Unum Life Insurance Company of America v. Martin

Filing 68

OPINION and ORDER: Plaintiff's Motion for Summary Judgment 50 is GRANTED. The amount owed to Unum shall be set off by $1,123, the amount of the July 11, 2011 payment that Unum withheld prior to Martin's receipt of his first SSDI benefit payment in August 2011. Plaintiff shall submit a proposed order of judgment within 30 days. See formal order. Signed on 3/19/2014 by Chief Judge Ann L. Aiken. (rh) Modified text on 3/20/2014 (kf).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

UNUM LIFE INSURANCE CO.
OF AMERICA,

Case No. 6:13-cv-00158-AA

Plaintiff,

OPINION AND ORDER

v.

JACK E. MARTIN,
Defendant.

Robert B. Miller,
Kilmer, Voorhees & Laurick, P.C.
732 NW 19th Avenue
Portland, Oregon 97209
Attorney for Plaintiff
William C. Carpenter, Jr.
474 Willamette Street, Suite 303
Eugene, Oregon 97401
Attorney for Defendant
AIKEN, Chief Judge:
Plaintiff Unum Life Insurance Company of America
Jack

E.

Martin's

1 -

Martin

filed

remaining

cross-motions

counterclaims

OPINION AND ORDER

for

for

summary

breach

of

(Unum)

judgment
contract

and
on
and

declaratory
motion

relief.

(doc.

50)

For

is

the

reasons

set

forth

below,

granted and Martin's motion

(doc.

Unum's
53)

is

denied.
BACKGROUND
Martin
insurance

participated

plan

(the

in

Policy) ,

County through Unum.

group

a

offered

long-term

by

his

disability

employer

Benton

During the course of his employment, Martin

became unable to work and filed a disability claim with Unum.

On

June 18, 2000, Martin's claim was approved and he began receiving
benefits.
Under
( SSDI)

the

Policy,

Martin or his

Administration
benefits.
SSDI

any

Social

Security

disability

family received from the

(SSA)

was

deductible

from

income

Social Security

Martin's

monthly

The Policy also permitted Unum to deduct an estimated

amount

determination

from
of

Martin's
Martin's

monthly

payments

eligibility

for

while
SSDI

the

was

Martin subsequently applied for and was denied SSDI.

final

pending.

He appealed

that decision.
On October 15, 2004, Martin signed a Reimbursement Agreement
(the

Agreement)

with

deduction· under the

Unum

that

deferred

the

estimated

SSDI

Policy and allowed Martin to receive

full

monthly payments from Unum until a final determination was made

2 -

OPINION AND ORDER

by the SSA.

Under the Agreement, Martin was required to provide

Unum with a copy of any final decision made by the SSA regarding
his

SSDI

repay

benefits

Unum

benefits.

any

within

4 8 hours

overpayment

Martin

eventually

he

of

receiving notice

acquired

was

by

awarded

and to

receiving

SSDI

SSDI

benefits

and

received a Notice of Award letter dated September 18, 2011.
On September 25,
the

2011,

Notice

letter,

receive a

of

Award

check for

Martin provided Unum with a copy of
which

$122,913.75.

stated

that

Martin

would

Unum believed that Martin's

children also would receive Family SSDI benefit payments,

which

would be subject to overpayment requirements under the Agreement.
However, Unum did not know the amount of SSDI payments that would
be made to the children.
Unum made several requests to Martin to provide copies of
the Notice of Award letter indicating the amount of Family SSDI
benefits that his children had received.
failed,

pursuant to terms of the Agreement,

Martin and his
$186,464.33.
withholding

children had received a
Unum began recouping

Martin's

monthly

Ill

OPINION AND ORDER

this

disability

them towards the overpayment balance.

3 -

After these attempts
Unum estimated that

SSDI payment amount of
overpayment
payments

and

amount

by

applying

On November 5,
Summary Judgment
This

Unum.
children

2013,

(doc.

Court

should

26)

held

be

this

regarding the amount that Martin owes
that

included

totaled $111,178.43

as

Court granted Unum's Motion for

the

in

benefits

the

of August

paid

overpayment

10,

to

amount,

The Court

2013.

Martin's
which

did not

resolve Martin's counterclaims at that time.
STANDARD OR REVIEW
Summary Judgment
there

is

no

genuine

is

appropriate

dispute

as

to

"if the movant
any

material

movant is entitled to judgment as a matter of law."
P. 56(a).

law on the

Elec.

Contractors

There

is

a

reasonable

809

dispute

and

the

Fed. R. Civ.

F.2d
if

Elec.
626,

the

Serv.,

630,

(9th

evidence

is

Inc.

v.

Cir.
such

pac.

1987).
that

a

jury would return a verdict for the nonmoving party.
Liberty Lobby,

party

has

the

Inc.,

burden

genuine issue of material

of

fact.

477 U.S.

242,

establishing

248
the

Celotex Corp.

V.

(1986).
absence
Catrett,

The
of

a

477

317, 323 (1986)
Special

rules

of

construction

judgment motions:

( 1)

of genuine

of material

4 -

T.W.

issue.

Ass'n,

genuine

Anderson v.

u.s.

fact

that

Whether or not a fact is material is determined by the

substantive

moving

shows

issues

apply

to

evaluating

summary

all reasonable doubts as to the existence

OPINION AND ORDER

facts

should be

resolved against

the moving party;

and

( 2)

all inferences must be drawn in the

light most favorable to the nonmoving party.

T.W. Elec.,809 F.2d

at 630-31.
DISCUSSION
Both

parties

move

for

summary

judgment

on

Martin's

counterclaims for breach of contract and declaratory relief.
A.

Breach of Contract.
Martin

makes

four

separate

arguments

breached

the

Agreement

by

support

of

his

First, Martin argues that

counterclaim for breach of contract.
Unum

in

attempting

to

collect

SSDI

benefits that were paid to his estranged children, rather than to
himself.

This Court disagrees.

its Opinion dated November 5,

As the Court already ordered in
2013, Martin owes Unum the amount

awarded to his children and the parties agree that the children
received $34,221 as Family SSDI benefits.
Second, Martin alleges that Unum withheld or reduced monthly
payments

that

it

was

contractually

required

to

make.

Unum

responds that it properly exercised its right under the Policy to
withhold benefit payments after the SSA issued a fully favorable
decision

to

award

undisputed facts,

disability

benefits

Martin.

Given

the

Martin cannot sustain his breach of contract

claim, except for one month's payment.

5 -

to

OPINION AND ORDER

Unum

made numerous requests to Martin and his lawyers for a

copy of the SSA Award Letter.
On March

29,

2011

Mills Second Decl. at

and May 11,

2011,

Martin's

~~

4, 6, 10.

lawyer

verbally

confirmed that Martin had received a fully favorable decision on
December

20,

2010.

Id.

at

~

5,

8.

On

initiated a conference call between Unum,
Id. at
had

~

9.

June

23,

Martin,

2011,

Unum

and the SSA.

During this conference call, the SSA claimed that it

sent Martin an award

letter

denied receiving this letter.

in March

Id.

Martin

2011.

The SSA also confirmed that

Martin would receive retroactive benefits in the amount of $1,123
per month, effective December 1, 2000.

Id.

The SSA stated that

the first monthly benefit check for his July 2011 SSDI benefit
payment would be sent in August 2011.
Equipped

with

three

verbal

Id.
confirmations

that

Martin

received a fully favorable decision on December 20, 2010, on July
11,

2011,

Unum reduced Martin's monthly benefit by the

$1,123

amount the SSA verbally confirmed he was entitled to receive, as
provided in the Agreement.

However,

Unum's $1,123 reduction of

benefits came one month prior to Martin's receipt of
SSDI

benefit payment

in August

2011.

Although

his first

Unum does

not

concede a breach of contract expressly, it argues that under the
doctrine of recoupment,

6 -

OPINION AND ORDER

the July 2011 benefit amount of $1,123

withheld before Martin received his first SSDI payment should be
setoff against the amount that Martin owes Unum.
argues

that

the

doctrine

of recoupment

is

However, Martin

an equitable

remedy

that is unavailable to Unum because Unum had unclean hands in its
overall dealings with Martin.

Thus,

Martin argues that Unum is

not entitled to recover the amounts owed to it.
To establish whether a party has unclean hands,
asserting
conduct

i~

the

defense

must

inequitable

demonstrate

and

that

subject matter of its claims.'"
Supp. 2d 1248, 1267
v.

Charriere,

2003))).

Supp.

Inc.

v.

conduct

plaintiff's

relates

Jardine,
that

to

Co.,

the

869 F.

(citing Providence Health Plan

2d 1169,

"'Equity requires

"'the

Ayers v. Life Ins.

(D. Or. 2012)

666 F.

Brother Records,

the

that

the party

1182
318

(D. Or.

F.3d

those

2009)

900,

seeking

909
its

(quoting
(9th Cir.

protection

shall have acted fairly and without fraud and deceit as to the
controversy in issue.'"
2d at 1182
1 0 97

( 9th Ci r .

19 8 5 ) ) ) .

7 -

Brockway,

"The doctrine,

Inc.,

however,

666 F.

Supp.

763 F.2d 1091,
i~

not without

North Pac. Lumber Co. v. Oliver, 286 Or. 639, 651,

596 P.2d 931 (1979).
serious

(quoting Providence,

(quoting Ellenburg v.

limitations."

be

Id.

enough

"In quantitative terms, the misconduct must
to

OPINION AND ORDER

justify

a

court's

denying

relief

on

an

otherwise

valid

saintliness."

claim.

Even

equity

does

not

require

Id.

None of the misconduct alleged by Martin justifies denying
relief on Unum's otherwise valid claim.
of

unclean

equitable

hands

does

not

prevent

remedy of recoupment

Court found Martin owes,

Therefore, the doctrine
Unum

from

utilizing

to collect the money that

the
this

less the setoff amount of $1,123 that

Unum withheld on July 11, 2011.
Martin also alleges that Unum breached the covenant of good
faith and fair dealing by representing to Martin and the Oregon
Insurance

Commissioner

disability

payments

(OIC)

until

that

Martin

it

would

received

all

not

withhold

of

his

back

payments from the SSA.
On

July

alleging

that

"erroneous

7,

2011,

Martin

Unum "maybe"

info"

and

filed

Complaint

breached the

estimating

documents," although the

a

with the

Policy by

Martin's

OIC,

relying

on

"with

NO

benefits

Policy states Martin's benefits would

"NOT be estimated" if he applied for Social Security benefits and
appealed to all levels and "sign[ed] Unums payment option form."
Mills Second Decl. Ex. 9 at 3.
Unum received a copy of Martin's Complaint on July 11, 2011.
Ten

8 -

days

later,

on

OPINION AND ORDER

July

21,

2011,

Unum

responded

to

the

Department of Consumer and Business Services

( DCBS)

and stated

that it had reduced Martin's benefit under the policy by $1,123
for the period of June 11, 2011 through July 10, 2011.
11,

2011,

On August

Unum wrote the DCBS again to report that it would not

apply Martin's benefit payments to Martin's overpayment balance
until Martin received the retroactive SSDI payment from the SSA.
On September 25, 2011 Martin sent Unum the Notice of Award letter
from the SSA, dated September 18, 2011, which stated that Martin
would receive a check for $122,913.75.
After

receiving

the

Award

Letter

from

Martin,

Unum made

numerous attempts to determine whether Martin had received his
retroactive SSDI payment.
October 24,

2011,

applying the

On

Unum began withholding Martin's benefits and

withheld

amounts

Eventually,

on

Martin

received the

had

Mills Second Decl. Ex. 14 at 1-2.

January

13,

to

2012,

SSDI

offset

his

Martin's

payment.

SSDI

wife

Thus,

overpayment.

confirmed that
Unum knows

that

Martin received his retroactive SSDI payment at some time between
September 18, 2011 and January 13, 2012.
Under
covenant

of

Oregon
good

law,
faith

every
and

fair

contract
dealing.

includes
See

an

implied

Uptown Heights

Assocs. v. Seafirst Corp., 320 Or. 638, 645, 891 P.2d 639 (1995).
To determine whether the implied covenant of good faith and fair

9 -

OPINION AND ORDER

dealing was breached, this Court considers whether an action was
taken in good faith by looking at a party's conduct in light of
Best v.

the reasonable expectations of the parties.
Bank, 303 Or.

557,

Health

169

Sys.,

Further,
will

be

563,
Or.

App.

only the parties'
examined

to

exercised in good faith.
891

P.2d

739 P.2d 554

639

Workers,

144

express

(citing
Or.

terms

App.

of

a

546,

(1987);

554-555,

Swenson v.

9

P.3d

145

Legacy
(2000).

"objectively reasonable expectations"

determine

whether

the

discretion

was

Uptown Heights Assocs., 320 Or. at 645,
Slover
565,

v.

572,

contract

State
927

help

Bd.

P.2d

to

of
1098

define

reasonable expectations of the parties.
320 Or. at 645,

U.S. Nat'l

Clinical
(1996)).

the

Soc.
The

objectively

Uptown Heights Assocs.,

891 P.2d 639; Stevens v.

Foren,

154 Or. App. at

52, 58, 959 P.2d 1008 (1998).
Here, Unum attempted to contact Martin after receipt of the
Award

Letter

received.

to

ascertain

whether

the

SSDI

benefits

were

Due to Martin's failure to timely provide Unum with

information regarding the receipt of back payments from the SSA,
this Court finds that Unum did not act in bad faith by eventually
exercising its authority under the Agreement to withhold Martin's
benefit payments

and apply the withheld amounts

SSDI overpayment.

10 -

OPINION AND ORDER

to offset

his

Finally,
attempting
increases

Martin alleges

to

collect

by the

that

amounts

SSA.

This

Unum breached the

that
Court

were

deemed

disagrees.

Policy by

cost-of-living
Unum collected

overpayment amounts from Martin based on the $1,123 amount that
was provided by the

SSA as

the base benefit

amount without

a

cost-of-living adjustment.
B.

Declaratory Relief.
Martin

makes

two

separate

arguments

counterclaim for declaratory relief.

in

First,

support

of

his

Martin argues that

he is not liable to Unum for any SSDI benefits that were paid to
his children, rather than to him directly.
As stated above,

This Court disagrees.

this Court already found that Martin owes Unum

the amount awarded to his children,

and the parties agree that

the children received $34,221 in Family SSDI benefits.
Next, Martin argues that pursuant to the Agreement, cost-ofliving increases

are not

subject to overpayment reimbursement.

Thus, Martin argues that he is entitled to a declaration that his
base Social Security entitlement benefit is $1,123,
$1,138.
basis

Because this Court and Unum already used $1,123 as the
for

the

amount

that

Martin

owes

Unum,

a

judgment on the offset amount is unnecessary and is,
denied.

11 -

rather than

OPINION AND ORDER

declaratory
therefore,

CONCLUSION
For the
Judgment

foregoing

(doc.

50)

set off by $1,123,

reasons,

is GRANTED.

plaintiff's Motion

for

Summary

The amount owed to Unum shall be

the amount of the July 11, 2011 payment that

Unum withheld prior to Martin's receipt of his first SSDI benefit
payment in August 2011.

Plaintiff shall submit a proposed order

of judgment within 30 days.
IT IS SO ORDERED.
Dated this

~~f

March, 2014.

Ann Aiken
United States District Judge

12 -

OPINION AND ORDER