Baker v. Metropolitan Life Ins. Co.

• Decision Date: 09 April 2004
• Docket Number: No. 02-20966.,02-20966.
• Citation: 364 F.3d 624
• Parties: Gena BAKER, Individually and as Executor of the Estate of Keith Baker; Burlington Resources Inc., Plaintiffs-Appellants, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

364 F.3d 624

Gena BAKER, Individually and as Executor of the Estate of Keith Baker; Burlington Resources Inc., Plaintiffs-Appellants, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.

No. 02-20966.

United States Court of Appeals, Fifth Circuit.

April 9, 2004.

John Hanson Barr, Jr. (argued), Bracewell & Patterson, Houston, TX, for Plaintiffs-Appellants.

Lawrence Keith Wolff, Metropolitan Life Ins. Co., New York City, Linda G. Moore (argued), Kirkpatrick & Lockhart, Dallas, TX, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before JOLLY, WIENER, and BARKSDALE, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

This ERISA case presents an appeal of a denial of benefits claimed by Gena Baker under a life insurance policy covering her deceased husband, Keith Baker. Gena Baker and Burlington Resources Inc., Keith Baker's employer (who paid the benefits to Gena Baker acquiring her right to the proceeds of this action), sued Metropolitan Life Insurance Company for these life insurance benefits. The complaint also alleged state law claims for breach of contract and violations of TEX. INS.CODE ANN. art. 21.21 et seq. and TEX. BUS. & COM.CODE ANN. § 17.46 et seq.¹ The district court granted summary judgment in favor of Metropolitan Life Insurance Co. and entered a final take-nothing judgment against Gena Baker and Burlington Resources Inc., disposing of their ERISA and state law claims.

This appeal requires us to determine the degree of deference the Plan insurer, Metropolitan Life Insurance Company, is required to give the named Plan administrator, Burlington Resources Inc., under the terms of the Metropolitan Life Plan. However, this inquiry is substantially complicated by the fact that Mr. Baker made his benefits election before the Plan had become effective and died after the effective date of the Plan but before the Plan had actually been drafted. Nevertheless, we hold that the district court was correct to uphold Metropolitan Life Insurance Company's denial of benefits under the Plan, but that it prematurely dismissed the state law claims.

I

A

Keith Baker was hired by Burlington Resources Inc. ("Burlington") on October 31, 1986. He initially enrolled in Burlington's group life insurance plan ("Burlington Plan") and on November 2, 1997, elected to receive both basic and supplemental life insurance benefits equal to one-time his annual salary in basic benefits and one-time his annual salary in supplemental benefits. In 1997 Burlington acquired the Louisiana Land and Exploration Company, which had its own employee benefit plan. Burlington sought an insurer that would take over its parallel benefit programs as a new uniform program to cover all employees. To this end, in April 1998, Burlington directed its agent and broker, William Mercer, Inc., to submit a Request for Proposal to numerous life insurance companies, including Metropolitan Life Insurance Company ("MetLife"), inviting them to bid on Burlington's life insurance program.

In the meantime, Mr. Baker's health was deteriorating. On October 15, 1998, he left work after developing skin cancer and on October 19, 1998, he was classified by Burlington as short-term disabled. After he went on short-term disability, enrollment notices were sent by Burlington to all "active" employees to allow them to enroll in the new MetLife benefits Plan.² Mr. Baker's name was carried on Burlington's list of active employees and Burlington sent him an enrollment notice. Burlington employees who received this notice were allowed to increase their life insurance coverage during the initial enrollment period. Consequently, on November 5, 1998, Mr. Baker called Burlington's human resources department and increased his life insurance coverage to six-times his annual salary.³ He was sent a letter by Burlington confirming this election, but the letter noted that any change in benefits would not become effective until January, 1, 1999, the date the Plan would become effective.

Mr. Baker never returned to work. He died on January 15, 1999. At the time of his death, the final MetLife Plan had not been completed. The Plan was not finalized until October 1999, and its effective date was made retroactive to January 1, 1999. The beneficiary of Mr. Baker's life insurance policy, his wife Gena Baker ("Baker"), submitted a claim for $757,080 — six-times Mr. Baker's salary.⁴ MetLife paid her $126,180 — one-time Mr. Baker's salary — but refused to pay the additional $630,900.⁵ In March 2000, Burlington gave Mrs. Baker a nonrecourse loan for the amount alleged to be due under the Plan and Baker assigned the proceeds of her causes of action to Burlington.

B

On April 25, 2001, Burlington and Baker filed this suit asserting ERISA and state law claims. The district court ordered the parties to submit an agreed chronology and a "binder of not more than twelve documents showing the evolution of their arrangement through January 15, 1999" and provided that "[t]he parties have through September 21, 2001 to move for judgment as a matter of law on what the plan says."

Both parties then filed cross-motions for summary judgment. The district court held that "[t]he beneficiary is bound by the plan as it ultimately existed or by the plan before the switch, and in neither case was the participant allowed unilaterally to increase his life coverage to six times his salary while on leave with a terminal illness." The district court reasoned that such an increase was not allowed because Baker was not actively at work when he made this election and did not return to active service before his death. The court reasoned that Mr. Baker could not have been actively at work in November 1998 because he was known to have been terminally ill. Moreover, even if he were deemed actively at work at this time, he would have been eligible only to continue his benefits under the October 1999 Plan, and not to increase them. Second, the district court held that Mr. Baker was ineligible to increase his life insurance benefits because he had not provided proof of insurability. The court concluded by noting that all parties — the employer, insurer and participant — are all bound by the Plan, not preliminary negotiations, and the Plan did not allow Mr. Baker to increase his life insurance benefits. Finally, the court made a common-sense observation that "[n]o fully-informed disinterested person would expect an insurance company to allow a terminally ill participant to increase his life insurance coverage."⁶ Accordingly, the district court entered a take-nothing judgment in favor of MetLife disposing of Burlington and Baker's ERISA and state law claims.

II

This appeal challenges the district court's grant of summary judgment in favor of MetLife upholding MetLife's decision denying Baker's claim for benefits under the Plan and holding that Burlington's state law claims are preempted by ERISA.

This Court reviews summary judgments de novo, applying the same standards applied by the district court. Performance Autoplex II Ltd. v. Mid-Continent Casualty Co., 322 F.3d 847, 853 (5th Cir.2003). A grant of summary judgment is proper if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id.; FED.R.CIV.P. 56(c). In evaluating the existence of a genuine issue of material fact, we review the evidence and inferences drawn from that evidence in the light most favorable to the non-moving party. Daniels v. City of Arlington, Tex., 246 F.3d 500, 502 (5th Cir.2001).

III

"Any review of an ERISA benefit determination must begin with the relevant plan language." Aboul-Fetouh v. Employee Benefits Committee, 245 F.3d 465, 468 (5th Cir.2001). First we will evaluate the terms of the Plan as they relate to Mr. Baker and then we will turn to evaluate the relationship between Burlington and MetLife under the Plan.⁷

The Plan — completed in October 1999, approximately ten months after Mr. Baker's death — indicates that Mr. Baker failed to meet the eligibility requirements for the increased benefits because he was not actively at work when he increased his benefits. The MetLife Plan provides:

If you make a request to be covered for Personal Benefits during the first annual enrollment period in which you can elect coverage, your Personal Benefits will become effective on the first day of the calendar year following the annual enrollment period, subject to the Active Work Requirement.

Mr. Baker enrolled in "in the first annual enrollment period in which [he could] elect coverage" — November 1998 — and his benefits should have "become effective on the first day of the calendar year following the annual enrollment period" — January 1, 1999 — provided that the Active Work requirement was met.

The Active Work Requirement provides:

You must be Actively at Work in order for your Personal Benefits to become effective. If you are not Actively at Work on the date when your Personal Benefits would otherwise become effective, your Personal Benefits will become effective on the first day after you return to Active Work.

Mr. Baker's entitlement to benefits thus turns on whether he was actively at work on January 1, 1999 or sometime thereafter. The Plan defines active work as "performing all of the material duties of your job with the Employer where these duties are normally carried out." Mr. Baker was on short-term disability and not attending work on January 1, 1999. Under the terms of the Plan, he was not "actively at work" on that date. Accordingly, his increased benefits never became effective under the MetLife Plan unless the Plan includes some exception to the Active Work requirement applicable to Mr. Baker.

Burlington argues that it was permitted to deem Mr. Baker "active" and to allow him to increase his benefits under the Plan. This contention is not supported by the language of the Plan, which only provides: "If you are not...