173 F.3d 542 (6th Cir. 1999), 97-2225, Krohn v. Huron Memorial Hosp.

Docket Nº:97-2225.
Citation:173 F.3d 542
Party Name:Margaret KROHN, Plaintiff-Appellant, v. HURON MEMORIAL HOSPITAL, Defendant-Appellee.
Case Date:April 01, 1999
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

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173 F.3d 542 (6th Cir. 1999)

Margaret KROHN, Plaintiff-Appellant,



No. 97-2225.

United States Court of Appeals, Sixth Circuit

April 1, 1999

Argued Dec. 9, 1998.

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[Copyrighted Material Omitted]

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Christopher A. Hajeck (argued and briefed), Gault, Davison, Bowers, Hill, Parker & McAra, Flint, MI, for Plaintiff-Appellant.

Scott C. Strattard (argued and briefed), Braun, Kendrick, Finkbeiner, Schafer & Murphy, Saginaw, MI, for Defendant-Appellee.

Before: NELSON, SILER, and DAUGHTREY, Circuit Judges.

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DAUGHTREY, Circuit Judge.

Plaintiff Margaret Krohn, a former employee of defendant Huron Memorial Hospital, was permanently disabled in an automobile accident but lost the opportunity to secure long-term disability benefits, she alleges, due to the hospital's breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq. She appeals the district court's grant of summary judgment to the defendant, contending that the court construed the hospital's fiduciary duty too narrowly. We agree and conclude that the hospital is liable for failing (1) to respond adequately to a request by the plaintiff's husband for information about plan benefits and (2) to alert its long-term-disability insurer that the plaintiff had made an application for benefits. For these reasons, we reverse the district court's judgment and remand.


The parties do not dispute the relevant facts. Margaret Krohn was employed as a registered nurse by Huron Memorial Hospital at the time of a March 1992 automobile accident that caused a closed-head injury and resulted in her permanent disability. At the time of Krohn's injury, she was eligible for both short-term and long-term disability benefits through Huron Memorial Hospital's disability policies. Under the short-term disability plan, a participant became eligible for benefits on the 15th day of an injury or illness in the amount of 60 percent of weekly earnings, up to a maximum of $200.00 per week, for up to 26 weeks. Under the long-term disability policy, a participant became eligible for benefits on the 180th day of an injury or illness in the amount of 60 percent of monthly earnings, up to a maximum of $3,000 per month. Based on Krohn's age at the time of the accident (42), she would have been entitled to disability benefits until age 65, for a total of 23 years.

When the long-term benefits first became available in 1988, some four years before Krohn's injury, Frances Neville, a personnel assistant at Huron Memorial, met individually with each nurse to provide them with a booklet regarding the long-term disability policy and orally explain the plan. Krohn later testified that she did not recall receiving the book, but conceded that it was "very possible" that she did receive it.

Within two weeks of Krohn's accident, her husband, James Krohn, had a conversation with Nancy Stanton, a personnel assistant at Huron Memorial Hospital, and inquired about the benefits to which his wife was entitled as a result of her injury and inability to work. According to Stanton's deposition testimony regarding that conversation, she

... would have told him [Krohn] that--if she was going to be out for more than 14 days, that she would have been eligible for short-term disability, and that it would be 60 percent of her gross weekly wage up to a max of $200 for 26 weeks.... And I had told him that based on my handling of short-term disability, that employees that were involved in automobile accidents normally would opt for the car insurance, and that they normally paid a higher rate. I also told him in the abstract that you cannot collect any money from the short-term disabilities if you're collecting it from other companies.

At the conclusion of this meeting, Stanton gave James Krohn a form entitled Initial Application For Disability Benefits, which he took with him.

James Krohn completed and returned the application for disability benefits form that Stanton had given him. He filled in the "employee's statement" section and had his wife's physician complete the section for the "physician's statement." The doctor indicated on the form that he anticipated that Margaret Krohn could return to

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work within five months. Although James Krohn testified in deposition that he had no recollection of completing the application or returning it to Stanton, the parties nonetheless agree that it is his handwriting. Stanton testified that James Krohn returned the application form to her on or around April 8, 1992, and informed her at that time that Margaret Krohn had decided to collect the lost-wages benefits provided under her car insurance policy. Stanton said that she then placed the application, which had been completed except for the employer verification statement, in Krohn's employee file and did not submit the application form to Huron Memorial's long-term disability insurance provider, UNUM Life Insurance Company of America, as a claim for benefits.

Three years later, Krohn's benefits under her auto insurance policy expired, and she applied for the long-term disability benefits provided by UNUM. UNUM denied her claim as untimely, pointing out that its long-term disability policy required that notice of a claim be given to it or its authorized agents within 30 days of the occurrence of a loss covered by its policy, or as soon thereafter as reasonably possible. Under the terms of the UNUM policy, a claimant had to provide UNUM with proof of disability, including the occurrence, the character, and the extent of loss, within 90 days of the completion of the 180-day elimination period that had to elapse before benefits became payable. Failure to provide such proof within the 90-day time period "w[ould] not invalidate nor reduce any claim if it was not reasonably possible to give proof within such time, provided that proof [wa]s furnished as soon as reasonably possible and in no event later than one year from the time proof [wa]s otherwise required." Instructions provided by the insurer to the plan administrator instructed the plan administrator to complete and submit a long-term disability claim form "four to six weeks before the end of the employee's elimination period or earlier if possible."

Based on these provisions, UNUM denied Krohn's application for long-term disability benefits, insisting that the elimination period for an injury on March 21, 1992, would have been satisfied on September 17, 1992. Thus, because UNUM did not receive Krohn's application for benefits until April 28, 1995, UNUM concluded that the claim was not timely submitted under its policy.

This action was originally filed in state court against both UNUM and Huron Memorial Hospital. With Huron Memorial's consent, UNUM removed the suit to federal court, on the ground that plaintiff's claims were preempted by ERISA, and secured a grant of summary judgment in its favor, leaving Huron Memorial as the sole defendant. The district court also dismissed the plaintiff's state law claims.

Krohn and Huron Memorial then filed cross-motions for summary judgment on Krohn's ERISA breach-of-fiduciary-duty claim, in which she alleged that various acts and omissions by Huron Memorial caused her injury. The district court granted Huron Memorial's motion and entered summary judgment in its favor. From that order, Krohn now appeals.


The parties agree that the UNUM long-term disability policy qualifies as an employee welfare benefit plan under ERISA and that Huron Memorial was the plan administrator and ERISA fiduciary. Plaintiff Krohn raises two arguments on appeal. First, she contends that the district court erred in concluding that Huron Memorial did not breach its fiduciary duty under ERISA by failing to disclose the availability of long-term disability benefits to her spouse when a request for benefit information was made on her behalf. Second, she contends that the district court erred in holding that Huron Memorial did not breach its fiduciary duty by failing to notify UNUM, its long-term-disability insurer, of her claim for benefits after her husband completed and returned the form

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entitled Initial Application for Disability Benefits.

  1. The Duty to Inform

    ERISA imposes high standards of fiduciary duty upon administrators of an ERISA plan. See 29 U.S.C. § 1104(a)(1); Kuper v. Iovenko, 66 F.3d 1447, 1458 (6th Cir.1995). As we have previously explained, ERISA's fiduciary duty encompasses three components. See Berlin v. Michigan Bell Telephone Co., 858 F.2d 1154, 1162 (6th Cir.1988). The first is a "duty of loyalty" which requires that "all decisions regarding an ERISA plan 'must be made with an eye single to the interests of the participants and beneficiaries.' " Id. (quoting Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir.1982)); accord 29 U.S.C. § 1104(a)(1) (requiring a plan fiduciary to "discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries"). Second, ERISA imposes a "prudent person" fiduciary obligation, which is codified in the requirement that a plan fiduciary exercise his duties "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man [sic] acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims." 29 U.S.C. § 1104(a)(1)(B); accord Berlin, 858 F.2d at 1162. The prudent person standard, in combination with the duty of loyalty, "imposes an unwavering duty on an ERISA trustee to make decisions with single-minded devotion to a plan's participants and beneficiaries and, in so doing, to act as a prudent person would act in a similar situation." Berlin, 858 F.2d at 1162 (quoting Morse v. Stanley, 732 F.2d 1139, 1145 (2d...

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