ERWOOD v. LIFE INSURANCE COMPANY OF NORTH AMERICA et al
Filing
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OPINION granting in part and denying in part 87 Motion for Summary Judgment; granting in part and denying in part 92 Motion for Summary Judgment; and denying 98 Motion for Summary Judgment. Signed by Chief Magistrate Judge Maureen P. Kelly on 9/16/16. (ard)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
PATRICIA ERWOOD,
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Plaintiff,
vs.
LIFE INSURANCE COMPANY OF
NORTH AMERICA; WELLSTAR
HEALTH SYSTEM, INC.; GROUP LIFE
INSURANCE PROGRAM,
Defendants.
Civil Action No. 14-1284
Chief Magistrate Judge Maureen P. Kelly
Re: ECF Nos. 87, 92 and 98
OPINION
Presently before the Court are three Motions for Summary Judgment: one filed by
Defendant Life Insurance Company of North America (“LINA”), ECF No. 87; one filed by
Defendants Group Life Insurance Program (“the Plan”) and WellStar Health System, Inc.
(“WellStar”)(collectively, “the WellStar Defendants”), ECF No. 92; and a Cross Motion for
Partial Summary Judgment filed by Plaintiff Patricia Erwood, ECF No 98. For the following
reasons, LINA’s Motion for Summary Judgment, ECF No. 87, will be granted in part and denied
in part; the WellStar Defendants’ Motion for Summary Judgment, ECF No. 92, will be granted in
part and denied in part; and Plaintiff’s Cross Motion for Partial Summary Judgment, ECF No.
98, will be denied.
I.
PROCEDURAL BACKGROUND
Plaintiff filed the operative Complaint, ECF No. 34, on November 19, 2014, seeking to
recover life insurance benefits from a policy purchased by her now-deceased husband, Dr. Scott
Erwood, (“Dr. Erwood”) as part of an employee benefit plan (“the Plan”) established pursuant to
the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001, et seq. LINA filed
its Answer on May 15, 2105. ECF No. 57. The WellStar Defendants filed their operative
Answer on August 26, 2015. ECF No. 72.
On February 26, 2016, LINA filed its Motion for Summary Judgment and supporting
documents. ECF Nos. 87-90. On that same date LINA also filed, on behalf of all parties, a
Stipulation of Undisputed Facts.
ECF No. 91.
Also on February 26, 2016, the WellStar
Defendants filed their Motion for Summary Judgment and supporting documents. ECF Nos. 9295. On April 6, 2016, Plaintiff filed her Cross Motion for Partial Summary Judgment 1 and
supporting documents. ECF Nos. 98-100. Also on April 6, 2016, Plaintiff filed Responses to the
Defendants’ Motions for Summary Judgment. ECF Nos. 101-103. Defendants filed Replies.
ECF Nos. 105-106. Plaintiff filed Sur-Replies. ECF Nos. 107-108.
On May 6, 2015, in response to Plaintiff’s Cross Motion for Partial Summary Judgment
and supporting document, LINA filed its Responses at ECF Nos. 110-112 and the WellStar
Defendants filed their Responses at ECF Nos. 113-114. Plaintiff replied thereto on May 13,
2016. ECF Nos. 115-116. Defendants filed Sur-Replies on May 20, 2016. ECF Nos. 117-118.
The three Motions for Summary Judgment are now ripe for review. The Court will
address them together.
II.
STANDARD OF REVIEW
Pursuant to Federal Rule of Civil Procedure 56(a), “[t]he court shall grant summary
judgment 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.” A disputed fact is “material” if proof of its
existence or nonexistence would affect the outcome of the case under applicable substantive law.
Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986); Gray v. York Newspapers, Inc., 957 F.2d
1070, 1078 (3d Cir. 1992). An issue of material fact is “genuine” if the evidence is such that a
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Plaintiff’s Motion seeks summary judgment on Count II only.
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reasonable jury could return a verdict for the nonmoving party. Anderson, 477 U.S. at 257;
Brenner v. Local 514, United Brotherhood of Carpenters and Joiners of America, 927 F.2d 1283,
1287-88 (3d Cir. 1991). When determining whether there is a genuine issue of material fact, the
court must view the facts and all reasonable inferences in favor of the nonmoving party. EEOC
v. Allstate Ins., 778 F.3d 444, 448 (3d Cir. 2015).
In order to avoid summary judgment, a party must produce evidence to show the
existence of every element essential to the case that it bears the burden of proving at trial; “a
complete failure of proof concerning an essential element of the nonmoving party's case
necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). If the nonmoving party fails to make a sufficient showing on any essential element of its
case, the moving party is entitled to judgment as a matter of law. Id.
III.
DISCUSSION
A.
Facts
The parties agree on the following facts.
Plaintiff’s husband, Dr. Erwood, was an
employee of WellStar. ECF No. 91 ¶ 1. Dr. Erwood began work at WellStar on April 1, 2011,
as a neurosurgeon. Id. ¶¶ 10-11. As a participant in the Plan as a WellStar employee, Dr.
Erwood was insured for $1,000,000 in life insurance benefits under policies 2 issued to the Plan
by LINA. Id. ¶¶ 2, 5, 12-13. WellStar administered the Plan, id. ¶ 9, but LINA was responsible
for paying policy benefits due. Id. ¶ 8.
In November of 2011, Dr. Erwood began to suffer symptoms of a malignant brain tumor.
ECF No. 99 ¶ 8; ECF No. 111 ¶ 8; ECF No. 113 at 4. He stopped working full-time at WellStar
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The Plan included one basic policy (FLX-980135) and one optional or voluntary policy (FLX-980136). Id. ¶ 4.
Dr. Erwood was insured for $500,000 in life insurance benefits under each policy.
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on November 16, 2011. ECF No. 91 ¶ 15. He continued to work part-time and/or receive pay
from WellStar until January 30, 2012. Id.
Dr. Erwood then took Family and Medical Leave Act (“FMLA”) leave. Id. ¶ 16. During
his FMLA leave, Dr. Erwood remained a participant in the Plan. Id. ¶ 18.
In early 2012, Plaintiff and Dr. Erwood met with WellStar human resource employees to
discuss Dr. Erwood’s benefits. Id. ¶¶ 19-20. On or about February 21, 2012, WellStar mailed
Dr. Erwood a leave packet which included benefit information. Id. ¶ 21.
While on FMLA leave, Dr. Erwood file a claim for long-term disability benefits through
a WellStar program insured and administered by LINA. Id. ¶¶ 14, 22. His claim was approved.
Id. ¶ 22.
On June 4, 2012, a WellStar Benefit Analyst emailed Plaintiff a copy of the Summary
Plan Description for the Voluntary Life Insurance policy and a document showing Dr. Erwood’s
life insurance benefit. Id. ¶ 23.
Dr. Erwood’s life insurance policies provided a Terminal Illness Benefit (“TIB”) which
allows the insured to claim a portion of life insurance benefits while alive if the insured suffers
from a terminal illness and is expected to die within 12 months. Id. ¶¶ 6-7, 25-26. In August
2012, Dr. Erwood filed a TIB claim. Id. ¶ 25.
Premiums for Dr. Erwood’s life insurance were paid through August 31, 2012. Id. ¶ 31.
No premium payments were paid thereafter. Id.
Under the terms of the life insurance policies, an insured could apply for conversion of
the policies upon expiration of coverage. The relevant policy language provides:
“To apply for conversion coverage, the Insured must, within 31 days after
coverage under the Policy ends:
1. submit an application to the Insurance Company; and
2. pay the required premium.”
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Conversion insurance will become effective on the 31st day after the day
coverage under the Policy ends provided the application is received by us
and the required premium has been paid.
“Extension of Conversion Period
If an Insured is eligible for conversion insurance and is not notified of this
right at least 15 days prior to the end of the 31-day conversion period, the
conversion period will be extended. The Insured will have 15 days from the
date notice is given to apply for conversion insurance. In no event will the
conversion period be extended beyond 90 days. Notice, for the purpose of
this section, means written notice presented to the Insured by the Employer
or mailed to the Insured’s last known address as reported by the Employer.”
Id. ¶ 28.
On September 4, 2012, Dr. Erwood’s 36 weeks of FMLA leave expired. Id. ¶¶ 16-17, 30.
Following the exhaustion of FMLA leave, neither LINA, the Plan nor WellStar issued a
notice of termination of life insurance coverage or a formal conversion notice such that Dr.
Erwood could assume payment of the requisite premiums. ECF No. 99 ¶ 37; ECF No. 113 ¶ 37.
On or around September 5, 2012, LINA paid Dr. Erwood $250,000 on his TIB claim. Id.
¶ 27. In the letter with that payment, LINA included the following information:
“This payment reduces the amount of your life insurance to $750,000.00.
Please be advised that the Terminal Illness benefit (TIB) is payable only
once in an Insured’s lifetime. Any premium payable will be calculated
based on the full amount of the Death Benefit before any reductions were
made due to the Terminal Illness Benefit paid. Any automatic increases in
Life Insurance Benefits will end when benefits are payable under this
provision.
The TIB benefit reduction will be applied to any death benefit payable
under the ported coverage. If you elect to convert your coverage, your
converted amount of coverage will be the amount of coverage reduced by
the TIB benefit payment. Premium would be due on the reduced coverage
amount.”
We encourage you to either contact your employee benefits department or
review the insurance booklet, certificate or coverage information made
available to you, to determine if you are eligible for additional benefits.
Id. ¶ 29.
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On June 26, 2013, Dr. Erwood died. Id. ¶ 32.
In September 2013, Plaintiff filed a claim for life insurance proceeds with LINA. Id.
¶ 33. LINA denied the claim via letter denied October 11, 2013. Id. ¶ 34. The letter stated that
the denial was based on LINA’s conclusion that, at the time of his passing, Dr. Erwood’s life
insurance was no longer in force because he was no longer an active employee at WellStar nor
had he elected to continue his policy on an individual basis. ECF No. 90 at 117-123. Plaintiff
appealed, but LINA upheld the benefit denial.
Id. ¶¶ 35-36.
Plaintiff exhausted her
administrative remedies. Id. ¶ 37.
B.
Count I
Plaintiff brings Count I against LINA and the Plan pursuant to 29 U.S.C.
§ 1132(a)(1)(B), 3 a provision of ERISA which permits a civil action to be brought by a
participant or beneficiary to “recover benefits due to him under the terms of his plan, to enforce
his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of
the plan.” ECF No. 34 ¶¶ 33-42. Plaintiff alleges that the denial of her claim for life insurance
benefits was improper as Dr. Erwood had, “at all relevant times, paid all necessary premiums,
and satisfied the requirements to receive the disputed life insurance benefits.” Id. ¶ 34. As to
LINA specifically, Plaintiff alleges that it failed to “not accept premiums for insurance coverage
for which [Dr. Erwood] was not eligible,” id. ¶ 37, and that it “failed in its obligations to
properly advise Dr. Erwood regarding his rights under the Plan when it misrepresented in its
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The parties dispute the applicable standard of review for the denial of benefits. The United States Supreme Court
has held “a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless
the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to
construe the terms of the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The Defendants
claim that LINA had discretionary authority so as to trigger an abuse of discretion standard. ECF No. 89 at 10-12;
ECF No. 93 at 9 n.3. Plaintiff claims the policies did not grant such discretionary authority. ECF No. 103 at 20-22.
In the interest of judicial economy and because the impact of the distinction is not great in this case, the Court
declines to decide this question and instead will utilize the de novo standard and review Plaintiff’s claim as any other
contract claim by looking to the terms of the plan. See Firestone Tire, 489 U.S. at 112-13.
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September 5, 2012 letter that $750,000 in life insurance proceeds remained in place under the
Life Plan, after the date coverage allegedly lapsed.” Id. ¶ 38.
A review of the filings concerning the instant Motions reveals that Plaintiff has now
abandoned her allegation in the Complaint that LINA improperly accepted premiums. No
premiums were paid after the FMLA leave expired. ECF No. 91 ¶¶ 30, 31.
LINA and the Plan assert that they are entitled to summary judgment on this Count
because the evidence shows that Dr. Erwood’s life insurance policies terminated, at the latest, in
October, 2012. ECF No. 89 at 13; ECF No. 93 at 9-10. Therefore, the argument follows, Dr.
Erwood was not covered by the policies at the time of his death in June, 2013, and benefits were
properly denied. ECF No. 89 at 14; ECF No. 93 at 9-10.
In response, Plaintiff offers a brief argument asserting that the policy language “is both
ambiguous and confusing,” and arguing that “a participant on disability could assume that
coverage for him continues until ‘the date the Employee is no longer disabled.’” ECF No. 103 at
24. The language she refers to is as follows:
Continuation for Disability
If an employee becomes Disabled, the Life Insurance Benefits shown in the
Schedule of Benefits will be continued, provided premiums are paid, until
the earlier of the following dates:
1. The date the Employee is no longer disabled.
2. The date following the Maximum Benefit Period shown in the Schedule
of Benefits.
3. The date coinciding with the end of the last period for which premiums
are paid.
4. The date the policy is terminated by the Insurance Company.
ECF No. 99 ¶ 22.
Plaintiff argues that from this language and LINA’s statement that Dr. Erwood had
$750,000 of remaining life insurance, “Dr. Erwood could easily have concluded that his life
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insurance continued throughout the period of his disability, under which he remained until his
death.” ECF No. 103 at 24.
The policy language upon which Plaintiff relies is conditioned upon payment of
premiums. It is undisputed that premium payments were paid only through August, 2012, and
thus ceased well before Dr. Erwood’s death in June, 2013. Accordingly, regardless of the
information that was provided or not provided to Dr. Erwood, because the payment of premiums
on the life insurance policies had stopped and the grace period had expired, Dr. Erwood had no
coverage under these policies at the time of his death.
Because Plaintiff has failed to produce evidence that benefits are due to her under the
terms of the Plan, LINA and the Plan are entitled to judgment as a matter of law on this claim.
C.
Count II
In Count II of the operative Complaint, Plaintiff brings a claim against all Defendants
pursuant to 29 U.S.C. § 1132(a)(3), a provision of ERISA which, in pertinent part, permits a
beneficiary to obtain equitable relief for violations of ERISA or the terms of an ERISA plan.
Plaintiff’s claim is principally based on her allegation that Defendants breached their fiduciary
duties to Dr. Erwood and his beneficiaries. ECF No. 34 ¶¶ 48-49.
To establish the relevant type of breach of fiduciary duty, “a plaintiff must demonstrate
that: (1) the defendant was ‘acting in a fiduciary capacity;’ (2) the defendant made ‘affirmative
misrepresentations or failed to adequately inform plan participants and beneficiaries;’ (3) the
misrepresentation or inadequate disclosure was material; and (4) the plaintiff detrimentally relied
on the misrepresentation or inadequate disclosure.” Unisys Corp. Retiree Med. Benefits Erisa
Litig. v. Unisys Corp., 579 F.3d 220, 228 (3d Cir. 2009).
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1.
LINA
In her Complaint, Plaintiff alleges, “[t]hrough the act of paying Dr. Erwood $250,000 in
proceeds under the Life Plan’s Terminal Illness Provision after the date the policy lapsed,
[LINA] misrepresented to Plaintiff that the coverage remained in place after that date, thereby
breaching the fiduciary duties it owed to Dr. Erwood and his beneficiaries.” Id. ¶ 49. Plaintiff
further alleges, “[b]y informing Dr. Erwood that he remained entitled to $750,000 in benefits
after the policy lapsed, [LINA] misrepresented to Plaintiff that the coverage remained in place
beyond the date it lapsed, thereby breaching the fiduciary duties it owed to Dr. Erwood and his
beneficiaries.” Id. ¶ 50.
In her Brief concerning the instant Motions for Summary Judgment, Plaintiff defines the
breaches of LINA’s fiduciary duties in a number of ways, i.e.,: (1) “LINA had a duty to
investigate the status of Dr. Erwood’s life insurance before assuring him that $750,000 of
coverage remained,” ECF No. 103 at 30; (2) “LINA breached its fiduciary duty by
misrepresenting the amount of insurance available without investigating whether Dr. Erwood had
converted his policy,” id. at 31; (3) “LINA failed to inform Dr. Erwood that he needed to take
action to ensure that the remaining $750,000 worth of insurance remained in place,” id. at 32;
and (4) “LINA represented that those benefits were still in place without investigating whether
that statement was true, nor advising Dr. Erwood that he need to take specific action to avail
himself of that benefit,” id. at 33. In any event, Plaintiff’s claim against LINA under Count II for
breach a fiduciary duty is based on an alleged misrepresentation via the letter accompanying the
TIB payment. 4
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The Court notes that Plaintiff claims that LINA is equitably estopped from denying a breach of fiduciary duty. “To
succeed under this theory of relief, an ERISA plaintiff must establish (1) a material representation, (2) reasonable
and detrimental reliance upon the representation, and (3) extraordinary circumstances.” Pell v. E. I. DuPont De
Nemours & Co., 539 F.3d 292, 300 (3d Cir. 2008) (citing Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226,
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LINA asserts that it made no misrepresentations in the letter. ECF No. 89 at 16-18. Had
Dr. Erwood died on September 5, 2012, LINA explains, he would have been entitled to recover
the $750,000 set forth in the letter. Id. at 18. At that time, given the agreed-upon date of
September 4, 2012, as the end of Dr. Erwood’s FMLA leave, he was within the grace period in
which he could convert his coverage. Id.
As to whether LINA failed to adequately inform Dr. Erwood as to his benefits
(specifically, the imminent need to convert his policies), LINA disputes that, in its role as claims
administrator, it could have any such duty to inform. Id. at 21. However, assuming that it could
have, LINA continues, it did not. Id. at 21-25. LINA cites to Davis v. AK Steel Corp., 670 F.
Supp. 2d 413, 427 (W.D. Pa. 2009), in which this Court set forth “three pertinent factors to
consider when determining whether a defendant has a fiduciary duty to provide information: (1)
whether the plaintiff inquires about benefits; (2) whether under the circumstances the defendant
has a reason to know that the plaintiff might be eligible for certain benefits that plaintiff does not
inquire about; and (3), ‘equally important’ whether the plaintiff has already been given sufficient
information from which the plaintiff could determine that he might be eligible for benefits ….”
(citation omitted). ECF No. 89 at 22. Consideration of these factors, LINA argues, reveals that
LINA had no duty because, inter alia, Dr. Erwood had received sufficient information from
which he could determine his conversion rights and requirements. Id. at 24-25.
It is clear to this Court that even assuming arguendo that LINA’s September 5, 2012,
letter contained no patent misrepresentations, the existence of latent misrepresentations/material
235 (3d Cir. 1994)). LINA argues that Plaintiff does not and cannot prove detrimental reliance, citing the lack of
evidence that Dr. Erwood relied on the September 5, 2012, letter in any way. ECF No. 89 at 19. Plaintiff argues
that “detrimental reliance is readily shown. LINA failed to inform Dr. Erwood that he needed to take action to
ensure that the remaining $750,000 worth of insurance remained in place. … Dr. Erwood died, taking no further
action, believing that he had more coverage than he did.” ECF No. 103 at 31-32. Although Plaintiff’s assertions are
unsupported by citation to record evidence concerning Dr. Erwood’s belief, the source thereof or any actions taken
or not taken in reliance thereupon, given the overall nature of her claim, there appears to be a question of fact on this
point. Accordingly, Plaintiff cannot, at this time, assert equitable estoppel against LINA.
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omissions therein remains an open question. It is equally clear that whether Dr. Erwood received
sufficient information from which he could determine his conversion rights and requirements is
the central and as-yet-unanswered question in this litigation. After review of the relevant briefs
and exhibits, as well as applicable statutory and case law, the Court finds that neither party has
established entitlement to judgment as a matter of law as to these questions. Thus, they should
be decided at trial.
2.
The WellStar Defendants
In her Complaint, Plaintiff alleges that the WellStar Defendants mishandled the
administration of the conversion process for Dr. Erwood, thus breaching their fiduciary duty to
him and his beneficiaries. In her Brief concerning the instant Motions for Summary Judgment,
Plaintiff’s defines that duty as one “to provide a conversion notice under the Plan.” ECF No.
103 at 28.
It is undisputed that WellStar provided the following to Plaintiff and/or Dr. Erwood: (1) a
February 21, 2012, letter and leave packet which included information that a conversion life
insurance policy may be available for employees who request to continue coverage at the end of
leave and an instruction to contact the Benefits office for details, ECF No. 94 ¶¶ 17-20; ECF No.
101 ¶¶ 17-20; and (2) a June 4, 2012, e-mail containing the voluntary life insurance Summary
Plan Description (“SPD”) containing a section concerning “Conversion Privilege for Life
Insurance,” ECF No. 94 ¶ 26; ECF No. 101 ¶ 26; ECF No. 93-14 at 19-20.
However, it is also undisputed that WellStar did not provide the following to Plaintiff
and/or Dr. Erwood: (1) information about conversion rights at any point after Dr. Erwood’s
termination on September 4, 2012; (2) materials necessary to apply for conversion, ECF No. 99 ¶
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38; ECF No. 113 ¶ 38; or (3) LINA’s “conversion brochure” which must be completed, in part,
by the employer, ECF No. 99 ¶¶ 109-111; ECF No. 113 ¶¶ 109-111; ECF No. 100-10 at 12.
Although the parties agree on the above-stated facts, they disagree as to the significance
thereof. Plaintiff alleges that WellStar’s actions did not amount to the notice of conversion rights
as required by the Plan. WellStar alleges that the Plan does not require notice above what it
provided to the Erwoods. After review of the relevant briefs and exhibits, as well as applicable
statutory and case law, the Court finds that neither party has established entitlement to judgment
as a matter of law as to this question. It thus should be decided at trial.
IV.
CONCLUSION
For the foregoing reasons, LINA’s Motion for Summary Judgment, ECF No. 87, is
granted as to Count I and denied as to Count II. The WellStar Defendants’ Motion for Summary
Judgment, ECF No. 92, is granted as to Count I and denied as to Count II. Plaintiff’s Cross
Motion for Partial Summary Judgment, ECF No. 98, is denied.
BY THE COURT:
/s/ Maureen P. Kelly
MAUREEN P. KELLY
CHIEF UNITED STATES MAGISTRATE JUDGE
cc:
All counsel of record via CM-ECF
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