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Lauga v. Applied-Cleveland Holdings, Inc.

United States District Court, E.D. Louisiana

July 20, 2018


         SECTION: “H” (3)



         Before the Court are cross-motions for summary judgment by Plaintiff Kim Lauga (Doc. 81) and Defendants Metropolitan Life Insurance Company (Doc. 85) and Applied-Cleveland Holdings, Inc. and Applied Consultants, Inc. (Doc. 87). For the following reasons, Plaintiff's Motion is DENIED and Defendants' Motions are GRANTED.


         This action arises from the denial of life insurance benefits under a group life insurance policy (“the Plan”) governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). Plaintiff Kim Lauga's husband, Glenn Lauga (“Glenn”), purchased life insurance coverage as part of the benefits offered by his employer, Defendants Applied-Cleveland Holdings, Inc. and Applied Consultants, Inc (collectively, “Applied”), and administered by Defendant Metropolitan Life Insurance Company (“MetLife”). The Plan named Plaintiff as the primary beneficiary. Although Glenn initially requested the coverage in March 2013, it did not become effective until August 2013. On July 9, 2015, Glenn committed suicide. Plaintiff's claim for benefits under the Plan was denied because the Plan excludes payment in the event that the insured commits suicide within two years of the date the insurance took effect.

         The following facts are undisputed. On February 20, 2013, during the open enrollment period for the March 1, 2013 plan year, Glenn completed Applied's online enrollment form requesting $400, 000 in life insurance coverage. As part of the application, Glenn was required to complete a Statement of Health form. The Statement of Health form instructed the “Recordkeeper, ” defined as the “Group Customer, a Third Party Administrator, or MetLife, ” to fill in the Group Customer Information and Insurance Information sections. The form instructed the employee to fill in the remainder of the form and send it directly to MetLife. Glenn filled out a Statement of Health form on March 13, 2013. Glenn's form requested only $200, 000 of coverage and was missing information from the Insurance Information section, including his date of hire and annual salary. Glenn submitted the form to Applied. The same day, Applied submitted the form to MetLife, which received it on March 14, 2013.

         MetLife's application process required that Glenn undergo a paramedical exam, which was scheduled by a third-party provider. Glenn's application was terminated in Applied's system on June 18, 2013 for the failure to complete a paramedical exam. On July 5, 2013, the paramedical exam was completed. MetLife received the results on July 10, 2013. On July 11, 2013, MetLife approved Glenn for $200, 000 of coverage. Glenn's application to Applied was reinstated on July 18, 2013 upon approval from MetLife. The insurance coverage was given an effective date of August 1, 2013. During the 2015 open enrollment period, Glenn obtained an additional $240, 000 in coverage.

         Glenn committed suicide on July 9, 2015. Plaintiff submitted a claim for life insurance benefits to MetLife on July 10, 2015. MetLife issued a denial of benefits on December 18, 2015 based on the Plan's two-year suicide exclusion. MetLife completed the administrative appeal of Plaintiff's claim on June 3, 2016, upholding the denial of benefits. In such an event, the Plan requires that all premiums paid be refunded. MetLife refunded the premiums paid toward Glenn's coverage in two parts, a check issued to Applied in July 2016 and a credit on Applied's August 2016 invoice. Applied refunded the premium amounts paid by Glenn to Plaintiff on November 11, 2016.

         Defendants additionally submit evidence of the following. MetLife mailed the Statement of Health form back to Glenn on March 21, 2013 because it was missing his date of hire and annual salary. MetLife received a completed Statement of Health form from Glenn on April 5, 2013. MetLife submitted an order for a paramedical exam to a third-party vendor on April 17, 2013. On May 18, 2013, noting that the paramedical exam had not been completed, MetLife sent a follow-up to Glenn. When the policy was ultimately approved, Glenn was surprised to learn that he only received $200, 000 in coverage when he elected $400, 000 during the online application. Applied explained that the Statement of Health form that Glenn completed only requested $200, 000. In response, Applied offered him the opportunity to undergo a new paramedical examination and submit a new Statement of Health form to obtain the additional coverage. Glenn declined to do so at that time or during the 2014 open enrollment period. Defendants submit emails and activity records from their employees describing this chain of events after the fact. Plaintiff does not present any evidence to the contrary, but points out that Defendants have not produced the original records referenced in the description of events.

         Plaintiff makes the following claims: 1) for equitable relief as a remedy for breach of fiduciary duty under 29 U.S.C. § 1132(a)(3) in failing to timely bind coverage at the requested amount; 2) for benefits under the terms of the plan pursuant to 29 U.S.C. § 1132(a)(1)(B), either as reformed following a grant of equitable relief on Claim 1 or as written; 3) for penalties pursuant to 29 U.S.C. § 1132(c)(1) for Defendants' failure to furnish plan documents upon request; and 4) for attorney's fees pursuant to 29 U.S.C. § 1132(g)(1).[1]

         Pursuant to this Court's briefing order, all parties now move for summary judgment on Plaintiff's four claims. The Court will address each claim in turn.


         Summary judgment is appropriate if “the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations. . ., admissions, interrogatory answers, or other materials” “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[2] A genuine issue of fact exists only “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[3]

         In determining whether the movant is entitled to summary judgment, the Court views facts in the light most favorable to the non-movant and draws all reasonable inferences in his favor.[4] “If the moving party meets the initial burden of showing that there is no genuine issue of material fact, the burden shifts to the non-moving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial.”[5] Summary judgment is appropriate if the non-movant “fails to make a showing sufficient to establish the existence of an element essential to that party's case.”[6] “In response to a properly supported motion for summary judgment, the nonmovant must identify specific evidence in the record and articulate the manner in which that evidence supports that party's claim, and such evidence must be sufficient to sustain a finding in favor of the nonmovant on all issues as to which the nonmovant would bear the burden of proof at trial.”[7] The Court does “not . . . in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts.”[8] Additionally, “[t]he mere argued existence of a factual dispute will not defeat an otherwise properly supported motion.”[9]

         To the extent that any of Plaintiff's claims involve a review of the Plan administrator's interpretation of the Plan and determination of eligibility for benefits, such claims will be determined under the abuse of discretion standard of review.[10] Review for abuse of discretion “is the functional equivalent of arbitrary and capricious review.”[11] “A decision is arbitrary if it is ‘made without a rational connection between the known facts and the decision.'”[12]


         I. Plaintiff's Claim for Breach of Fiduciary Duty

         Plaintiff alleges that Defendants, as administrators of the Plan, breached their fiduciary duties to Plaintiff and seeks equitable relief as a result. Section 1132(a)(3) allows a beneficiary of an ERISA plan to obtain “appropriate equitable relief” to redress violations or enforce provisions of ERISA.[13] Under an ERISA plan, a fiduciary must “discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries” and do so “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.”[14] An employee benefit plan must name one or more fiduciaries who have control and authority to manage the plan.[15] ERISA also makes any person a fiduciary of a plan to the extent that he “has any discretionary authority or discretionary responsibility in the administration of such plan.”[16]This definition both broadens the pool of who can become a fiduciary, but also narrows the context in which each fiduciary owes its duty.[17] Duties that are merely clerical do not give rise to a fiduciary relationship.[18]

         Plaintiff identifies several equitable remedies available to her: reformation, surcharge, and equitable estoppel. Reformation requires a plaintiff to show either a mutual mistake of both parties or the mistake of one party coupled with fraud or inequitable conduct by the other.[19] Surcharge requires a plaintiff to show that a) the defendant owed the plaintiff a fiduciary duty, b) the defendant breached that duty, c) plaintiff suffered actual harm, and d) defendant's breach of duty was the cause of plaintiff's harm.[20] Equitable estoppel requires a plaintiff to prove “(1) a material misrepresentation; (2) reasonable and detrimental reliance upon the representation; and (3) extraordinary circumstances.”[21]

         Both Applied and MetLife argue that Plaintiff cannot bring a cause of action under § 1132(a)(3) for equitable relief because a remedy exists under § 1132(a)(1)(B) and the terms of the Plan. Previously, this Court held that the substance of the relief that Plaintiff seeks-redress for the failure of Defendants to timely bind the insurance policy-is equitable in nature and separate from that available under the Plan, and therefore appropriate for § 1132(a)(3).[22] Nothing in the evidence submitted changes that conclusion.

         A. Defendant Applied's Breach of Fiduciary Duty

         Plaintiff specifically alleges that Defendant Applied breached its duties to Plaintiff as a Plan fiduciary by: 1) failing to fill in Glenn's employment start date and salary information on the first Statement of Health form, 2) failing to notify MetLife that Glenn had applied for $400, 000 in coverage through the online system, and 3) failing to take corrective measures to bind life insurance in the amount of $400, 000 as Glenn originally requested.

         While the Statement of Health form clearly required Applied to fill in Glenn's hire date and salary, Applied's failure to do so was not a breach of fiduciary duty because the required act was merely clerical. Fiduciary duties in the ERISA context extend only to discretionary functions exercised in the administration of a plan.[23] Applied was not exercising any discretionary function when it failed to fill out the Statement of Health form. Therefore, Applied did not breach a fiduciary duty.

         Plaintiff mistakenly relies on Strom v. Goldman, Sachs & Co. as implicitly holding that an employer owes a duty to an employee to promptly process life insurance application forms.[24] The Second Circuit, however, expressly disclaimed any such implication.[25] The holding of Strom was strictly limited to whether the relief that plaintiff sought was equitable in nature.[26] Plaintiff also cites to Mauroner v. Massachusetts Indemnity & Life Insurance Co., which held that an insurance company has a duty under Louisiana tort law to process applications that it receives in a timely manner.[27] To the extent that a case decided under the Louisiana Civil Code is even persuasive authority for matters governed by the federal common law of trusts, the case provides no guidance on the nature of the duties of an employer to fill in portions of an application for insurance from a third party.[28]

         In Hughes v. Legion Insurance Co., however, the district court did find that an employer breached its fiduciary duty by failing to properly enroll an employee's child in their health insurance plan and misrepresenting that the child had been enrolled.[29] There, the employer actually handled and completed all forms between the employee and insurance provider. The provider informed the employer that the employee's application was missing information. The employer failed to provide the required documents, but repeatedly represented to the employee that the child was enrolled. Here, Applied did not take on the role of intermediary between the employee and insurance provider, did not make any misrepresentations, and did not perform the function of evaluating whether coverage had been bound. Because Applied was performing a clerical function, rather than exercising discretion, Applied owed Plaintiff no fiduciary duty.

         Even if Applied had breached a fiduciary duty that it owed, Plaintiff cannot prove that Applied's actions caused her harm. Plaintiff presents no evidence of a mistake or misrepresentation, as required for reformation or equitable estoppel, and therefore the only equitable relief available to Plaintiff is surcharge.[30] One of the elements of a claim for surcharge is that the defendant's breach of duty caused plaintiff's harm.[31]

         Glenn sent the incomplete form to Applied on March 13, 2013, who then forwarded it to MetLife. MetLife returned the form to Glenn requesting the additional information on March 21, eight days later. Assuming that nothing else changed and the entire timeline of Glenn's application moved forward by eight days, MetLife would have approved the coverage on July 3, 2013. In that case, the coverage would still have become effective on August 1, 2013, the first day of the month after the application was approved. Plaintiff argues that the delay was actually 24 days, the time from when Glenn submitted his initial Statement of Health form to when he submitted the complete version. There is no reason, however, to attribute to Applied the sixteen days between when Glenn received the incomplete form and instructions on how to complete it and when MetLife received the complete form.

         Moreover, Applied's failure to fill out the missing information was not the proximate cause of Plaintiff's injury.[32] Any delay attributable to Applied made up only a small part of the overall delay between when Glenn first filled out his form and when the insurance application was approved. The other delays-Glenn's own delay in returning a completed Statement of Health form to MetLife and the delay in obtaining a paramedical exam-were intervening causes significant enough to attenuate the connection between Applied's acts and Plaintiff's injury. Similarly, Glenn's suicide is a superseding cause. Finally, again assuming that Applied owed a fiduciary duty at all, the scope of the duty to complete two boxes on a form would not extend to the risk that an insured would commit suicide before the Plan's exclusion expired. Because Applied's contribution to Plaintiff's injuries was minor, superseded, and beyond the scope of any duty to fill out information on a form, Plaintiffs cannot, as a matter of law, establish that Applied was the legal cause of Plaintiff's injuries.

         The other two breaches by Applied that Plaintiff identifies involve the discrepancy between the amount of insurance coverage requested on the online application and the Statement of Health form. Such claims only offer relief if the suicide exclusion does not bar all coverage in the first place. Because this Court ultimately upholds the exclusion, it does not reach the issue of whether Applied breached a duty relating to the amount of coverage. Accordingly, Defendant Applied is entitled to summary judgment on Plaintiff's claim against it for breach of fiduciary duty.

         B. Defendant MetLife's ...

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