised Aetna that its

denial was directly contradicted by the 2009 coverage
verification letter” and she “contacted the Owens Corning
benefits manager directly in an attempt to resolve the issue . .
. .”

Compl. ¶ 24.

She states further that she “spent an

inordinate amount of time and effort dealing with both Aetna and
Owens Corning’s intentional misrepresentations and bad faith
determination in denying benefits under the Policy.”

Id. at 25.

When these efforts were unsuccessful in obtaining benefits,
Plaintiff retained counsel.

On June 27, 2013, her counsel sent

a demand letter to Aetna and Owens Corning indicating her intent
to promptly file suit if settlement was not reached.
letter requested a response by July 3, 2013.

The demand

Aetna did not

respond to the demand letter and Plaintiff subsequently filed
suit in the Circuit Court for Baltimore County on August 6,
2013.

The Complaint included three state law claims: a breach

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of contract claim against Aetna and Owens Corning (Count I); a
claim for the intentional breach of the implied covenant of good
faith and fair dealing against Aetna (Count II); and a claim for
the intentional breach of the implied covenant of good faith and
fair dealing against Owens Corning (Count III).
Aetna removed the action to this Court on the ground that
Plaintiff’s claims arise, if at all, under ERISA, 29 U.S.C. §
1001 et seq. and, therefore, fall within the original
jurisdiction of this Court.
to dismiss.1

ECF No. 7-1.

Aetna then filed the pending motion
In this motion, Aetna argues that

Plaintiff’s claims against it are preempted under ERISA, and
must be converted into federal claims under that statute.
Specifically, Aetna asserts that Plaintiff’s claims are simply a
claim for denial of benefits under § 502(a)(1)(B) of ERISA, 29
U.S.C. § 1132(a)(1)(B).

Once converted, Aetna contends that

Plaintiff’s claims must be dismissed because Plaintiff failed to
exhaust her administrative remedies prior to filing suit.

In

addition, to the extent Plaintiff intends that her breach of the
duty of good faith and fair dealing could be considered an ERISA
claim for breach of fiduciary duty under § 502(a)(3), 29 U.S.C.

1

Owens Corning has not responded to the Complaint and this
motion relates only to the claims against Aetna. Owens Corning
had yet to be served at the time that this action was removed to
this Court and Plaintiff has yet to file a proof of service as
to Defendant Owens Corning.
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§ 1132(a)(3), Aetna maintains that it must be dismissed because
courts do not allow overlapping claims under § 502(a)(1)(B) and
§ 502(a)(3).2

Finally, Aetna argues that, should any of

Plaintiff’s claims survive, Plaintiff’s request for a jury trial
and the award of punitive damages should be stricken because
neither a jury trial nor punitive damages are available under
ERISA.
II. LEGAL STANDARD
To survive a motion to dismiss under Rule 12(b)(6) of the
Federal Rules of Civil Procedure, 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, 663 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)).

Such determination is a

“context-specific task,” Iqbal, 556 U.S. at 679, in which the
factual allegations of the complaint must be examined to assess
whether they are sufficient “to raise a right to relief above
the speculative level.”

Twombly, 550 U.S. at 555.

“[A] court

accepts all well-pled facts as true and construes these facts in
the light most favorable to the plaintiff in weighing the legal
2

Aetna also argued in its motion that any claim under §
502(a)(3) must be dismissed because this section can only be
used to obtain equitable relief and not monetary damages. ECF
No. 7-1 at 15 (citing Scott v. Am. Nat’l Red Cross, Civ. No. 051284, 2005 WL 2510456, at *6 (D. Md. Oct. 11, 2005)). In its
reply, Aetna concedes that this aspect of Scott has been
abrogated. ECF No. 16 at 8 n.7.
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sufficiency of the complaint.”

Nemet Chevrolet, Ltd. v.

Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009)
(citations omitted). Such deference, however, is not accorded to
labels and legal conclusions, formulaic recitations of the
elements of a cause of action, and bare assertions devoid of
further factual enhancement.

Iqbal, 556 U.S. at 678.

III. DISCUSSION
There is no dispute that Plaintiff’s claims are preempted
by ERISA.

The parties also agree that the effect of that

preemption is that Plaintiff’s claims were automatically
converted to claims under ERISA upon removal.

See Darcangelo v.

Verizon Commc’ns, Inc., 292 F.3d 181, 195 (4th Cir. 2002)
(holding that “when a claim under state law is completely
preempted and is removed to federal court because it falls
within the scope of § 502, the federal court should not dismiss
the claim as preempted, but should treat it as a federal claim
under § 502”).

There is also general agreement that Plaintiff’s

state law breach of contract claim in Count I is converted to a
claim for denial of benefits under § 502(a)(1)(B).

As noted

above, the dispute regarding the conversion to ERISA claims is
whether Plaintiff’s state law claim for breach of the implied
covenant of good faith and fair dealing against Aetna can be
converted to an ERISA claim for breach of a fiduciary duty under

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§ 502(a)(3) and, if so converted, can it be maintained alongside
Plaintiff’s § 502(a)(1)(B) claim.
Many courts, including this one, once held that claims
under § 502(a)(3) were limited to equitable relief and could not
be a source of recovery of monetary damages.
(noting abrogation of this holding in Scott).

See supra, n.2
The Supreme Court

in CIGNA Corp. v. Amara, 131 S. Ct. 1866, 1880 (2011), however,
opened the door to the possibility that “appropriate equitable
relief” available under § 502(a)(3) could encompass monetary
relief.

See also McCravy v. Metro. Life Ins. Co., 690 F.3d 176

(4th Cir. 2012) (finding that the traditional equitable remedies
of surcharge and equitable estoppel, which could include
monetary relief, were available under § 502(a)(3)).

Plaintiff

contends that this “sea change” in ERISA jurisprudence permits
her to bring a § 502(a)(3) claim in addition to her claim under
§ 502(a)(1)(B).

The Court disagrees.

Long before Amara, the Supreme Court held in Varity Corp.
v. Howe, 516 U.S. 489, 515 (1996), that a plaintiff cannot
pursue relief under § 502(a)(3) when § 502(a)(1)(B) provides an
adequate remedy for that same harm.

See also, Korotynska v.

Metro. Life Ins. Co., 474 F.3d 101, 102–03 (4th Cir. 2006)
(holding that if “adequate relief is available for the
plaintiff's injury through review of her individual benefits
claim under § [502](a)(1)(B), relief under § [502](a)(3) will
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not lie,” citing Varity, 516 U.S. at 515).

The Court in Varity

reasoned that § 502(a)(3) functions as a “catchall” provision or
“safety net,” intended to provide an “appropriate equitable
relief” only in situations where no other remedy is available.
516 U.S. at 512.

“[W]here Congress elsewhere provided adequate

relief for a[n] ... injury, [however,] there will likely be no
need for further equitable relief, in which case such relief
would not be ‘appropriate.’”

Id. at 515.

With one possible exception,3 courts have consistently held
that Amara and it’s progeny did not alter the rule announced in

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Plaintiff points to a single decision, Strickland v. AT&T
Umbrella Benefit Plan No. 1, Civ. No. 10-268, 2012 WL 4511367
(W.D.N.C. Oct. 1, 2012), which appears to reject the continued
vitality of Varity post-Amara. In Strickland, the defendant
argued, citing Varity, that ERISA does not provide a cause of
action for breach of fiduciary duty under Section 1132(a)(3)
where the plaintiff has a remedy under another provision of
ERISA. The court summarily responded that it agreed with the
plaintiff’s response that the “[d]efendant's reliance on preAmara cases is misplaced. In light of the Supreme Court's
decision in Amara, [], and the Fourth Circuit's interpretation
of Amara in McCravy, [], equitable relief is now available.”
Id. at *6. While that latter proposition is undeniably correct,
the court did not explain what impact that proposition had on
the rule announced in Varity.
This Court also notes that the plaintiff in Strickland was
not asserting a claim for benefits under § 502(a)(3). The
plaintiff had conceded that he had no claim for benefits. Id.
at *6 n.5. Instead, the plaintiff alleged that, in reliance on
the defendant’s representations that he was covered under
defendant’s medical insurance policy, he underwent non-emergency
surgeries. The defendant at first paid the medical claims for
these surgeries but, after determining that the plaintiff should
have applied for Medicare Part B, demanded recovery of those
payments from the medical providers. The medical providers then
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Varity.

See, e.g., Biglands v. Raytheon Empl. Sav. & Inv. Plan,

801 F. Supp. 2d 781, 785-86 (N.D. Ind. 2011); Harp v. Liberty
Mut. Group, Inc., Civ. No. 12-640, 2013 WL 5462290, at *4-5
(M.D.N.C. Sept. 30, 2013); Nemitz v. Metro. Life Ins. Co., Civ.
No. 12-8039, 2013 WL 3944292, at *4 (N.D. Ill. July 31, 2013);
Roque v. Roofers’ Unions Welfare Trust Fund, Civ. No. 12-3788,
2013 WL 2242455, at *7 (N.D. Ill. May 21, 2013); Krase v. Life
Ins. Co. of N. Am., Civ. No. 11-7659, 2012 WL 4483506, at *3
(N.D. Ill. Sept. 27, 2012).

While Amara and McCravy may have

expanded the kinds of equitable remedies available under §
502(a)(3), those remedies are still only available when adequate
relief for a beneficiary’s injury is not available elsewhere.
It is important to note that the rule in Varity does not
prohibit a plaintiff from asserting a claim under § 502(a)(1)(B)
and § 502(a)(3) in the same action if those claims are not
sought to address the same harm.

If a breach of fiduciary claim

is for “some injury that is separate and distinct from the
denial of benefits,” it “may proceed with a claim for benefits.”
turned to the plaintiff for payments which he was unable to
make. As a result, the plaintiff asserted that his credit was
destroyed and he was subjected to collection activity. Id. at
*9. He asserted that, had he been given the correct
information, he would have obtained Medicare Part B coverage
before undergoing those surgeries. Id. at *10. While the scope
of the “make-whole relief” the plaintiff was seeking under §
502(a)(3) was not specified, it would not appear to be the same
as a claim for benefits. See infra (noting that Varity only
bars § 502(a)(3) claims to recover for the same harm as a §
502(a)(1)(B) claim for denial of benefits).
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Biglands, 801 F. Supp. 2d at 786 (citing cases where the §
502(a)(3) claim was “separate, distinct and severable from the
alleged harm arising from the benefit denial”); see also Krase,
2012 WL 4483506, at *3 (observing that “Varity leaves the door
open for plaintiffs to pursue truly distinct claims under
subsections (a)(1)(B) and (a)(3)”).

The question then becomes

whether the breach of fiduciary claim asserted against Aetna in
Count II is brought to remedy the same harm or injury for which
relief is sought in Plaintiff’s claim for denial of benefits in
Count I.
The Court notes that the prayers for relief in Count I and
Count II are different.

In Count I, Plaintiff seeks to recover

the $20,000 benefit due under the policy.

In Count II,

Plaintiff alleges she has suffered “substantial economic loss
and damages,” and seeks in excess of $75,000.

The only conduct

of Aetna referenced in Count II, however, is the allegation that
“Aetna has denied Plaintiffs’ (sic) claim without justification
or excuse.”

Compl. ¶ 40.

In opposing the motion to dismiss,

Plaintiff reinforces the conclusion that she is seeking in her §
502(a)(3) claim nothing more than the benefits under the policy.
As described by Plaintiff, the equitable remedies she is seeking
would serve only to restore coverage under the policy.
No. 15 at 16-17.

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See ECF

Because Count II incorporates by reference the preceding
allegations in the Complaint, the Court could look to Aetna’s
sending of the September 10, 2009, letter verifying coverage
under the policy as the source of a separate and distinct
injury.

Plaintiff alleges that, in reliance on that letter, Mr.

Leach cancelled another life insurance policy that had been
purchased on his behalf.

This might constitute an injury

distinct from the denial of benefits.

The difficulty with that

basis for a claim of damages against Aetna, however, is that
Plaintiff’s own allegations place the blame for that error on
Owens Corning, not Aetna.

Plaintiff alleges that it was Owens

Corning that breached its duty to inform Aetna of Mr. Leach’s
change in employment status, and the clear inference from the
allegations in the Complaint is that it was that breach that
caused Aetna to send incorrect information to Mr. Leach.

Thus,

the Court finds that Plaintiff has not stated a claim under §
502(a)(3) that is distinct from her claim under § 502(a)(1)(B)
and that Count II must be dismissed.
Aetna also argues that Plaintiff’s converted ERISA claims
under either section must be dismissed on the ground that
Plaintiff failed to exhaust her administrative remedies before
filing suit.

ERISA does not contain an explicit requirement

that the participant exhaust plan remedies before pursuing legal
recourse.

Smith v. Sydnor, 184 F.3d 356, 361 (4th Cir. 1999).
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Nonetheless, the statute mandates that benefit plans include an
internal administrative appeal process, 29 U.S.C. § 1133(2), and
courts have consistently required administrative exhaustion as a
prerequisite for an ERISA claim.

White v. Sun Life Assur. Co.

of Canada, 488 F.3d 240, 247 (4th Cir. 2007) (“[A]lthough ERISA
does not explicitly state that claimants must exhaust internal
appeals before filing suit, courts have universally found an
exhaustion requirement in part because statutory text and
structure establish these twin remedies of administrative and
judicial review as parts of a single scheme.”); see, e.g., Makar
v. Health Care Corp. of the Mid–Atl. (CareFirst), 872 F.2d 80,
82 (4th Cir. 1989).
Here, Aetna asserts in its motion that “the plan documents
specifically provide that an adverse benefit determination of a
life claim may be appealed by requesting review of the denied
claim within 60 days following receipt of an adverse decision.”
ECF No. 7-1 at 11.

In support of that assertion, Aetna cites to

“Exhibit ‘A’ hereto at Aetna 16.”

Id.

While Exhibit A to

Aetna’s motion appears to be the plan document, the Court’s
review of that document finds no reference, on page 16 or
elsewhere in that document, to the time in which appeals must be
requested.

As noted above, however, the denial letter sent to

Plaintiff on February 21, 2013, does state that, if Plaintiff
had any additional information that she believed would be
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helpful to Aetna in evaluating her claim, she should forward
that to Aetna within 60 days of the receipt of that letter.
No. 7-3 at 3.

ECF

Later in the letter, Aetna states that her

“request for review must be mailed or delivered within 60 days
following receipt of this explanation.”

Id.

Aetna proceeds in its motion to argue that “[w]here plan
documents and the notice of denial of claim sent to the
plaintiff inform the plaintiff’s administrative obligations if
she desires to appeal the denial decision, there is ‘no
question’ the notice is sufficient and that the plaintiff’s
failure to pursue those administrative obligations will result
in the dismissal of her claims for failure to exhaust.”

ECF No.

7-1 at 11 (quoting Cosby v. Lowe’s Cos. Inc., Civ. No. 9-22,
2009 WL 4611879, at *6 (W.D.N.C. Dec. 1, 2009)) (emphasis added
by Court).

Because the Court will deny Aetna’s motion on other

grounds, the Court will assume, for purposes of this opinion,
that the relevant plan documents do contain a 60-day appeal
provision.

The Court notes that Plaintiff does not challenge

that this was the requirement.
Instead, Plaintiff responds to Aetna’s exhaustion argument
in two ways.

First, Plaintiff suggests that the failure to

exhaust administrative remedies is an affirmative defense and
cannot be raised on a motion to dismiss.

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Second, Plaintiff

contends that she did seek timely review of the denial of
benefits.
Plaintiff’s first argument is without merit.

While the

failure to exhaust administrative remedies is an affirmative
defense, courts can and often do address that defense in ruling
on a motion to dismiss under Rule 12(b)(6) of the Federal Rules
of Civil Procedure.

See, e.g., Berry v. Gen. Elec. Co., Civ.

No. 12-500, 2013 WL 3324259 (W.D. Va. July 1, 2013) (dismissing
ERISA claims on Rule 12(b)(6) motion for failure to exhaust
administrative remedies); Thomas v. Wells Fargo Ins. Servs. of
West Virginia, Inc., Civ. No. 7-671, 2010 WL 3702666 (S.D. W.
Va. Sept. 14, 2010) (same).

The cases cited by Plaintiff, see

ECF No. 15 at 19, do not support her position.

In some of those

cases, the court denied the defendant’s motion to dismiss on the
ground that the plaintiff had sufficiently pled the
applicability of an exception to the exhaustion requirement.
See, e.g., Taylor v. Oak Forest Health and Rehab., LLC, Civ. No.
11-471, 2013 WL 4505386, at *3 (M.D.N.C. Aug. 22, 2013) (denying
Rule 12(b)(6) motion after concluding that the plaintiff
“presented a plausible argument supported by factual
allegations” that the futility exception to exhaustion might
apply); Trotter v. Kennedy Krieger Inst., Inc., Civ. No. 113422, 2012 WL 3638778, at *5 (D. Md. Aug. 22, 2012) (denying
Rule 12(b)(6) after concluding that facts alleged in the
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complaint supported a plausible inference that futility and
“denial of meaningful access” exceptions might apply).

In one

of the other cases cited by Plaintiff, Goodman v. PraxAir, Inc.,
the Fourth Circuit specifically noted that “where facts
sufficient to rule on an affirmative defense are alleged in the
complaint, the defense may be reached by a motion to dismiss
filed under Rule 12(b)(6).”

494 F.3d 458, 464 (4th Cir. 2007).

The court acknowledged that those situations are “relatively
rare” and, in the case before it, concluded that an affirmative
defense based on a statute of limitations did not “clearly
appear on the face of the complaint” and denied the motion to
dismiss.

Id.

Plaintiff’s second argument has potential merit.

While

Plaintiff has not alleged that she submitted a timely written
request for review, she does allege that she “advised Aetna that
its denial was directly contradicted by the 2009 coverage
verification letter” and she “contacted the Owens Corning
benefits manager directly in an attempt to resolve the issue . .
. .”

Compl. ¶ 24.

Although Plaintiff does not indicate

precisely when or how these contacts were made, it could be
inferred that it was soon after receiving the denial letter.
her opposition to the motion, Plaintiff states that “Aetna
lulled [her] into believing” that she was engaged with the
companies in resolving the dispute.
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ECF No. 15 at 21.

In

Plaintiff also complains that she never had access to the
relevant plan documents.
While Aetna suggests that Plaintiff’s “lulled into
believing” argument is newly raised and not supported by the
Complaint, Plaintiff did allege in the Complaint that she “spent
an inordinate amount of time and effort dealing with both Aetna
and Owens Corning’s intentional misrepresentations and bad faith
determination in denying benefits under the Policy.”
25.

Thus, this is not a new argument.

Compl. ¶

As to her access to plan

documents, the February 21, 2013, letter stated that Aetna would
provide her with a copy of the Policy certificate upon written
request.

Given that the Policy certificate that Aetna has

submitted to the Court contains no information regarding
initiating an appeal, it leaves some question as to how helpful
a request to Aetna for plan documents would have been.
At this stage in the litigation, the Court cannot conclude
that it clearly appears on the face of the Complaint that
Plaintiff’s ERISA claim should be barred for failure to exhaust
her administrative remedies.

That is not to say that on a

fuller record the Court would not reach a different conclusion.
The motion to dismiss will be denied as to Count I.
The Court will grant the motion as it relates to
Plaintiff’s prayer for punitive damages and a jury trial.
Plaintiff concedes that she is not entitled to punitive damages
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under ERISA.

ECF No. 15 at 13 n.8.

While Plaintiff makes no

response to Aetna’s assertion regarding the non-availability of
a jury trial under ERISA, it is well established in the Fourth
Circuit that ERISA claims are for the court and are not for
determination by a jury.

Phelps v. C.T. Enterprises, Inc., 394

F.3d 213, 222 (4th Cir. 2005).
IV. CONCLUSION
For the above stated reasons, the Court concludes that
Aetna’s Motion to Dismiss should be granted in part and denied
in part.

Count II will be dismissed and the prayer for punitive

damages and a jury trial will be stricken.

A separate order

will issue.

_______________/s/________________
William M. Nickerson
Senior United States District Judge

DATED: February 5, 2014

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