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Smith v. Standard Life Insurance Co.

United States District Court, W.D. Oklahoma

February 2, 2018

GREG SMITH, Plaintiff,



         Before the Court is Plaintiff's Motion for Summary Judgment Against Standard Insurance Company on His Second Claim for Relief [Doc. No. 37], filed pursuant to Fed.R.Civ.P. 56. Both Defendant Standard Insurance Company (“Standard”) and Defendant Carlisle Corporation (“Carlisle”) have responded to the Motion, which is fully briefed.[1]

         Factual and Procedural Background

         Plaintiff Greg Smith is the surviving spouse of Cheryl Smith, who was employed before her death by a subsidiary of Carlisle. Plaintiff brought suit in the District Court of Oklahoma County, Oklahoma, against Carlisle and its insurer, Standard, to recover life insurance benefits allegedly due under an employee benefit plan sponsored by Carlisle and funded by a group life insurance policy issued by Standard (the “Policy”). Defendants timely removed the case to federal court based on jurisdiction under 28 U.S.C. § 1331 due to claims arising under the Employee Retirement Income Security Act of 1974 (ERISA”), 29 U.S.C. § 1001 et seq.

         The case concerns Standard's decision, as the claims administrator, to pay only the basic life insurance coverage benefit provided by the Policy for all eligible employees and to deny an additional coverage benefit that employees could elect to purchase under the terms of the Policy. By agreement of the parties, Plaintiff's claims have been bifurcated, and the first phase of the case is limited to a ruling on the “Second Claim for Relief” in his pleading. See Sched. Order [Doc. No. 34]; Pet. [Doc. No. 1-2], p.13. By this claim, Plaintiff asserts that he is entitled to recover the additional life insurance benefit provided by the Policy due to an “Incontestability Clause.” Standard refused to pay the benefit on the ground that Mrs. Smith did not effectively enroll in the additional coverage. Plaintiff claims, however, that Standard is precluded from relying on any flaw in the enrollment process because the Incontestability Clause applies and “renders Plaintiff's claim [for benefits] incontestable for any reason other than non-payment of premiums.” See Pet. [Doc. No. 1-2], ¶ 39. By the instant Motion, Plaintiff seeks a summary adjudication of this “Incontestability Claim” in his favor as a matter of law.

         Standard of Decision

         Although Plaintiff has moved for summary judgment, Rule 56 plays a limited role in an ERISA case. “[S]ummary judgment is merely a vehicle for deciding the case; the factual determination of eligibility for benefits is decided solely on the administrative record, and the non-moving party is not entitled to the usual inferences in his favor.” LaAsmar v. Phelps Dodge Corp. Life, Accidental Death & Dismemberment & Dependent Life Ins. Plan, 605 F.3d 789, 796 (10th Cir. 2010) (internal quotation omitted); Cardoza v. United of Omaha Life Ins. Co., 708 F.3d 1196, 1201 (10th Cir. 2013).

         Plaintiff concedes that the ERISA plan and the Policy gave Standard discretionary authority to decide claims for benefits and interpret the Policy and, thus, judicial review of Standard's benefit decision is generally governed by a deferential arbitrary-and-capricious standard of review. See Pl.'s Mot. Summ. J. [Doc. No. 37] at 5-6. Plaintiff argues, however, that Standard's determination that the Incontestability Clause does not apply to Plaintiff's claim “is a pure legal conclusion” and that legal conclusions are subject to de novo review. Id. at 6 (emphasis omitted). Plaintiff provides no controlling legal authority for this argument but relies primarily on federal appellate court decisions from other circuits.

         In the Court's view, the applicability of the Incontestability Clause under the circumstances requires an interpretation of the Policy and not merely a legal ruling, as discussed infra. The law of the Tenth Circuit is clear: “Under [ERISA's] arbitrary-and-capricious standard, our review is limited to determining whether the interpretation of the plan was reasonable and made in good faith.” LaAsmar, 605 F.3d at 796 (internal quotation omitted); Cardoza, 708 F.3d at 1201.[2" name="FN2" id= "FN2">2] Thus, the Court's task in reviewing Standard's benefit decision is to determine whether Standard's conclusion that the Incontestability Clause did not apply “is predicated on a reasoned basis.” See Graham v. Hartford Life & Accident Ins. Co., 589 F.3d 1345, 1357 (10th Cir. 2009) (internal quotation omitted). If Plaintiff demonstrates a mistake of law, however, this is one “indicia of an arbitrary and capricious denial of benefits.” Cardoza, 708 F.3d at 1201-02; Graham, 589 F.3d at 1357; Caldwell v. Life Ins. Co. of N. Am., 287 F.3d 1276');">287 F.3d 1276, 1282 (10th Cir. 2002).

         Undisputed Facts

         The Policy was part of an “employee welfare benefit plan” as defined by ERISA, 29 U.S.C. § 1002(1), that was maintained by Carlisle to provide life insurance benefits for salaried, fulltime employees of Carlisle and its subsidiaries. The Policy funded the life insurance benefits provided by the plan beginning January 1, 2012. Carlisle was the policyholder and the ERISA plan administrator. Standard was the insurer and the claims administrator for the plan. The Policy provided two types of insurance coverage to eligible employees: a) non-contributory, “Plan 1” or “basic life” coverage; and b) contributory, “Plan 2” or “additional life” coverage. This case concerns only the latter type of coverage.

         Mrs. Smith was a salaried, fulltime employee of Carlisle Food Service Products, Inc., a wholly owned subsidiary of Carlisle, before her death in 2014. During open season for the 2012 plan year (the time period during which eligible employees could make changes in elected coverage), Mrs. Smith made the election to enroll in additional life coverage by submitting an application for insurance in the amount of three times her annual earnings, and agreeing to a payroll deduction for premium payments. Carlisle processed Mrs. Smith's application and, from January 2012 until her death (a period of 33 months), deducted the amount of the required premium payments from her paychecks and remitted the payments to Standard. Mrs. Smith died September 23, 2014.

         Plaintiff was Mrs. Smith's spouse and the designated beneficiary of all her life insurance coverage. After her death, he timely submitted a claim for payment of both types of life insurance benefits. Standard promptly paid Plaintiff the basic life benefit provided by the Policy in the amount of $88, 000.00 on November 12, 2014, but later denied the additional life benefit that Mrs. Smith had elected and paid for during her employment.

         Standard investigated the claim for additional life coverage and, by letter dated February 26, 2015, decided that Mrs. Smith's enrollment for the coverage was incomplete and ineffective because Standard had not received or approved medical evidence for her, as required by the “Evidence of Insurability” (or “EOI”) provisions of the Policy. Specifically, Standard's written decision stated in pertinent part as follows:

Under the terms of the policy, Evidence Of [sic] Insurability is required for members that were eligible but not insured under the prior plan. Therefore, this election required Cheryl Smith to complete and submit a Medical History Statement to Standard Insurance Company and gain approval from our Medical Underwriting Department before the Plan 2 Additional Life Insurance could become effective. The Standard has no record of receiving and approving medical evidence for Cheryl Smith. Therefore, the claim for $132, 000 in Plan 2 (additional) Life Insurance must be denied.

Admin. R. (hereafter, “AR”) 361. Under this view, the insurance premiums paid by Mrs. Smith were wrongly received, and with the letter, Standard remitted a check in the ...

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