Hilbert et al v. Sun Life Assurance Company of Canada et al
Filing
59
OPINION AND ORDER by Judge Frank H. Seay denying 40 Motion for Partial Summary Judgment (trl, Chambers)
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF OKLAHOMA
LISA HILBERT, individually, and
LISA HILBERT, as the executor of
the estate of KENNETH L. CONLEY,
deceased,
)
)
)
)
)
Plaintiff, )
)
vs.
)
)
SUN LIFE ASSURANCE COMPANY OF
)
CANADA, a corporation,
)
)
Defendants. )
No. CIV-10-214-FHS
OPINION AND ORDER
Before the court for its consideration is the Plaintiff’s
Motion For Partial Summary Judgment on ERISA and Brief in Support
(Doc. #40).
In this motion, the plaintiff requests partial
summary judgment and a finding by the court that the two
insurance policies at issue are separate policies; that the
remedies for breach of policy two are not limited by ERISA; and
that plaintiff is entitled to recover damages for Sun Life’s
breach of the insurance policies based on Sun Life’s admissions.
Defendant argues the policies at issue are part of one plan and
as such are subject to ERISA.
They also argue that even if the
policies are two separate policies they are both governed by
ERISA.
The court now turns to the merits of the motion.
FINDINGS OF FACT
The court finds the facts as follows. Tesco previously had
insurance benefits with Unum.
On April 1, 2005,
Tesco decided
to change carriers and selected Sun Life to provide its employees
with employer paid Basic Life, Basic Accidental Death, Short Term
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Disability and Long Term Disability Insurance.
At the same time,
Tesco offered to its employees the option to purchase Voluntary
Accidental Death Coverage.
Tesco determined which employees were
eligible, the length of the waiting period before coverage would
become effective, and the benefit amounts, as well as other plan
terms.
Tesco also designated itself as Plan Sponsor and Plan
Administrator for this comprehensive benefit plan.
Sun Life issued an insurance policy to Tesco, policy number
18524-001 (policy 1) on April 1, 2005, as amended July 6, 2008.
Sun Life issued an insurance policy to Tesco, policy number
18524-002 (policy 2) on April 1, 2005, as amended January 1,
2006.
Policy 1 is the Basic Life, Basic Accidental Death, Short
Term Disability and Long Term Disability policy and policy 2 is
an Accidental Death and Dismemberment Insurance Policy.
The
employer paid the premiums for policy 1 and the employees paid
the entire premiums for policy 2. Enrollment in policy 2 was
optional for employees. The 01 and 02 at the end of the policy
numbers was added for billing purposes.
The 01 designated an
employer paid premium and the 02 designated the voluntary
coverage. Plaintiff is seeking benefits under both the employer
paid Basic Accidental Death and the employee paid Voluntary
Accidental Death policy.
Plaintiff has argued the two polices at issue are separate
policies and requests this court to find that policy 2 is not
subject to ERISA.
Defendant argues that all the coverage issued
by Sun Life to Tesco Corporation U.S. is under a single plan and
a single policy and the entire insurance coverage under this
policy is governed by ERISA.
The court finds the two policies are part of one plan.
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First, the policy numbers are identical except for the 01 and 02
at the end of the policy numbers.
This distinction was done for
billing purposes since the employer paid for the basic plan and
the employee paid for the voluntary one. For purposes of
satisfying the safe harbor provision, plaintiff is attempting to
sever her optional disability benefits from the rest of the plan.
Under existing case law, this simply cannot be done.
The court
finds that both policies were part of one comprehensive plan.
“(Severing) cannot be done because the [optional] coverage was a
feature of the Plan, notwithstanding the fact that the cost of
such coverage had to be contributed by the employee.” Smith v.
Jefferson Pilot Insurance Company, 14 F.3d 562, 567 (11th Cir.
1994), cert. denied, 513 U.S. 808, 115 S.Ct. 57, 130 L.Ed. 2d 15
(1994).
Gaylor v. John Hancock Mutual Life Insurance Company,
112 F.3d 460, 463 (10th Cir. 1997). The court finds that all
coverage is part of the same plan, and the benefits offered in
policy 2 were an additional feature of the main employee benefit
plan offered in policy 1. Since the optional part cannot be
severed from the comprehensive plan, if ERISA applies to one
portion of the plan, ERISA applies to the entire plan.
Next, the court must determine whether ERISA applies to
policy 1.
An employee benefit plan is covered by ERISA if the
following elements are met: (1) a “plan, fund or program”, (2)
established or maintained, (3) by an employer or by an employee
organization, or by both, (4) for the purpose of providing
medical, surgical, hospital care, or benefits, (5) to
participants or their beneficiaries.
Peckham v. Gem State Mutual
of Utah, 964 F.2d 1043, 1047 (10th Cir. 1992).
The court finds
that policy 1 meets these elements.
First, the court must determine whether there is a plan,
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fund or program.
“A ‘plan, fund, or program’ exists if from the
surrounding circumstances a reasonable person can ascertain the
intended benefits, a class of beneficiaries, the source of
financing, and the procedures for receiving benefits.” Gaylor at
464.
In this case, the court finds these elements are satisfied.
The intended benefits are the Basic Accidental Death and
Voluntary Accidental Death benefits which plaintiff is claiming.
The class of beneficiaries is the Tesco employees and their
beneficiaries.
The source of financing is the employer and the
employee, depending on the policy.
Finally, the procedures for
receiving benefits are included within the policy booklets given
to the plan participants.
The second and third requirement is whether the employer
“established or maintained” the Plan.
As stated by the Tenth
Circuit Court of Appeals “‘the purchase of a group policy or
multiple policies covering a class of employees offers
substantial evidence that a plan....has been established.’
Additionally, an employer’s payment of premiums is substantial
evidence that a plan has been established.” Sipma v. Mass. Cas.
Ins. Co., 256 F.3d 1006, 1012 (10th Cir. 2001). “The established
or maintained requirement is designed to ensure that the plan is
part of an employment relationship.” Gaylor
at 464.
The court
looks at the “degree of participation by the employer in the
establishment or maintenance of the plan.” Id.
“An important
factor in determining whether a plan has been established is
whether the employer’s purchase of the policy is an expressed
intention by the employer to provide benefits on a regular and
long term basis.” Gaylor
at 464.
The evidence shows that Tesco
secured the plan and paid for all of policy 1.
Tesco also
determined who is entitled to benefits and when.
available to its employees.
Tesco made it
Here it appears undisputed that
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Tesco established and maintained the plan in question.
Prior to
the selection of Sun Life, Tesco’s employee coverage was through
Unum.
Tesco negotiated the eligibility requirements for the
voluntary coverage, negotiated rate guarantees, the amount of
coverage and amendments.
It is clear the plan was established for the purpose of
providing life insurance and disability insurance to its
employees and/or their beneficiaries.
and final element.
Thus, satisfying the fifth
Accordingly, the court finds policy 1 meets
the requirements to be covered by ERISA.
Since policy 2 was part
of the same plan and cannot be severed from the plan, it too, is
covered by ERISA.
Plaintiff has argued that policy 2 satisfies the Safe Harbor
provisions and as such, cannot be subject to ERISA.
However, as
was stated previously, plaintiff cannot segregate the Voluntary
Accidental Death policy from the basic employer paid policy.
This is simply not allowed under existing Tenth Circuit Court of
Appeals law.
Gaylor
at 463.
Finally, the plaintiff has requested this court find that
plaintiff is entitled to recover damages for Sun Life’s breach of
insurance policies based on Sun Life’s admissions in previous
pleadings.
The court denies this request.
Defendant filed an
Amended Answer after the motion to dismiss was ruled on by this
court. The Amended Answer was filed within the deadline set by
the Scheduling Order.
Plaintiff moved to strike this answer as
untimely among other arguments. Plaintiff argued it was not filed
timely after the denial of the motion to dismiss and the
defendant did not seek leave of court to file it. On June 8,
2011, this court entered an order denying the motion to strike
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the answer.
In its order, the court stated that by entering a
Scheduling Order the court in essence gave defendant leave of
court to file the answer out of time.
Accordingly, since the
Amended Answer was not stricken, the court denies plaintiff’s
request to allow her to recover damages based on their admissions
in the earlier answer and other pleadings.
Accordingly, the court rules as follows on the Plaintiff’s
Motion for Partial Summary Judgment on ERISA and brief in support
(Doc. #40).
The court finds the two policies at issue are part
of one plan.
The court also finds policy 1 is covered by ERISA
and policy 2 cannot be segregated from the comprehensive plan.
As such, policy 2 is also governed by ERISA.
Finally, the court
denies plaintiff’s request that they are entitled to recover
damages based on Sun Life’s admissions.
IT IS SO ORDERED this 26th
day of July, 2011.
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