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Swenson v. Lincoln National Life Insurance Co.

United States District Court, W.D. Louisiana, Shreveport Division

May 18, 2018

KATHERYN SWENSON
v.
LINCOLN NATIONAL LIFE INSURANCE COMPANY, ET AL.

          HORNSBY JUDGE.

          MEMORANDUM RULING

          ELIZABETH ERNY FOOTE DISTRICT JUDGE.

         In the underlying action, Plaintiff seeks to recover life insurance benefits from United of Omaha Life Insurance Company ("United"). Plaintiffs late husband, Donald Swenson ("Swenson") was employed by Eldorado Casino Shreveport Joint Venture ("Eldorado") and allegedly participated in Eldorado's ERISA-governed life insurance plan administered by United. United has brought a third-party complaint against Eldorado, which Eldorado has moved to dismiss. [Record Documents 18 at 29-32 and 23]. Because the facts alleged do not entitle United to indemnity, Eldorado's motion is GRANTED as to United's indemnity claim. However, because United has alleged that Eldorado negligently represented Swenson's eligiblity for coverage, the motion is DENIED as to United's claim for defense costs.

         I. Background

         The Court has amply discussed the factual and procedural background in its prior rulings in this matter. See Swenson v. Eldorado Casino Shreveport Joint Venture (Swenson I), No. 15-CV-2042, 2017 WL 1334307 (W.D. La. Apr. 7, 2017), ofd sub nom. Swenson v. United of Omaha Life Ins. Co., 876 F.3d 809 (5th Cir. 2017); Swenson I, No. 15-CV-2042, 2016 WL 6106483 (W.D. La. Oct. 19, 2016); [Record Document 35 in No. 15-CV-2042]. After Swenson's death, United denied Plaintiffs life insurance claim, asserting that Swenson was ineligible and that United received no premiums for his coverage. [Record Document 1-2 at l].[1] After Plaintiff sued United and Eldorado, [2] the Court dismissed her state-law and equitable claims with prejudice and dismissed her claim for benefits under 29 U.S.C. § 1132(a)(1)(B) without prejudice for failure to exhaust her administrative remedies. Swenson I, 2017 WL 1334307, at *4-5, *7. While an appeal was pending, Plaintiff settled with Eldorado. [Record Document 23-1 at 9]. The Fifth Circuit then affirmed this Court's dismissal of Plaintiff s state-law and equitable claims. Swenson I, 876 F.3d 809.

         Following her unsuccessful appeal, Plaintiff brought the present action. [Record Document 11]. In its answer, United named Eldorado as a third-party defendant, alleging that Eldorado knew that Swenson was ineligible for life insurance coverage because he was not actively working and failed to share this information with United when submitting premiums on Swenson's behalf. [Record Document 18 at 31]. On the basis of Eldorado's alleged duty to "inform [United] who was and was not eligible" for benefits, United seeks indemnification if "United ... is held liable to the plaintiff for any sums whatsoever because of Eldorado's breach of fiduciary duty to Donald Swenson." [Id. at 32]. United has also alleged that "Eldorado is liable to United ... for all defense costs incurred in connection with this matter by United ... because, if Eldorado had informed United that Donald Swenson was never eligible for coverage under this policy, United would not be facing these claims and demands . . . ." [Id.]. Eldorado responded with the instant motion, which denies any legal basis for indemnity as well as any duty to inform United of employees' eligibility for benefits. [Record Document 23]. The parties have filed an opposition, a reply, and a surreply. [Record Documents 27, 28, 33].

         II. Law and Analysis

         A. Standard of Review

         In order to survive a motion to dismiss under Rule 12(b)(6), a complaint must "state a claim to relief that is plausible on its face." Bell At!. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Tivombly, 550 U.S. at 556). In determining whether a complaint states plausible claim, the court must construe the complaint in the light most favorable to the plaintiff, see In re Great Lakes Dredge & Dock Co., 624 F.3d 201, 210 (5th Cir. 2010), and accept as true all well-pleaded factual allegations, see Twombly, 550 U.S. at 555; In re Katrina Canal Breaches Litig, 495 F.3d 191, 205 (5th Cir. 2009). However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). Thus, the Court does not have to accept as true "conclusory allegations, unwarranted factual inferences, or legal conclusions." Plotkin v. IPAxessInc, 407 F.3d 690, 696 (5th Cir. 2005) (citing Southland Sec. Corp. v. INSpirelns. Sols, Inc., 365 F.3d 353, 361 (5th Cir. 2004)).

         B. Indemnity Resulting from Eldorado's Alleged Fiduciary Duty to United

         United has alleged that Eldorado "breached its fiduciary duties to [United]" by failing to inform United that Swenson was not actively working and was ineligible for coverage and by submitting premiums on his behalf. [Record Documents 18 at 30-32 and 27 at 15].[3] United asserts that if Eldorado had not breached this alleged duty by submitting an application for a person that Eldorado knew was ineligible for coverage, United would not have been sued; United therefore concludes that Eldorado is liable for United's defense costs and any sums for which United is held liable to Plaintiff. [Record Documents 18 at 31-32 and 27 at 15-17]. Eldorado argues that under ERISA an employer has no fiduciary duty to an insurer and that because United, not Eldorado, makes eligibility determinations, Eldorado had no duty prior to a claim being made to inform United whether Swenson was actively working. [Record Document 23-1 at 12-14]. As the plan administrator, [Record Document 1-2 at 72], Eldorado has a fiduciary duty to Swenson, see 29 U.S.C. § 1002(14)(A), (2l)(A) (2012); Wildburv. ARCO Chem. Co., 97'4 F.2d 631, 645 (5th Cir. 1992). Because a "plan fiduciary's responsibilities run only to participants and beneficiaries, " Boggs v. Boggs, 520 U.S. 833, 850 (1997) (citing 29 U.S.C. § 1104(a)(1) (2012)), and because United is neither a participant nor a beneficiary, Eldorado does not have a fiduciary duty to United. Therefore, United cannot claim indemnity on the basis of this alleged duty.

         C. Indemnity Resulting from Eldorado's Fiduciary Duty to Swenson

         United has alleged that Eldorado breached its fiduciary duty to Swenson by accepting an enrollment form from him and paying premiums on his behalf and for that reason must indemnify United if United is held liable to Plaintiff. [Record Document 18 at 30-32]. Eldorado argues that there is no right of indemnity under ERISA. [Record Document 23-1 at 11-14].

         In their respective roles as plan administrator and claims administrator, [Record Document 1-2 at 65, 72], both Eldorado and United owed Swenson fiduciary duties, see 29 U.S.C. § 1002(14)(A), (2l)(A); Sanders v. Unum Life Ins. Co. of Am.,553 F.3d 922, 925 (5th Or. 2008); Wildbur, 974 F.2d at 645. Under the common law of trusts from which ERISA derives, two co-fiduciaries, both of whom have participated in a breach of trust, may obtain contribution or indemnity. See Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 570 (1985); Restatement (Third) of Trusts § 102(1) & cmt. b(2) (2012). The Seventh and Second Circuits have held that ERISA co-fiduciaries have a right to indemnity or contribution, [4] while the Eighth and Ninth Circuits deny ERISA co-fiduciaries these remedies. Compare Chesemore v. Fenkell,829 F.3d 803 (7th Cir. 2016) and Chemung Canal Trust Co. v. Sovran Bank/Md.,939 F.2d 12 (2d Cir. 1991) with Travelers Cas. (&Sur. Co. of Am. v. IADA Servs., Inc.,497 F.3d 862 (8th Cir. 2007) and Kim v. Fujikawa,871 F.2d 1427 (9th Or. 1989). District courts in the Fifth Circuit are split Compare Maher v. Strachan Shipping Co.,817 F.Supp. 43 (E.D. La. 1993) (finding indemnity and contribution rights) within re Enron Corp. Sees., Derivative, & "ERISA" Eitig,228 F.R.D. ...


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