Caldwell v. Life Ins. Co. of North America

• Decision Date: 07 March 1997
• Docket Number: Civil Action No. 93-2550-GTV.
• Citation: 959 F.Supp. 1361
• Parties: Rufus A. CALDWELL, III, Plaintiff, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant.
• Court: U.S. District Court — District of Kansas

959 F.Supp. 1361

Rufus A. CALDWELL, III, Plaintiff, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant.

Civil Action No. 93-2550-GTV.

United States District Court, D. Kansas.

March 7, 1997.

William P. Ronan, Cloon, Bennett & Ronan, Overland Park, KS, for Rufus A. Caldwell, III.

Phillip R. Fields, Wichita, KS, for Western Atlas Intern., Inc. Richard N. Bien, James A. Durbin, Swanson, Midgley, Gangwere, Kitchin & McLarney, L.L.C., Kansas City, MO, Craig T. Kenworthy, Swanson, Midgley, Gangwere, Kitchin & McLarney, L.L.C., Overland Park, KS, for Life Ins. Co. of North America.

MEMORANDUM AND ORDER

VAN BEBBER, Chief Judge.

Plaintiff Rufus A. Caldwell, III, challenges the decision of defendant Life Insurance Company of North America (LINA) to deny him disability benefits. The Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., governs Caldwell's claim in which he alleges entitlement to disability benefits through a group disability insurance policy, which LINA issued to the plaintiff's former employer, Western Atlas International (Western). Caldwell alleges that LINA refused to pay the disability benefits to which he is entitled and seeks $310,860.00 in disability payments. Alternatively, he contends that LINA failed to provide him with a full and fair review of benefit denial and requests that the matter be remanded for further proceedings.

A trial to the court was held on August 23, 1996. After careful consideration of the evidence and arguments in this case, the court concludes that the case will be remanded to LINA as plan administrator in order to allow Caldwell to receive a full and fair review of LINA's denial of his disability claim.

Pursuant to Fed.R.Civ.P. 52(a), the court makes the following findings of fact and conclusions of law.

I. Findings of Fact

1. On January 31, 1989, during the course of his employment with Western, Caldwell was injured when he fell to the ground climbing out of his truck.

2. LINA had issued a group disability insurance policy to Western that was in effect on the date of Caldwell's injury. Under the terms of the policy, LINA pays total disability benefits to an employee for the first twenty-four months after sickness or injury if the employee cannot "perform the essential duties of his occupation." After twenty-four months, an employee's eligibility for total disability payments continues only if the employee is "unable to perform all the essential duties of any occupation for which he is or may reasonably become qualified based on his education, training or experience." (Def.'s Tr. Ex. 400, at 238.) The policy specifies that the monthly benefit is sixty percent of the employee's salary at the time of total disability offset by any other benefits received.

3. Under the policy, disability payments commence when LINA receives "due proof that: (1) the Employee becomes Totally Disabled while insured for this Long Term Disability Insurance; and (2) his Total Disability has continued for a period longer than the Benefit Waiting Period shown in the Schedule." (Def.'s Tr. Ex. 402, at 247). The policy defines the benefit waiting period as ninety days of continuous total disability.

4. The policy enumerates situations in which an employee's insurance coverage may terminate, including the earlier date of the following: the employee ceases to be an eligible employee or the employee ceases active service with the employer.

5. On April 28, 1989, Caldwell's employment with Western ended.

6. On December 28, 1993, Caldwell filed the instant case against Western, alleging several claims of breach of contract and retaliatory discharge. (Doc. 1.)

7. On March 21, 1994, Caldwell sent a notice of disability claim to LINA, which responded by sending him a claim form on April 11, 1994. Caldwell returned the completed claim form on April 25, 1994.

8. On March 24, 1994, Caldwell filed a motion to amend his complaint to add LINA as a defendant. The motion was granted, and Caldwell filed the amended complaint on April 24, 1994.

9. On May 13, 1994, LINA wrote Caldwell, asking about his delay in filing a claim based upon an January 1989 injury. On June 7, 1994, Caldwell's attorney responded, stating that Western had not informed Caldwell until March 6, 1994, that LINA was the disability insurance carrier.

10. On October 4 and 30, 1994, LINA sent letters to Caldwell to request additional medical and employment information. (Def.'s Tr. Ex. 400, at 37-38, at 150-51.)

11. On December 13, 1994, the court ruled upon Lina's motion to dismiss or to stay the proceedings for failure to exhaust administrative remedies. See Caldwell v. Western Atlas Int'l, 871 F.Supp. 1392 (D.Kan.1994). The court found that ERISA preempted Caldwell's state contract claim against LINA. The court further ruled that Caldwell had not exhausted his administrative remedies, a prerequisite to seeking judicial review, in that he had not received an initial decision on his claim or requested an administrative review. The court deemed Caldwell's request for review filed as of the date of its order of December 13, 1994. Additionally, the court stayed proceedings for 120 days, until April 12, 1995, to allow LINA to conduct its review. The parties were directed to file a status report with the court within 120 days.

12. LINA requested additional medical information from Caldwell or his attorney in letters dated December 15, 1994, January 10, 1995, February 16, 1995, March 13, 1995, and April 19, 1995. (Def.'s Tr. Ex. 400, at 39-42, 80, 113-14.) LINA also sent letters requesting medical information directly to Caldwell's identified medical providers. (Def.'s Tr. Ex. 400, at 81-98, 136.)

13. On March 17, 1995, Caldwell and Western jointly dismissed with prejudice Caldwell's claims against Western. (Doc. 50.) Caldwell's only remaining claim is his ERISA claim against LINA to recover benefits allegedly owed to him under an employee benefit plan.

14. On April 12, 1995, Caldwell filed a status report, stating that his claim still was under consideration and that he did not know whether LINA had admitted or denied his claim. (Doc. 51.)

15. On April 28, 1995, the court ordered LINA to show cause in writing by May 8, 1995 why Caldwell's administrative remedies should not be deemed exhausted and the stay lifted. (Doc. 52.)

16. On May 8, 1995, LINA filed two pleadings, a motion to stay proceedings for completion of administrative review and a response to the order to show cause. LINA filed a motion to stay proceedings for an additional sixty days "to complete its initial claim determination of Plaintiff's claim for benefits." (Doc. 54, at 1). In that motion, LINA explicitly stated, "The initial claim determination has not been completed." (Doc. 54, at 2.) In its response to the court's show cause order, LINA stated that the "court should not deem the plaintiff's administrative remedies under the Plan exhausted and the claim denied" and that the "[p]laintiff has agreed that the initial claim determination is not complete." (Doc. 55, at 1, 4.) A determination had not yet been made, according to LINA, because it was awaiting requested medical and employment evidence. In both pleadings, LINA commented: "ERISA contemplates delays as experienced by LINA. 29 C.F.R. § 2560.503[-1](h) allows 120 days for a review after a claim denial. Here, the claim has not yet been denied." (Doc. 54, at 2-3; Doc. 55, at 3-4) (emphasis in original).

17. On May 19, 1995, the court entered an order accepting LINA's response to the show cause order and stayed proceedings "until July 17, 1995, to give the defendant an opportunity to complete its initial claim determination." (Doc. 57.)

18. On July 21, 1995, because no information from either party had been received regarding the status of Caldwell's claim for benefits, the court deemed that Caldwell had exhausted his administrative remedies and reinstated proceedings. The court referred the case to Magistrate Judge Rushfelt for further scheduling and preparation of a pretrial order. (Doc. 60.)

19. On July 25, 1995, LINA sent a letter to Caldwell denying his claim. According to LINA, the letter served as LINA's "first consideration of the claim and review" under ERISA. (Claim File, Ex. 400, at 11-12.)

20. On March 27, 1996, Magistrate Judge Rushfelt partially granted LINA's motion for a protective order. Caldwell v. Life Ins. Co. of N.A., 165 F.R.D. 633 (D.Kan.1996).

21. On August 23, 1996, at the conclusion of the bench trial, the court took the case under advisement.

II. Conclusions of Law

Caldwell sues to recover disability benefits allegedly due him under LINA's group disability insurance policy, which is an employee welfare benefit plan governed by ERISA. See Caldwell, 871 F.Supp. at 1395-96; see also 29 U.S.C. § 1002(1); Chiles v. Ceridian Corp., 95 F.3d 1505, 1510 (10th Cir.1996)(disability insurance plan is considered an employee welfare benefit plan). ERISA permits plan participants to sue to recover benefits due under an employee welfare benefit plan. 29 U.S.C. § 1132(a)(1)(B). The court has subject matter jurisdiction over this action. 29 U.S.C. §§ 1132(e), (f).

A. Standard of Review

ERISA does not provide an express standard of review for courts to apply in a benefits dispute brought pursuant to 29 U.S.C. § 1132(a)(1)(B). In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the United States Supreme Court held that the language of the plan determines the standard of review. If the plan grants no discretion to the administrator or fiduciary to construe plan terms or determine eligibility, a de novo standard applies. Id. at 113-16, 109 S.Ct. at 956-57. If, however, the plan bestows discretion to construe plan terms or determine eligibility, an arbitrary and capricious standard applies. Id.; see also Millensifer v. Retirement Plan for Salaried Employees of Cotter Corp., 968 F.2d 1005, 1009 (10th Cir.1992); Woolsey v....