Smith et al v. Kohler Company et al

Filing 65

MEMORANDUM OPINION re 64 Order on Motion for Summary Judgment,,, Order on Motion to Continue,,,,. Signed by Glen H. Davidson on 6/20/13. (tab)

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF MISSISSIPPI

OXFORD DIVISION

BENNIE SMITH and DORIS SMITH

v.

PLAINTIFFS
CIVIL ACTION NO. 3:ll-CV-00135-GHD-SAA

KOHLER COMPANY and UNICARE
LIFE AND HEALTH INSURANCE CO.

DEFENDANTS

MEMORANDUM OPINION RULING ON MOTIONS FOR SUMMARY JUDGMENT
Presently before the Court in the case sub judice are the following: a motion for summary
judgment [36] filed by Defendant Kohler Company ("Kohler"); a motion for summary judgment
[39] filed by Defendant UniCare Life and Health Insurance Co. ("UniCare"); a motion for
summary judgment [41] filed by Plaintiffs Bennie Smith and Doris Smith ("Plaintiffs"); and a
motion for continuance of trial setting and pending deadlines [63] filed jointly by all parties.
Upon due consideration, the Court finds that Defendants' motions for summary judgment [36
and 39] are well taken and should be granted; Plaintiffs' motion for summary judgment [41] is
not well taken and should be denied; and the parties' joint motion for continuance of trial setting
and pending deadlines [63] should be denied as moot.
A. Factual and Procedural Background
This ERISA case presents a claim for benefits by Plaintiffs, who are the sole beneficiaries
of their deceased son's basic life, supplemental life, and accidental death and dismemberment
insurance through his former employer, Kohler. Plaintiffs' deceased son, Jason Lynn Smith
("Decedent") had coverage under Kohler's group plan through UniCare which provided basic
life, supplemental life, and accidental death and dismemberment benefits. Plaintiffs' amended
complaint alleges that Defendants wrongfully denied supplemental life insurance benefits at the

1

$100,000 level and accidental death and dismembenuent benefits at the $100,000 level and
failed to advise Plaintiffs on the procedure for appealing the denial of benefits. Plaintiffs aver in
the amended complaint that Defendants' alleged actions constitute "a breach of contract and
violations of [Defendants'] obligations under ERISA and state[-]law contractual obligations," "a
breach of fiduciary duty," and an "arbitrary and capricious" decision that was "subject to a
serious conflict of interest." Pis.' Am. Compl. [4]

~

7. Plaintiffs further allege in the amended

complaint that Defendants "should be equitably estopped from denying the benefits" to
Plaintiffs. ld.
After answering the amended complaint, Defendants each filed motions for summary
judgment, and Plaintiffs filed a cross-motion for summary judgment. Plaintiffs' motion for
summary judgment solely addresses its wrongful denial of benefits claim under Section
502(a)(l) of ERISA.
Under the tenus of the plan in question (the "Plan"), Decedent was automatically entitled
to a benefit of $10,000 basic life insurance coverage. AR 00230. Decedent had the option to
purchase supplemental life insurance coverage and accidental death and dismembenuent
coverage in the amount of $25,000, $50,000, or $100,000. AR 00228. Decedent's accidental
death and dismembenuent benefits could not exceed the amount of his basic and supplemental
life insurance. AR 00053, 00231. Under the tenus of the Plan, in the event of Decedent's death,
the Plan would pay his named beneficiaries the amount of the employee's basic coverage in
addition to the amount of any supplemental coverage. ld.
Plaintiffs allege that they are entitled to $100,000 in supplemental life insurance coverage
and $100,000 in accidental death and dismembenuent insurance coverage, and thus that although

2

they have received benefits of $1 0,000 for basic life, $25,000 for supplemental life, and $25,000
for accidental death and dismemberment (a total of $60,000 in benefits), that they are entitled to
an additional $75,000 in supplemental1ife benefits and an additional $75,000 in accidental death
and dismemberment benefits (a total of $150,000 in claimed benefits). Defendants contend that
at the time of Decedent's death, Decedent had not presented evidence of insurability, and thus
that Plaintiffs are not entitled to benefits at the $100,000 level on either supplemental life
insurance or accidental death and dismemberment insurance. Plaintiffs argue in response that
Decedent was never notified of the need to submit evidence of insurability to obtain the higher
level of coverage and that the confirmation of his election to receive higher coverage constitutes
a notice that the higher coverage was in effect at the time of Decedent's death.
According to the administrative record, Decedent elected to receive no supplemental life
insurance benefits and no accidental death and dismemberment insurance benefits from March
17, 2008 until December 31, 2008.

AR 00017.

Subsequently, during Decedent's open

enrollment season at Kohler in October of 2008, the record indicates that Decedent elected to
enroll for $100,000 supplemental life insurance coverage and $100,000 accidental death and
dismemberment coverage. AR 00075-00077. Decedent listed the Plaintiffs as beneficiaries of
the benefits he was entitled to under these applicable insurance plans. AR 00018. The record
indicates that upon submitting his open season enrollment, Decedent received an on-screen open
enrollment confirmation of his decision to increase his supplemental life insurance coverage to
$100,000 and his accidental death and dismemberment insurance coverage to $100,000. AR
00081-00082. The confirmation indicated the annual contribution by Kohler and Decedent's
projected per-payday paycheck deduction amount reflecting Decedent's $100,000 coverage on
both policies, but the on-screen confirmation also noted that any change in benefits would not

3

become effective until January I, 2009, and that Decedent would be able to make changes to his
plan elections during open season or after open season had ended. Id. Defendants maintain that
employees who receive open enrollment confirmations also receive an on-screen notice if
evidence of insurability is required to obtain a higher level of coverage.

Plaintiffs dispute

whether Decedent ever received such an on-screen notice. Included in the record is a screen
capture of an open enrollment notice stating as follows:
Open Enrollment
Evidence of Insurability
The life insurance vendor requires a signed copy of the form
you have just completed. You will receive this form in the mail[;]
please sign and return this form to Kohler Konnect (a self­
addressed envelope will be provided). At this time, you will be
automatically enrolled in the highest level of coverage available
which does not require evidence of insurability[;] this amount will
be on your confirmation statement.
Upon receipt of your signed form, Kohler Konnect will
forward the form to the life insurance vendor who will either
approve or deny your request for $100,000.00 in life insurance
coverage. If approved, Kohler Konnect will enroll you in this
amount of life insurance as you had originally requested. If
denied, your coverage will remain the same as the amount shown
on your confirmation statement.
AR 00074. Decedent died on July 23,2009 after suffering a fall. AR 00005.
By a letter dated August 3, 2009, Kohler wrote to Plaintiffs estimating Decedent's
benefits under their group plan as follows: $10,000 in basic life insurance coverage, $25,000 in
supplemental life insurance coverage, and $25,000 in accidental death and dismemberment
insurance coverage. By a letter dated November 3, 2009, Plaintiff Doris Smith wrote to Kohler
that its benefits estimation was incorrect because Decedent had received the open enrollment
confirmation providing that he had $100,000 in supplemental life insurance coverage and

4

$100,000 in accidental death and dismemberment insurance coverage. AR 00083. By a letter
dated December 2, 2009, Kohler wrote to Plaintiffs:
After further review, it has been determined that the
[s]upplemental [l]ife [i]nsurance benefit will remain at the $25,000
level. This determination was made based on the following:
•
The copy of the self-serve open enrollment
confirmation statement which did not include the
additional pages that indicated that the [e]vidence
of [i]nsurability form had to be completed,
signed[,] and returned to [Kohler] before the
coverage level of $1 00,000 would go into effect;
•
The lack of receipt of such [e]vidence of
[i]nsurability within the time frame from
10/3012006 to 7/16/2009; and
•
The premiums that were deducted from
[Decedent]'s pay from 111112009 to 7/16/2009
which were for $25,000 of [s]upplemental [l]ife
[i]nsurance coverage.
AR 00153. Kohler also stated that upon receipt of Decedent's death certificate Kohler would file
death claims for a $10,000 basic life benefit, a $25,000 supplemental life benefit, and a $25,000
accidental death and dismemberment benefit. Id. On December 3, 2009, Kohler submitted a
group policyholder statement to UniCare stating that Decedent had died on July 23, 2009, and
that the amounts of insurance to be paid out were $10,000 for basic life, $25,000 for
supplemental life, and $25,000 for accidental death and dismemberment insurance. AR 00006.
On or about December 15, 2009, UniCare issued checks to the Plaintiffs for a total of
$25,000 for supplemental life insurance. Plaintiffs cashed these checks in December of 2009.
On or about January 6, 2010, UniCare issued checks to the Plaintiffs for a total of $25,000 for
accidental death and dismemberment insurance coverage.
January of2010.

5

Plaintiffs cashed these checks in

B. Summary Judgment Standard
Standard summary judgment rules control in ERISA cases.

Vercher v. Alexander &

Alexander Inc., 379 F.3d 222, 225 (5th Cir. 2004). Summary judgment "should be rendered if
the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is
no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter
oflaw." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
See FED. R. CIV. P. 56(a); Weaver v. CCA Indus., Inc., 529 F.3d 335, 339 (5th Cir. 2008). The
rule "mandates the entry of summary judgment, after adequate time for discovery and upon
motion, against a party who fails to make a sufficient showing to establish the existence of an
element essential to that party's case, and on which that party will bear the burden of proof at
trial." Celotex Corp., 477 U.S. at 322, 106 S. Ct. 2548.
The party moving for summary judgment bears the initial responsibility of informing the
court of the basis for its motion and identifying those portions of the record it believes
demonstrate the absence of a genuine dispute of material fact. Id. at 323, 106 S. Ct. 2548.
Under Rule 56(a), the burden then shifts to the non-movant to "go beyond the pleadings and by .
. . affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate
'specific facts showing that there is a genuine issue for trial.' " Id. at 324, 106 S. Ct. 2548;
Littlefield v. Forney Indep. Sch. Dist., 268 F.3d 275, 282 (5th Cir. 2001); Willis v. Roche
Biomedical Labs., Inc., 61 F.3d 313,315 (5th Cir. 1995).

C. Discussion and Analysis
Plaintiffs allege that Defendants' denial of entitlement to benefits at the $100,000 level
of coverage for supplemental life insurance benefits and accidental death and dismemberment
benefits was an arbitrary and capricious decision that should be reversed by this Court pursuant

6

to Section 502(a)(I) of ERISA. Defendants argue that Plaintiffs' claims should be dismissed
because the plan administrator's decision was neither arbitrary nor capricious and was instead
supported by substantial evidence.
ERISA confers jurisdiction on federal courts to review benefit determinations by
fiduciaries or plan administrators. See 29 U.S.C. § 1132(a)(1)(B). The Fifth Circuit has stated
that "[0 Jur cases . . . make clear that 'when an administrator has discretionary authority with
respect to the decision at issue, the standard of review should be one of abuse of discretion.' "

Baker v. Metro. Life Ins. Co., 364 F.3d 624, 629 (5th Cir. 2004) (quoting Vega v. Nat 'I Life Ins.
Servs., Inc., 188 F.3d 287, 295 (5th Cir. 1999) (en banc)); see also Firestone Tire & Rubber Co.
v. Bruch, 489 U.S. 101, 115, 109 S. Ct. 948, 103 L. Ed. 2d 80 (1989). This deferential standard
is recognized by the subject Plan, which provides that the "[p]lan [a]dministrator [Kohler] has
the exclusive right to determine eligibility for benefits and to interpret provisions of the plan so
the decision by the [p]lan [a]dministrator [Kohler] shall be conclusive and binding." AR 00209.
Courts in the Fifth Circuit apply a two-step process when evaluating a plan
administrator's denial of benefits under the abuse of discretion standard. Crowell v. Shell Oil

Co., 541 F.3d 295, 312 (5th Cir. 2008).

First, a court must determine whether the plan

administrator's interpretation and application of the plan is legally correct. Id. If so, the inquiry
ends and there is no abuse of discretion.

Id.

Alternatively, if the court finds the plan

administrator's interpretation was legally incorrect, the court must then determine whether the
plan administrator's decision was an abuse of discretion.

Id.; Aboul-Fetouh v. Employee

Benefits Comm., 245 F.3d 465, 472 (5th Cir. 2001). A denial of benefits is not an abuse of
discretion if it "is supported by substantial evidence and is not arbitrary and capricious." Ellis v.

Liberty Life Assurance Co. ofBoston, 394 F.3d 262, 273 (5th Cir. 2004). This Court is of the

7

opinion that this case is one in which the plan administrator's decision was legally correct based
on the language of the Plan, and thus that the Court need not engage in an abuse of discretion
analysis. I
In evaluating the record to detennine whether the interpretation of a plan is "legally
correct," we consider: "(1) whether the administrator has given the plan a unifonn construction,
(2) whether the interpretation is consistent with a fair reading of the plan, and (3) any
unanticipated costs resulting from different interpretations of the plan." Crowell v. Shell Oil Co.,
541 F.3d 295, 312 (5th Cir. 2008). "[W]hether the administrator gave the plan a fair reading is
the most important factor." Stone v. UNOCAL Termination Allowance Plan, 570 F .3d 252, 260
(5th Cir. 2009); see also Crowell, 541 F.3d at 313.

An administrator's interpretation is

consistent with a fair reading of the plan if it construes the plan according to the "plain meaning
of the plan language." Threadgill v. Prudential Sec. Grp., Inc., 145 F.3d 286, 292 (5th Cir.

1998); see also Stone, 570 F.3d at 260.
The record in the case sub judice indicates that Kohler properly focused on giving the
Plan a unifonn construction and considered that the interpretation urged by the Plaintiffs would
result in unanticipated costs.

The record further indicates that Kohler's decision to deny

1 The Court notes that Plaintiffs maintain that Kohler, as Decedent's employer, plan administrator, and
plan sponsor, was operating under a conflict of interest which must be weighed as a factor in detennining whether
there is an abuse of discretion. Because the Court finds that the plan administrator's decision was legally correct,
the Court need not weigh as a factor whether the plan administrator operated under a conflict of interest. See Stone
v. UNOCAL Tennination Allowance Plan, 570 F.3d 252, 257 (5th Cir. 2009). The Court notes for thoroughness,
however, that ERISA authorizes employers to act as both plan sponsors and plan administrators. 29 U.S.C. §
1002(16)(A), (B). A conflict of interest may be said to exist when the plan administrator is also the payer of
benefits. Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 108, 128 S. ct. 2343, 171 L. Ed. 2d 299 (2008) ("Often the
entity that administers the plan, such as an employer or an insurance company, both determines whether an
employee is eligible for benefits and pays benefits out of its own pocket. We here decide that this dual role creates a
conflict of interest; that a reviewing court should consider that conflict as a factor in determining whether the plan
administrator has abused its discretion in denying benefits; and that the significance of the factor will depend upon
the circumstances of the particular case."). In the subject Plan, Kohler was the plan administrator and plan sponsor,
but UniCare was the payer of benefits under the Plan. Thus, even if the Court had reached the two-step, abuse of
discretion inquiry, conflict of interest would not have been a factor in the analysis.

8

$100,000-level supplemental life and accidental death and dismembennent benefits is consistent
with a fair reading of the Plan. The Plan provides that an employee is required to present
evidence of insurability if the employee's "coverage amount equals $50,000 or $100,000," or if
the employee "increase[d] [his or her] coverage amount more than one level (i.e., from $25,000
to $100,00)." AR 00227. In the case sub judice, Decedent was required to present evidence of
insurability because he had elected to have $100,000 coverage in supplemental life insurance
coverage, and because he had elected to increase his coverage amount more than one level. The
Plan makes clear that "[ c]overage at the higher level will begin when the insurance company
approves your application. If you cannot supply [evidence of insurability], you will not be able
to obtain this optional coverage." Id.

The Plan similarly states with respect to Class "C"

employees, including Decedent: "Supplemental [i]nsurance amounts of $50,000 or $100,000
shall not become effective prior to approval of evidence of your insurability by the insurer." AR
00051. No evidence in the record supports that Decedent supplied evidence of insurability prior
to his death or that UniCare had approved his application for $100,000-level coverage on his
supplemental life insurance. Thus, at the time of his death, Decedent did not have $100,000
supplemental life insurance coverage, and Plaintiffs are likewise not entitled to supplemental life
insurance benefits at the $100,000 level.
The Plan provides that when an employee elected to increase his insurance coverage by
more than one level and/or up to the $50,000 or $100,000 level, but failed to present evidence of
insurability, the employee would "be enrolled into the highest coverage level not requiring
[evidence of insurability] until the life insurance company approves [the employee] for
coverage" at the higher level. Thus, under the Plan, because Decedent had elected to increase his
supplemental life insurance coverage to the $100,000 level, but had failed to present evidence of

9

insurability, he was enrolled in the $25,000 supplemental life insurance coverage level pending
UniCare's approval of Decedent's evidence of insurability-which was never received. Because
his accidental death and dismemberment insurance level could not exceed his supplemental life
insurance coverage level under the Plan, Decedent was enrolled in the $25,000 accidental death
and dismemberment insurance coverage level. Thus, from January 1,2009 until the day of his
death, Decedent had $25,000 coverage in supplemental life insurance and $25,000 coverage in
accidental death and dismemberment insurance. 2
The Court notes that there is also no evidence in the record that UniCare had approved
the increased coverage by deducting the appropriate amounts from Decedent's paycheck to
reflect a $100,000 level of benefits for both policies. The open enrollment confirmation form
had indicated that Decedent's deductions would be $1.11 per payday for $100,000 supplemental
life insurance coverage and $0.83 per payday for $100,000 accidental death and dismemberment
coverage. Instead, the deductions taken from Decedent's paychecks reflected a $25,000 level of
coverage on both policies; from the time of Decedent's first paycheck in 2009 until his last
paycheck prior to his death, Deduction's deductions were $.28 per payday for $25,000
supplemental life insurance coverage and $.21 per payday for $25,000 accidental death and
dismemberment coverage.

AR 00136-00151.

Thus, Decedent's deductions indicated his

coverage level was $25,000 for both supplemental life and accidental death and dismemberment
insurance.

2 With respect to Plaintiffs' argument that no evidence in the record supports that Decedent received
notice that evidence of insurability was required to obtain the $ I 00,000 level of coverage, the Court finds this
argument does not highlight a genuine dispute of material fact, as the Plan itself provided notice to Decedent that
evidence of insurability was required to obtain the $ 100,000 level of supplemental life insurance coverage, and that
the amount of accidental death and dismembennent insurance could not exceed the amount of supplemental life
insurance.

10

Because the record indicates that Plaintiffs have no entitlement to benefits at the
$100,000 coverage level, Defendants' decision to deny benefits to Plaintiffs at the $100,000
coverage level was appropriate.
Plaintiffs' response to Defendants' motions for summary judgment, as well as Plaintiffs'
cross-motion for summary judgment, do not address Plaintiffs' other claims in the amended
complaint that Defendants (1) failed to describe the policy review, appeal process, or rights of
action pursuant to 29 U.S.C. § 1132, as required by 29 U.S.C. § 1133; (2) failed to provide
information regarding internal appeal procedures and any documents necessary to file such an
appeal in violation of29 U.S.C. § 1132(c); (3) committed breach of contract in violation of state
law when they denied entitlement to benefits at the $100,000 level; and (4) should be equitably
estopped from denying the benefits to Plaintiffs under state law. Defendants hotly contest the
validity of these claims in their motions for summary judgment. The Court finds that by not
addressing the aforementioned claims in the response to Defendants' summary judgment
motions or in the cross-summary judgment motion, Plaintiffs have abandoned these claims.
Under Rule 56(c)(1)(A) of the Federal Rules of Civil Procedure, "[a] party asserting that a fact
cannot be or is genuinely disputed must support the assertion by ... citing to particular parts of
materials in the record." Thus, no genuine dispute of material fact exists and summary judgment
is proper on Plaintiffs' claims.
D. Conclusion

In sum, Defendant Kohler Company's motion for summary judgment [36] will be
GRANTED, and Defendant UniCare Life and Health Insurance Co.'s motion for summary
judgment [39] will be GRANTED, as no genuine disputes of material fact exist and Defendants
are entitled to judgment as a matter of law on all claims. Plaintiffs' motion for summary
11

judgment [41] will be DENIED. The parties' joint motion for continuance of trial setting and
pending deadlines [63] will be DENIED AS MOOT.
A separate order in accordance with this opinion shall issue this day.

~ ft.

THIS, the

JJ,.. f1. D~

~day ofJune, 2013.

I

SENIOR JUDGE

12