Akers et al v. Minnesota Life Insurance Company
Filing
124
MEMORANDUM OPINION AND ORDER denying Minnesota Life's 86 MOTION for Summary Judgment; granting Alpha's 84 MOTION for Summary Judgment on Coverage; granting Akers' 79 MOTION for Summary Judgment; Minnesota Life abused it s discretion in denying Ms. Akers' claim; directing the parties to submit to the court a joint status report recommending a schedule for resolution of the remaining issues in this case by 4/18/2014.Signed by Judge John T. Copenhaver, Jr. on 3/31/2014. (cc: attys; any unrepresented parties) (taq)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
JUDY AKERS, individually,
and as Administrator of the
ESTATE OF WALTER AKERS, deceased,
Plaintiffs,
v.
Civil Action No. 2:12-cv-0667
MINNESOTA LIFE INSURANCE CO. and
ALPHA NATURAL RESOURCES, LLC,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending are the motion by plaintiff Judy Akers (“Ms.
Akers” or “Akers”) for summary judgment, filed March 22, 2013,
the motion by defendant Minnesota Life Insurance Company
(“Minnesota Life”) for summary judgment, filed March 27, 2013,
and the motion by defendant Alpha Natural Resources, LLC
(“Alpha”) for summary judgment on coverage, also filed March 27,
2013.
At issue in this case is whether Minnesota Life was
justified in denying benefits for Walter Akers under an employee
benefit plan.
I. Background
A. Factual Background
Beginning in 2005, Walter Akers worked as an employee
of Nicewonder Contracting (“Nicewonder”).
That company was
acquired by Alpha in 2007, and thereafter Nicewonder adopted
Alpha’s employee benefit plan.
Mr. Akers was entitled to, and
did, enroll in Alpha’s Welfare Benefit Plan (the “Plan” or the
“Alpha Plan”).
The Plan offered both Life and Accidental Death
and Dismemberment (“AD&D”) insurance.
With respect to life insurance benefits, the parties
have stipulated that the Plan consists of three documents: (1)
the Alpha Welfare Benefit Plan document (“the Master Plan”), (2)
the Summary Plan Description for Alpha’s Life and Accidental
Death and Disability Plan (“the SPD”), and (3) Group Policy No.
18710-T (the “Policy”) issued by Minnesota Life for Alpha as the
Plan Sponsor. 1
Stip. Concerning Documents that Make Up the Alpha
Plan Exs. 1-3.
1
Originally the Master Plan was not produced to the court or in
discovery. The court ordered on January 13, 2014 for the
parties to stipulate to what documents constitute the Plan, in
part because the SPD referred to other “plan documents” and
because the Employee Retirement Income Security Act (“ERISA”),
29 U.S.C. §§ 1001-1461 (2012) requires that the terms of the
plan be described in a written document. 29 U.S.C. §
1102(a)(1), (b)(1-4) (2012). In response to that order, the
parties produced the Master Plan, in addition to the alreadyprovided SPD and Policy.
2
Mr. Akers enrolled in basic & supplemental life
insurance and basic AD&D insurance through the Policy.
Mr.
Akers’ basic life coverage and basic AD&D coverage began on
October 1, 2007.
Alpha paid the premiums for those coverages.
A month later, his Supplemental Life coverage began, which was
paid for through payroll deductions. 2
Ms. Akers claims that her
husband was insured in the amount of $274,000 (three times his
annual earnings) for each of these coverages, totaling $822,000
for all three.
In late May of 2010, Mr. Akers became severely injured
after falling two stories from a ladder at home.
With the
exception of a brief six-day period, he was continuously
hospitalized until his death on January 25, 2011, at the age of
63.
3d Am. Compl. ¶ 22.
Despite his hospitalization, Alpha
treated him as an employee during that time, paying him full
salary, and remitting to Minnesota Life all payments for the
coverages he elected under the Policy.
In addition, Minnesota
Life accepted insurance payments for Mr. Akers’ coverages and
2
The Policy only offers one form of an AD&D benefit, and the
parties do not dispute that Mr. Akers paid for and was an
eligible group member for this benefit. It is not known whether
supplemental AD&D insurance was offered by another insurance
carrier, but it does not matter because Ms. Akers does not
request payment for supplemental AD&D benefits. The SPD refers
to both basic and supplemental forms of AD&D coverage. Stip.
Concerning Documents that Make Up the Alpha Plan, Ex. 2. at
ALPHA 7-8, 20-26.
3
did not attempt to return them.
Alpha and Minnesota Life have
stipulated that Mr. Akers was an employee during this time and
should be treated as an “eligible group member” under the
Policy.
Stip. Alpha and Minn. Life with Respect to Walter
Akers’ Emp’t 1.
Shortly before Mr. Akers’ death, Alpha decided to
terminate the Policy with Minnesota Life and go with a different
carrier for its group life insurance.
The termination date was
December 31, 2010, 25 days before Mr. Akers died.
Following his
death, Ms. Akers sought payment under a conversion privilege in
the Plan by filing a claim with Minnesota Life directly.
That
privilege, set out more fully below, differs in its terms
between the SPD and the Policy.
However, it generally provides
(1) that an insured may convert the group policy to an
individual policy of life insurance within 31 days of the date
of the group policy’s termination, and (2) allows a beneficiary
to collect what the insured could have converted if the insured
dies within that 31-day period.
Mr. Akers never applied to
convert, but Ms. Akers sought payment because her husband died
during the 31-day period.
By letter dated May 10, 2011, and
sent to both Ms. Akers and Alpha, Minnesota Life denied the
claim.
Alpha’s Mot. Summ. J., Ex. 4.
Life simply stated that
4
In the denial, Minnesota
According to our records, the group life insurance coverage
under [the Policy] and other policies issued to the [sic]
Alpha Natural Resources, LLC were cancelled on December 31,
2010. Because coverage on all individuals insured under
this group policy would also terminate on December 31,
2010, Mr. Akers did not have any group life insurance in
effect with our Company at the time of death.
Id. 3
The denial letter did not reference the conversion
privilege.
After learning of this denial, Alpha contacted
Minnesota Life through e-mail on May 26, 2011, requesting that
they reconsider based on the conversion language in the Policy.
Id. Ex. 5.
A response to that request, if any exists, has not
been placed in documents before the court.
During a meeting of
the Alpha Natural Resources Benefits Committee on June 21, 2011,
Alpha also agreed to pay some of the benefits to Ms. Akers that
it believed she was due from Minnesota Life.
Summ. J., Ex. 10.
Minn. Life’s Mot.
Alpha paid Ms. Akers for coverage under the
Basic Life and AD&D coverages in the Policy, but not the
Supplemental Life coverage, totaling $548,000, with the
agreement that Alpha would attempt to recoup payment for those
two coverages from Minnesota Life, and that Ms. Akers would
return the money if Alpha was successful and Minnesota Life paid
3
Minnesota Life also indicated that Mr. Akers was not eligible
for a waiver of premium benefit -- a separate benefit in the
policy stemming from accidents that cause disability -- because
Mr. Akers did not become totally and permanently disabled while
under the age of 60 and therefore did not qualify. The waiver
of premium benefit is not related to the conversion privilege.
5
Ms. Akers directly.
Alpha’s Mot. Summ. J. Ex. 6.
Minnesota Life responded to Ms. Akers’ attorney
through e-mail on December 14, 2011, continuing to deny the
claim.
In that message, Mark Bremseth, a Manager of Group
Insurance Claims at Minnesota Life, stated that “[t]he
termination of the Group policy by the policy holder does not
trigger an opportunity for conversion.
The insured must
terminate eligibility (employment) with the employer while under
4
coverage to trigger such an event.”
Minn. Life’s Mot. Summ. J.
Ex. 14.
B. The Plan Terms
The Master Plan provides that
[t]he term ‘Plan’ includes the component benefit
programs/plans which are presented as a Summary Plan
Description (“SPD”). The Plan provides welfare benefits
through each of the . . . component benefit programs . . .
[including the] Life and Accidental Death and Dismemberment
Insurance Program.
Stip. Concerning Documents that Make Up the Alpha Plan, Ex. 1,
at 2 [hereinafter “Master Plan”].
The Master Plan provides no
terms of any insurance, apparently deferring to other documents.
The title page of the SPD reads “Life and AD&D
Insurance Plan,” but the next page of the SPD states that
4
Mr. Bremseth also stated again that Mr. Akers was not eligible
for the waiver of premium benefit.
6
This summary plan description (SPD) summarizes the
provisions of the Alpha Natural Resources, LLC Life and
AD&D Insurance Plan available to eligible employees who are
actively employed by the Company on or after January 1,
2003. Provisions of the Plan are governed by the terms of
the applicable insurance contract and plan documents. In
case of any discrepancy between this SPD and the applicable
insurance contract or plan documents, the insurance
contract and plan documents will govern.
Id. Ex. 2, at ALPHA 1-3 [hereinafter “SPD”].
The SPD describes
various portions of the Plan, including who is eligible for
coverage under the basic and supplemental forms of life and AD&D
insurance, how to submit a claim, what events might affect
coverage, and the plan and claims administrators.
While the
Policy itself also overlaps some of the topics addressed by the
SPD, the Policy disagrees with the terms indicated by the SPD in
a number of respects.
Under the section entitled “Converting Your Coverage”,
the SPD states:
When your Basic Life Insurance, Supplemental Life
Insurance, and Supplemental AD&D Insurance coverage ends,
you may convert your insurance to individual policies.
. . . .
For Basic Life Insurance and Supplemental Life Insurance
(for yourself and your dependents) the following rules
apply:
•
If you lose coverage because the group policy is
changed or cancelled, and your life insurance under
the Company’s Plan has been in effect for at least
five years, the amount you may convert is limited to
the lesser of $10,000 or the amount of coverage you
lost as a result of the change. This amount will be
7
reduced by the amount of other group insurance for
which you or your dependents become eligible within 31
days of the date your coverage under [Alpha’s] Plan
ends.
•
If you (or your dependents) lose coverage for any
other reason, the amount you may convert may be up to
the amount in force before your coverage under the
Company’s Plan ends.
To convert your Basic Life Insurance, Supplemental Life
Insurance, and Supplemental AD&D Insurance to individual
policies, you must apply to the insurance company and pay
the first premium within 31 days after you are no longer
covered. If you die within the 31 days, and before your
individual policy goes into effect, the amount payable
under the group contract is limited to the maximum amount
you could have converted.
. . . .
You may not convert your Basic AD&D coverage.
SPD at ALPHA 35.
The Policy reads as follows:
[I]f the group policy terminates or is amended so as to
terminate the insurance, an owner under this policy may
convert the insurance under the group policy to an
individual policy of life insurance with [Minnesota Life]
subject to the following:
(1) The owner’s written application to convert to an
individual policy and the first premium for the
individual policy must be received in our home
office within 31 days of the date the insurance
terminates under the group policy.
(2) The owner may convert all or a part of the group
insurance in effect on the date that his or her
coverage is terminated to an individual life
insurance policy offered by us, except a policy of
term insurance. . . .
(3) If the insured should die within 31 days of the
8
date that insurance terminated under the group
policy, the full amount of insurance that could
have been converted under this policy will be
paid.
In the case of the termination of the group policy,
[Minnesota Life] may require that an insured under a
certificate be so insured for at least five years prior to
the termination date in order to qualify for the above
conversion privilege.
Policy at ALPHA 192 (emphasis added).
There is no dispute that Mr. Akers was not covered
under the Policy for five years prior to termination or that he
did not apply to convert his coverage.
Nor is there a dispute
that Mr. Akers died within the 31-day period after termination
of the policy.
C. Procedural History
Akers brought a complaint in the Circuit Court of
Mingo County, West Virginia, on February 1, 2012 against
Minnesota Life.
Minnesota Life timely removed to this court on
March 8, 2012. 5
The Third Amended Complaint claims that
Minnesota Life violated W. Va. Code § 33-11-4, the Unfair Claims
Settlement Statute, and Title 114, Series 14 of the Legislative
Rules of the Insurance Commissioner of West Virginia.
5
3d Am.
The complaint in Mingo County Circuit Court was served on the
West Virginia Secretary of State as Minnesota Life’s
representative on February 8, 2012.
9
Compl. ¶¶ 33-34.
Akers also claims that Minnesota Life breached
a fiduciary duty of good faith and fair dealing, failed to pay
her under the policy terms, and fraudulently denied benefits.
Id. ¶¶ 35-37.
Akers asserts she was owed $822,000 ($274,000 for
each coverage) and consequential damages, attorney’s fees,
costs, lost earnings, emotional distress, and punitive damages,
but states her right to the proceeds under the Basic Life and
Basic AD&D coverages have been assigned to Alpha.
Id. ¶¶ 38-40.
Akers claims that Alpha failed to notify Mr. Akers of the change
in group coverage and breached fiduciary and contractual duties
because it failed to continue Mr. Akers’ Basic Life policy.
She
claims damages against Alpha in the amount of $274,000 she
believes she is owed under the Supplemental Life coverage and
consequential damages, attorney’s fees, and costs.
Id. ¶¶ 43-
51.
Against both Alpha and Minnesota Life, Akers brings
federal claims that the defendants violated the Employee
Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001-1461
because they have breached their duties as fiduciaries by
failing to provide the life insurance benefits.
Id. ¶¶ 52-62.
Minnesota Life has filed a counterclaim against Akers for a
declaratory judgment that it was not required to pay any
benefits and acted in good faith, and owes no damages to Akers
10
or Mr. Akers’ estate.
Counterclaim 9-12.
Minn. Life Ans. 3d Am. Compl. and
Alpha has filed a counterclaim against Akers
requesting a declaration of the rights and obligations of the
parties under the agreement whereby Alpha paid Akers what it
believed she was entitled under the Basic Life and AD&D
coverages.
Alpha Ans. to 2d Am. Compl., Counterclaim, and
Cross-claim 12-13.
Alpha has also filed a cross-claim against
Minnesota Life seeking indemnification for its payment to Akers
and for any amount to which it might be jointly liable with
Minnesota Life in the course of this litigation.
Id. at 13-15.
The court has original jurisdiction in diversity over
the dispute pursuant to 28 U.S.C. § 1332.
It is undisputed that
Judy Akers is a resident and citizen of West Virginia and that
Walter Akers was also a citizen and resident of West Virginia
when he was alive.
28 U.S.C. § 1332(c)(2) (decedent’s legal
representative assumes decedent’s citizenship).
The parties
also do not dispute that Alpha is a Virginia corporation with
its principal place of business in Virginia, and that Minnesota
Life is a Minnesota corporation with its principal place of
business in Minnesota.
28 U.S.C. § 1332(c)(1) (2012).
The
plaintiff requests compensation exceeding $75,000 -- at the
least she requests $274,000, which is what she believes she is
due under the Supplemental Life coverage.
11
3d Am. Compl. ¶ 49.
The parties are completely diverse and the amount in controversy
requirement to exercise jurisdiction is satisfied.
There is also jurisdiction under 28 U.S.C. §§ 1331,
1367, as the plan is subject to ERISA and its interpretation is
a matter of federal law, and all state law claims involve the
same nucleus of operative facts as the federal claim.
The
plaintiff’s claims arise not under the terms of a new policy
issued by exercising the conversion privilege, but instead
concern whether the plaintiff has a right to payment under the
conversion provisions of the Alpha Plan, and therefore such
claims are subject to ERISA.
See McCale v. Union Labor Life
Ins. Co., 881 F. Supp. 233, 235-36 (S.D.W. Va. 1995)
(determining that state law claims under a right to conversion
are preempted by ERISA, but under the conversion policy itself
are not).
The court issued a bifurcation order on April 23,
2012, directing that the case proceed in two stages.
The
underlying coverage issue, that is, whether Walter Akers’
beneficiary was due payment under the Plan, is to be decided
first.
All other claims are held in abeyance pending the
decision on that issue.
In accordance with the bifurcation
order, this order pertains only to the coverage issue.
To the
extent that any party’s motion for summary judgment seeks
12
adjudication of an issue other than coverage, those requests are
denied without prejudice.
In their original briefing, Akers and Alpha both argue
that Walter Akers was covered under the language of the Policy,
because it is vague and should therefore be construed against
the drafter, Minnesota Life.
Minnesota Life argues that the
Policy language and SPD regarding conversion is not vague, and
that Mr. Akers needed to first apply to convert before he could
collect under the conversion provision.
ERISA.
No party mentioned
The court ordered that the parties brief whether ERISA
affects the coverage question on October 8, 2013.
Both parties
argue that ERISA applies to the Alpha Plan, but dispute the
meaning of the language.
Alpha and Akers believe that the Plan
gives discretion to Alpha to determine coverage, and Minnesota
Life believes that the Plan language gives it discretion.
Minnesota Life also argues that it did not abuse that discretion
in denying Ms. Akers’ claim.
II. Governing Standard
A party is entitled to 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.”
Fed. R. Civ. P. 56(a).
Material facts are those necessary to
13
establish the elements of a party’s cause of action.
Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A genuine issue of material fact exists if, in viewing
the record and all reasonable inferences drawn therefrom in a
light most favorable to the non-moving party, a reasonable
factfinder could return a verdict for the non-movant.
Id.
The
moving party has the burden of “‘showing’ — that is, pointing
out to the district court — that there is an absence of evidence
to support the nonmoving party’s case.”
Catrett, 477 U.S. 317, 325 (1986).
Celotex Corp. v.
If the movant satisfies this
burden, the non-movant must respond by showing specific,
admissible evidence that establishes the existence of all
elements essential to the case.
Celotex, 477 U.S. at 322–23.
Fed. R. Civ. P. 56(c-e);
A party is entitled to summary
judgment if the “record as a whole could not lead a rational
trier of fact to find in favor of the non-movant.”
Williams v.
Griffin, 952 F.2d 820, 823 (4th Cir. 1991).
III. Analysis
The parties have framed the issue here as one of
coverage under the policy.
issue.
It involves a policy interpretation
There is no dispute that Mr. Akers was an eligible group
14
member and was covered under the policy as of the time it was
cancelled on December 31, 2010.
Nor is there a dispute that Mr.
Akers never applied for conversion.
Rather, at issue is whether
Minnesota Life was justified in denying Ms. Akers’ claim based
on the language in the Plan regarding both conversion and
payment, upon termination of the group policy, when death ensued
within 31 days.
Compare Canada Life Assur. Co. v. Estate of
Lebowitz, 185 F.3d 231, 236-38 (4th Cir. 1999) (where coverage
of the decedent was in dispute and was dispositive as to whether
conversion was available, plan administrator’s determination
that decedent was covered was given deference where plan
language gave the administrator discretionary authority to make
that determination, even when insurance company had
discretionary authority to adjudicate claims).
The issue gives rise to two separate but related
inquiries: (1) what standard of review (de novo or abuse of
discretion) the court applies to this claims determination and
(2) under that standard, was the claims determination proper?
The court notes initially that it is the claimant’s
burden to demonstrate entitlement to benefits under the plan.
Ruttenberg v. U.S. Life Ins. Co., 413 F.3d 652, 663 (7th Cir.
2005); see Stanford v. Continental Cas. Co., 514 F.3d 354, 364
(4th Cir. 2008) (Wilkinson, J., dissenting) (quoting Gallagher
15
v. Reliance Standard Life Ins. Co., 305 F.3d 264, 270 (4th Cir.
2002), as providing that “claimants bear the burden of proving
disability.”).
The standard of review for a decision made by an
administrator of an ERISA benefit plan generally is de novo.
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).
However, where the plan gives the administrator discretionary
authority to determine benefit eligibility or to construe plan
terms, the standard of review is whether the administrator
abused that discretion.
Firestone, 489 U.S. at 111; Williams v.
Metropolitan Life Ins. Co., 609 F.3d 622, 629-30 (4th Cir.
2010).
In determining whether discretionary authority exists,
the court examines the plan documents de novo, “without
deferring to either party’s interpretation.”
Booth v. Wal-Mart
Stores, Inc. Assocs. Health and Welfare Plan, 201 F.3d 335, 340
(4th Cir. 2000) (quoting Firestone, 489 U.S. at 112).
“No
specific phrases or terms are required in a plan to preclude a
de novo standard of review.”
Gallagher v. Reliance Standard
Life Ins. Co., 305 F.3d 264, 268 (4th Cir. 2002) (citing Feder
v. Paul Revere Life Ins. Co., 228 F.3d 518, 522 (4th Cir.
2000)).
Yet, “a grant of discretionary authority must be
clear.”
Cosey v. Prudential Ins. Co. of Am., 735 F.3d 161, 165
16
(4th Cir. 2013).
“Neither the parties nor the courts should
have to divine whether discretion is conferred.”
Id. (quoting
Sandy v. Reliance Standard Life Ins. Co., 222 F.3d 1202, 1207
(9th Cir. 2000)).
Under the abuse of discretion standard, a
plan administrator's decision will not be disturbed if it is
reasonable, even if the reviewing court would have come to a
different conclusion independently.
See Smith v. Continental
Cas. Co., 369 F.3d 412, 417 (4th Cir. 2004); Feder, 228 F.3d at
522.
"[A] decision is reasonable if it is the result of a
deliberate, principled reasoning process and if it is supported
by substantial evidence."
Ellis v. Metropolitan Life Ins. Co.,
126 F.3d 228, 232 (4th Cir. 1997) (internal quotation marks
omitted).
A recent alteration of the law in this area is
noteworthy.
In Metropolitan Life Ins. Co. v. Glenn, 554 U.S.
105 (2008), the Supreme Court discussed how a court conducts the
review of a benefits determination when the plan administrator
operated under a conflict of interest.
Our court of appeals
previously accounted for a conflict of interest by way of the
modified abuse of discretion standard.
See, e.g., Carden v.
Aetna Life Ins. Co., 559 F.3d 256, 259-61 (4th Cir. 2009);
Champion v. Black & Decker (U.S.) Inc., 550 F.3d 353, 358 (4th
Cir. 2008).
Following Glenn, however, “a conflict of interest
17
becomes just one of the ‘several different, often case-specific,
factors' to be weighed together in determining whether the
administrator abused its discretion.”
(quoting Glenn, 554 U.S. at 117).
Carden, 559 F.3d at 260
The weight accorded to the
conflict "will . . . depend largely on the plan's language and
on consideration of other relevant factors."
Id. at 261.
A nonexclusive recitation of those “other relevent
factors” is found in Booth, which directs a reviewing court to
consider:
(1) the language of the plan; (2) the purposes and goals of
the plan; (3) the adequacy of the materials considered to
make the decision and the degree to which they support it;
(4) whether the fiduciary's interpretation was consistent
with other provisions in the plan and with earlier
interpretations of the plan; (5) whether the decisionmaking
process was reasoned and principled; (6) whether the
decision was consistent with the procedural and substantive
requirements of ERISA; (7) any external standard relevant
to the exercise of discretion; and (8) the fiduciary's
motives and any conflict of interest it may have.
Booth, 201 F.3d at 342-43; Johannssen v. District No. 1-Pacific
Coast Dist., MEBA Pension Plan, 292 F.3d 159, 176 (4th Cir.
2002); see also Lockhart v. UMWA 1974 Pension Trust, 5 F.3d 74,
77 (4th Cir. 1993).
There are compelling reasons for the deferential
standard of review, not the least of which is that it
“‘ensure[s] that administrative responsibility rests with those
18
whose experience is daily and continual, not with judges whose
exposure is episodic and occasional.’”
Brogan v. Holland, 105
F.3d 158, 161, 164 (4th Cir. 1997) (noting no abuse is present
if the decision “‘is the result of a deliberate, principled
reasoning process and if it is supported by substantial
evidence.’”) (citations omitted); Johannssen, 292 F.3d at 169;
Lockhart, 5 F.3d at 77 (noting the “dispositive principle
remains . . . that where plan fiduciaries have offered a
reasonable interpretation of disputed provisions, courts may not
replace it with an interpretation of their own.”
Nevertheless, there are circumstances where a
reviewing court will direct an administrator to have another
look at a claim through the device of remand.
The circumstances
justifying a remand, however, are quite exceptional:
If the court believes the administrator lacked adequate
evidence on which to base a decision, “the proper course[
is] to ‘remand to the trustees for a new determination,'
not to bring additional evidence before the district
court.” As we have previously indicated, however, “remand
should be used sparingly.” Remand is most appropriate
“where the plan itself commits the trustees to consider
relevant information which they failed to consider or where
[the] decision involves ‘records that were readily
available and records that trustees had agreed that they
would verify.’” The district court may also exercise its
discretion to remand a claim “where there are multiple
issues and little evidentiary record to review.”
Elliott v. Sara Lee Corp., 190 F.3d 601, 609 (4th Cir. 1999)
(citations and quoted authority omitted); Berry v. Ciba-Geigy
19
Corp., 761 F.2d 1003, 1008 (4th Cir. 1985) (“The case for a
remand is strongest where plan itself commits the trustees to
consider relevant information which they failed to consider or
where decision involves ‘records that were readily available and
records that trustees had agreed that they would verify.’”).
A. Discretionary Authority
1. Relevant Plan Provisions
Of the three documents that the parties stipulate
constitute the Plan, the court observes that the Master Plan and
the SPD contain language regarding discretion, while the Policy
does not.
The Master Plan states as follows:
DETERMINATIONS AS TO ELIGIBILITY, COVERAGE, PAYMENTS AND
REIMBURSMENTS
. . . .
For component benefit programs that are provided through
the purchase of insurance, the insurance company makes the
final determination as to claims. . . .
Persons or entities which exercise discretion in the
interpretation, application or administration of the Plan
are authorized to exercise such discretion to the fullest
extent permitted by law, including, without limitation, the
discretion to determine facts necessary to the
interpretation, application, or administration of the plan.
Master Plan at 4-5.
The SPD contains the following:
20
The Plan Administrator is responsible for the operation of
the benefit plan. The Plan Administrator also has the
discretionary authority to resolve any questions relating
to the Plan and to interpret the Plan.
The Plan Administrator may be contacted by writing or
calling . . . Alpha Natural Resources, LLC.
SPD at 31.
With respect to life insurance claims, the SPD
reads:
The Plan is fully insured through contracts with ING Life
Insurance Company and Reliance Standard Life Insurance
Company. The insurance companies are responsible for
investing the premiums and paying benefit claims. They
guarantee the payment of claims before the contract
terminates.
. . . .
Claims for benefits under the Plan should be submitted to
the insurance company listed below.
BASIC LIFE, BASIC AD&D AND SUPPLEMENTAL LIFE BENEFITS
The insurance company is:
ING Employee Benefits . . . .
. . . .
SUPPLEMENTAL AD&D BENEFITS
The insurance company is:
Reliance Standard Life Insurance Company . . . .
SPD at 32.
The SPD also names the same aforementioned insurance
companies as the “Claims Administrator[s]” for those respective
claims.
SPD at 22.
As is apparent, the SPD does not name Minnesota Life
as the insurance company for life insurance claims.
21
The parties
state that ING Employee Benefits (“ING”) was Minnesota Life’s
predecessor.
That is, Minnesota Life replaced ING as the
insurer, not that ING was purchased by Minnesota Life or the
rights of ING were somehow assigned to or assumed by Minnesota
Life.
See Minn. Life’s Reply Mem. Concerning Applicability
ERISA 2 n.1 [hereinafter Minn. Life’s ERISA Reply Mem.].
Nevertheless, Alpha and Minnesota Life have stipulated that the
SPD as submitted is part of the Plan.
2. Minnesota Life’s Authority
Minnesota Life argues that the Plan gives it the
ultimate discretionary authority with respect to determining the
validity of life insurance claims.
See Minnesota Life Mem.
Concerning Applicability of ERISA 5 [hereinafter Minn. Life
ERISA Mem.].
It asserts that the language of the plan does not
provide explicit discretion for it to review claims, but rather
creates “discretion by implication.”
Woods v. Prudential Ins.
Co. of Am., 528 F.3d 320, 322 (4th Cir. 2008) (quoting Feder,
228 F.3d at 522-23).
By the terms of the Master Plan, Minnesota Life makes
the “final determination as to claims.”
This is so because the
benefits Akers seeks are through the purchase of a Minnesota
Life policy.
Master Plan at 4.
If the Master Plan stopped at
22
this point, it would not be enough to confer discretionary
authority.
The “authority to make determinations does not carry
with it the requisite discretion under Firestone unless the plan
so provides.”
Woods, 528 F.3d at 322 (quoting Gallagher v.
Reliance Standard Life Ins. Co., 305 F.3d 264, 269 (4th Cir.
2002)).
However, the Master Plan continues, and states that
any entity having discretion to interpret the Plan will have
discretion to the fullest extent permitted by law.
The court
finds that this language, together with the fact the Minnesota
Life will make a “final determination as to claims” imply that
Minnesota Life was vested with discretionary authority to
interpret the Plan inasmuch as it concerned benefits insured by
Minnesota Life, even though the Master Plan does not explicitly
grant discretionary authority.
In particular, this case is
similar to others where implied discretionary authority was
found.
In both Boyd v. Trustees of United Mine Workers Health
and Retirement Funds, 873 F.2d 57, 59 (4th Cir. 1989) and
Lockhart v. United Mine Workers of Am. 1974 Pension Trust, 5
F.3d 74, 77 (4th Cir. 1993), the administrator could promulgate
rules to implement the plan and could make a “full and final
determination as to all issues concerning eligibility for
benefits.”
Because the terms of the plan “indicate a clear
23
intention to delegate final authority” for Minnesota Life to
decide claims, Minnesota Life is vested with discretionary
authority.
Feder v. Paul Revere Life Ins. Co., 228 F.3d 518,
524 (2004).
The court notes that the parties also spend a
considerable portion of their ERISA briefing arguing whether and
to whom the language in the SPD grants discretion.
But the SPD
clearly states that in the event of a conflict between it and
any other plan documents, the other plan documents shall govern.
Because the Master Plan confers authority to Minnesota Life, the
SPD’s directive conferring the same authority to Alpha
conflicts, and has no effect by the very terms of the SPD. 6,7
6
The court also doubts the parties’ reliance on the SPD because,
although the parties have stipulated that the SPD is part of the
Plan, as a matter of law the SPD does not constitute terms of
the Plan. In CIGNA Corp. v. Amara, 131 S.Ct. 1866, 1877-78
(2011), the Supreme Court indicated that “the information about
the plan provided by those disclosures [in the SPD] is not
itself part of the plan,” and “we have no reason to believe that
the statute intends to . . . giv[e] the administrator the power
to set plan terms indirectly by including them in the summary
plan descriptions.” Id. See also Cosey, 735 F.3d at 168 n.4
(citing Amara); Woods, 528 F.3d at 322 n.3. But see Canada Life
Assur. Co. v. Estate of Lebowitz, 185 F.3d 231, 237 (1999)
(relying on language in the SPD regarding discretionary
authority).
7
The Fourth Circuit has, in certain instances, enforced language
in the SPD when in opposition to terms of the Plan, even when a
disclaimer to the contrary is present in the SPD, as it is here.
See, e.g., Aiken v. Policy Management Sys. Corp., 13 F.3d 138,
140-41 (4th Cir. 1993); Pierce v. Security Trust Life Ins. Co.,
979 F.2d 23, 27 (4th Cir. 1992). Even assuming this precedent
survives in light of Amara, Cosey, and Woods, see supra note 6,
24
The last document that is part of the Plan is the
Policy.
The Policy does not have any language granting
Minnesota Life discretionary authority.
While the Policy does
say that a claimant must provide “proof satisfactory to
[Minnesota Life]” to collect on a claim, such verbiage is not
enough to confer discretionary authority.
Policy at ALPHA 186,
197, 199, 200, 202; Cosey, 735 F.3d at 165-68.
The court finds
that the Policy has no bearing on the discretionary authority of
Minnesota Life.
For the above reasons, the court concludes that any
decision made by Minnesota Life with respect to Akers’ benefits
is subject to review for an abuse of discretion.
In addition,
the court finds that Alpha did not retain discretionary
authority to review claims arising under Minnesota Life’s
policy. 8
it is not relevant here because the claimant, rather than the
administrator, must have significantly relied upon language in
the SPD or show prejudice flowing from a faulty plan description
to enforce the SPD. Aiken, 13 F.3d at 141. See also Glocker v.
W.R. Grace & Co., 974 F.2d 540, 542-43 (4th Cir. 1992).
8
Alpha also argues often throughout the briefing that its
dispute with Minnesota Life is one solely under the terms of the
insurance contract, and not subject to the vagaries of ERISA.
While that may (or may not) be true, the question to be decided
at this juncture is whether a decision under the Plan was
authorized, not whether a contract was breached.
25
B. Abuse of Discretion
The totality of responses to Akers’ claim by Minnesota
Life that have been placed in the record consists of two
documents.
The first is the denial letter of May 10, 2011.
That letter did not address the conversion privilege, merely
stating that “Mr. Akers did not have any group life insurance in
effect with our Company at the time of death.”
J., Ex. 4.
Alpha Mot. Summ.
The second is an e-mail by Bremseth to Akers’
counsel on May 26, 2011. 9
That message referenced conversion,
but stated that “[t]he termination of the Group policy by the
policy holder does not trigger an opportunity for conversion.
The insured must terminate eligibility (employment) with the
employer while under coverage to trigger such an event.”
Minn.
Life’s Mot. Summ. J. Ex. 14.
Minnesota Life also raises post-hoc arguments for why
the decision was not an abuse of discretion.
These reasons for
denial were never presented to the plaintiff during the claims
process.
The court must consider the actual basis for Minnesota
9
As previously noted, both documents also addressed the waiver
of premium benefit. Supra notes 3, 4. But the waiver of
premium benefit is irrelevant, as it only lasts until the date
the group insurance policy is terminated, Mr. Akers was under 60
and did not qualify, and Akers was seeking payment under the
conversion privilege. Policy at ALPHA 200.
26
Life’s determination, and is “free to ignore ERISA plan
interpretations that did not actually furnish the basis for [the
claims] administrator’s benefits decision”.
Marolt v. Alliant
Techsystems, Inc., 146 F.3d 617, (8th Cir. 1998).
Cf. Thompson
v. Life Ins. Co. of North America, 30 Fed. App’x 160, 164 (4th
Cir. 2002).
In any event, as explained below, the post-hoc reasons
for denial put forth by Minnesota Life would have constituted an
abuse of discretion had they been the basis for Minnesota Life’s
decision.
There are two arguments.
Minnesota Life argues that
its denial was not an abuse of discretion because the SPD
required that Akers be insured for five years prior to
termination to convert.
The other argument is that Minnesota
Life’s decision was justified based on the Policy language.
Specifically, Minnesota Life argues that it was within Minnesota
Life’s discretion of resolving ambiguities in the Policy to
determine that Mr. Akers could not convert based on the language
that Minnesota Life “may require” that Mr. Akers was insured for
five years to convert.
Of the Booth factors the court considers in
determining whether the decision was an abuse of discretion, the
most relevant factors to this case are (1) “the language of the
plan,” (2) “whether the decisionmaking process was reasoned and
27
principled,” (3) “the fiduciary's motives and any conflict of
interest it may have,” and (4) “whether the fiduciary's
interpretation was consistent with other provisions in the plan
and with earlier interpretations of the plan.”
Booth, 201 F.3d
at 342-43.
Minnesota Life’s responses to Akers’ claim are in
stark contradiction to the language of the Policy (and the SPD).
Its first response did not even reference the conversion
privilege.
Its second response stated that Alpha’s termination
of the group policy does not trigger an opportunity for
conversion.
Neither the Policy nor the SPD has any such
requirement.
Indeed, the Policy explicitly states that
conversion is available “if the group policy terminates.”
Policy at ALPHA 192.
It is clear that Minnesota Life ignored
the language of the Plan in crafting its responses to claims.
See Blackshear v. Reliance Std. Life Ins. Co., 509 F.3d 634, 639
(4th Cir. 2007), abrogated on other grounds by Metropolitan Life
Ins. Co. v. Glenn, 554 U.S. 105 (2008) (failure to correctly
interpret plain terms of plan is an abuse of discretion).
Minnesota Life’s post-hoc reliance on other terms of
the Plan is similarly unavailing.
Its first argument, that the
SPD requires five years of coverage to convert, ignores the fact
that the SPD also states that the Policy will govern in the
28
event of a conflict between the two documents.
Minnesota Life’s second post-hoc argument fails
because it is not in line with its prior interpretations of
similar policies.
In discovery, Minnesota Life disclosed
thirteen instances where it paid “insurance . . . that could
have been converted where the insured died within 31 days of the
group insurance policy termination date.”
Ex. 9, Ans. 10.
Alpha Mot. Summ. J.,
Minnesota Life produced nine policies, covering
eleven of these thirteen instances, each of which has identical
language regarding conversion. 10
They state:
Limited conversion is available if, after you have been
insured for at least five years, insurance is terminated
because . . . the group policy is terminated . . . .
You may convert up to the full amount of terminated
insurance, but not more than the maximum. The maximum is
the lesser of: (a) $10,000; and (b) the amount of life
insurance which terminated minus any amount of group life
insurance for which you become eligible under any group
policy issued or reinstated by us or any other carrier
within 31 days of the date the insurance terminated under
the group policy.
. . . .
If you die during the 31-day period allowed for conversion,
we will pay a death benefit regardless of whether or not an
application for coverage under an individual policy has
been submitted. The death benefit will be the amount of
insurance you would have been eligible to convert under the
terms of the conversion right section.
Alpha Mot. Summ. J., Ex. 10.
10
Of these eleven, four claims were
Nine policies were produced.
each.
Two policies had two claims
29
from insureds who did not have insurance in effect for five
years before the group policy terminated, but were paid by
Minnesota Life.
Alpha Mot. Summ. J., Ex. 9.
The two claimants
whose policies were not produced also did not have insurance in
effect for five years prior.
Alpha Mot. Summ. J., Ex. 9.
Minnesota Life has not stated whether the other seven claims
arose from insureds who were not insured for five years before
the group policy terminated.
Minnesota Life has produced no instances where it has
declined to pay benefits that could have been converted.
Thus,
even when the policy required five years of prior coverage to
convert but the insured was not so covered, Minnesota Life has
paid what could have been converted anyway. 11
This policy is
less restrictive -- it permits Minnesota Life to convert even
though Akers was not insured for five years prior.
Accordingly,
refusing to pay is inconsistent with Minnesota Life’s prior
practices and interpretations.
See, e.g., Juniper v. M & G
11
Minnesota Life argues that some of the thirteen payments were
payments under the waiver of premium benefit in these policies.
That provision allows insurance to continue, often beyond the
date of the group policy termination, for an insured who becomes
disabled. But Minnesota Life provides no evidence to support
this claim and does not identify which payments were for a
waiver of premium benefit. More important, its discovery
response identifies the thirteen payments as ones where it paid
insurance . . . “that could have been converted where the
insured died within 31 days of the group insurance policy
termination date,” not as waiver of premium benefit payments.
30
Polymers USA, LLC, 495 F. Supp. 2d 590, 601 (S.D. W.Va. 2007);
Patel v. United of Omaha Life Ins. Co., Civ. Action No. PWG-12880, 2013 WL 212863, at *7 (D. Md. Jan. 18, 2013).
As to whether Minnesota Life’s decision was reasoned
or principled, the court concludes that it was not.
The first
response did not address the conversion privilege, and the
second plainly ignored the language of the Policy.
Finally, there was a conflict of interest involved.
Minnesota Life was both the claims administrator and the party
that would pay a claim, leaving Minnesota Life with an incentive
to deny claims.
Glenn, 554 U.S. at 116.
The court finds that
this conflict, involving several hundreds of thousands of
dollars, was “significant given ‘the circumstances of this
case.’”
See Fortier v. Principal Life Ins. Co., 666 F.3d 231,
236 n.1 (4th Cir. 2012) (quoting Glenn, 554 U.S. at 108);
Florence Nightingale Nursing Serv., Inc. v. Blue Cross/Blue
Shield of Alabama, 41 F.3d 1476, (11th Cir. 1995) (pecuniary
interest supports a finding of conflict of interest).
This
pecuniary interest is magnified because Alpha terminated its
business relationship with Minnesota Life before the claim was
submitted, so it would no longer receive income from Alpha or
its employees.
31
The court concludes that Minnesota Life’s decisions in
this matter constituted an abuse of discretion.
IV.
For the reasons stated above, it is, accordingly,
ORDERED that:
(1) Minnesota Life’s Motion for Summary Judgment, filed
March 27, 2013, be, and it hereby is, DENIED as set
forth herein;
(2) Alpha’s Motion for Summary Judgment on Coverage, filed
March 27, 2013, be, and it hereby is, GRANTED as set
forth herein;
(3) Akers’ Motion for Summary Judgment, filed March 22,
2013, be, and it hereby is, GRANTED as set forth
herein;
(4) Minnesota Life abused its discretion in denying Ms.
Akers’ claim;
(5) by April 18, 2014, the parties shall submit to the
court a joint status report recommending a schedule for
resolution of the remaining issues in this case.
32
The Clerk is directed to transmit copies of this order
to counsel of record and any unrepresented parties.
ENTER: March 31, 2014
John T. Copenhaver, Jr.
United States District Judge
33
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