Anweiler v. American Elec. Power Service Corp.

• Decision Date: 25 August 1993
• Docket Number: No. 92-2560,92-2560
• Court: U.S. Court of Appeals — Seventh Circuit
• Parties: 17 Employee Benefits Ca 1090 Lynn E. ANWEILER, Plaintiff-Appellant, v. AMERICAN ELECTRIC POWER SERVICE CORPORATION and Aetna Life Insurance Company, Defendants-Appellees.

Page 986

3 F.3d 986

17 Employee Benefits Ca 1090

Lynn E. ANWEILER, Plaintiff-Appellant, v. AMERICAN ELECTRIC POWER SERVICE CORPORATION and Aetna Life

Insurance Company, Defendants-Appellees.

No. 92-2560.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 10, 1992.

Decided June 3, 1993.

Amended Aug. 25, 1993 ^*.

Vincent J. Heiny (argued), Haller & Colvin, Fort Wayne, IN, for Lynn E. Anweiler.

Steven L. Jackson (argued), Michael J. Nader, Baker & Daniels, Fort Wayne, IN, for American Elec. Power Service Corp. and Aetna Life Ins. Co.

Before COFFEY and MANION, Circuit Judges, and WOOD, JR., Senior Circuit Judge.

HARLINGTON WOOD, JR., Senior Circuit Judge.

Larry Anweiler, plaintiff's husband, developed Hodgkin's disease and received disability benefits from his employer Indiana & Michigan Electric Company ("I & M") from October 1980 until April 1989. Mr. Anweiler also received social security disability benefits for most of this time. In 1981, Mr. Anweiler signed a reimbursement agreement at I & M's request which designated Aetna Life Insurance Company the beneficiary of his $37,000 group life insurance policy for any overpayment of benefits which were owed at his death. When Mr. Anweiler died in 1989, the proceeds from his life insurance policy went to Aetna because of the double payment of disability benefits by Aetna and the Social Security Administration. I & M's disability plan allows for benefits owed under its plan to be reduced by any social security benefits the plan participant receives. When Mr. Anweiler died, he had been overpaid $46,227.01 by Aetna, who administered the disability plan, due to his receipt of social security disability benefits in addition to his long-term disability benefits from work.

In this action under the Employee Retirement Income Security Act of 1974 ("ERISA" or "the Act"), 29 U.S.C. Sec. 1001 et seq., plaintiff Lynn Anweiler, widow of Larry Anweiler, alleges defendants American Electric Power Service Corporation ("AEPSC") and Aetna breached their fiduciary duties when her husband Larry Anweiler was requested to sign the reimbursement agreement in 1981. Plaintiff further argues the reimbursement agreement lacks consideration, though she does not dispute her husband was overpaid by Aetna. She seeks penalties against defendants for their failure to provide specific reasons and a full and fair review of Aetna's denial of her claim for the insurance proceeds and requested documents as well as attorney fees.

All parties moved for summary judgment. The district court granted defendants' joint motion and denied plaintiff's in a final judgment on June 1, 1992. For the reasons given below, we affirm the grant of summary judgment for defendants.

I. FACTS

Larry Anweiler worked for I & M from 1969 until Hodgkin's disease disabled him and prevented him from working in June 1980. His last position was a substation mechanic. I & M and defendant AEPSC are wholly-owned subsidiaries of American Electric Power Corporation ("AEP"). AEPSC is the administrator and a fiduciary of the long-term disability and group life insurance employee welfare plans for AEP and I & M employees, including Mr. Anweiler. Aetna insured the plan, which we will call the AEP disability plan, that paid Mr. Anweiler's long-term disability benefits and life insurance.

After using his vacation and sick time, Mr. Anweiler was entitled to $799.07 a month in long-term disability benefits as of October 4, 1980, under his AEP disability plan. Mr. Anweiler also applied for disability benefits under the Social Security Act, and in April 1981 he was awarded those benefits retroactively from December 1980. Mr. Anweiler informed Aetna of the award in April 1981. Under the AEP disability plan, Mr. Anweiler was entitled to $799.07 a month, which would be paid by Aetna minus any other income benefits Mr. Anweiler or his family received. Thus, because of the overpayment caused by his receipt of double benefits, he owed Aetna $2,555.16. This amount was to be recouped by reducing his benefits from the AEP disability plan. But in early 1982, the Social Security Administration reversed its decision to award benefits to Mr. Anweiler. Consequently, Aetna began paying Mr. Anweiler the full long-term benefits available under the plan. Mr. Anweiler, however, appealed the Social Security Administration's decision and won. His social security disability benefits were reinstated retroactively from February 1982. Until 1988, Mr. Anweiler received disability benefits from the Social Security Administration and Aetna. Mr. Anweiler, his wife, and four children used the money for food, clothing, housing, and general living costs.

In May 1988, Mr. Anweiler informed I & M that he had been receiving social security benefits since 1982. Plaintiff claims her husband notified someone at Aetna of the social security benefits some years prior to 1988. Aetna denies it was informed of the double benefits before May 1988. By May 1988, because of the double benefits, Aetna had overpaid Mr. Anweiler $47,588.69. Aetna then began reducing his long-term disability benefits to recover the overpayment. When Mr. Anweiler died on April 9, 1989, Aetna was still owed $46,227.01.

In August 1981, I & M requested Mr. Anweiler to sign a reimbursement agreement which made Aetna a beneficiary under his group life insurance policy issued by Aetna to the extent of any overpayment existing at his death. When Mr. Anweiler died in 1989, therefore, Aetna was paid the $37,000 from Mr. Anweiler's life insurance policy. The reimbursement agreement states in relevant part:

I am familiar with and understand the provisions of group policy ... by [Aetna] ... to the effect that the amount of any benefits payable for any month ... shall be reduced by the amount of any benefits I receive or am entitled to receive under the United States Social Security Act as well as certain other income sources as enumerated in said group policy.

. . . . .

I request Aetna to postpone making any reduction in the amount of my group policy benefits until such time as I begin to receive Social Security or other applicable income benefits. I agree to notify Aetna promptly as soon as I am awarded Social Security or other applicable income benefits and to refund to Aetna any amount it may pay me under said group policy.... In consideration of Aetna granting my request, I hereby assign, transfer and set over to Aetna, to the extent of any excess so paid under this Agreement, all rights, benefits and advantages to be had from ... any insurance policy benefits hereafter becoming payable to me ... [and] designate Aetna as creditor beneficiary under any group life policy issued by Aetna ... to the extent of the amount of any overpayment which may exist at the time of my death.

The $37,000 life insurance policy would have been payable to plaintiff as Mr. Anweiler's previously designated beneficiary but for the reimbursement agreement. When Mr. Anweiler signed the agreement, he was not informed that he did not have to sign the agreement in order to receive his long-term disability benefits, nor was he informed that it was revocable at will like his prior beneficiary designation. Aetna states that it routinely asks plan participants for agreements of this type.

When plaintiff filed a death claim for the proceeds from her husband's life insurance policy, she was informed the $37,000 had been paid to Aetna for the overpayment of long-term disability benefits pursuant to the reimbursement agreement. Several times plaintiff requested further explanation and review of the denial of her claim as well as a copy of the master insurance plan. After Aetna's repeated denial of her claim, she filed her suit against Aetna and AEPSC on April 4, 1991. Aetna has not sought to recover the approximately $9,000 remaining from its overpayment of benefits to Mr. Anweiler.

II. ANALYSIS

ERISA is a comprehensive statute designed to protect the interests of employees and their beneficiaries in pension and welfare benefit plans. ¹ Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983). ERISA mandates standards of conduct, responsibility, and obligations for fiduciaries of employee benefit plans and provides appropriate remedies, sanctions, and access to federal court. 29 U.S.C. Sec. 1001(b). ERISA establishes duties of loyalty and care for fiduciaries as well as the obligation to act solely in the interest of the benefit plan and its participants and beneficiaries. Id. Secs. 1104, 1106. Section 1109 of the Act establishes liability for any breach of this fiduciary duty. ²

Civil actions for ERISA violations are found in section 1132 of the Act. There are "six carefully integrated civil enforcement provisions" in this section demonstrating the evident care with which ERISA was crafted. Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146-47, 105 S.Ct. 3085, 3092, 87 L.Ed.2d 96 (1985). In Russell, the Supreme Court held that recovery for breaches of fiduciary duty should go to the plan unlike actions for recovery of benefits due a participant or beneficiary which go to the individual. Id.; accord Harsch v. Eisenberg, 956 F.2d 651, 657 (7th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 61, 121 L.Ed.2d 29 (1992).

Plaintiff's claim centers upon defendants' alleged breach of their fiduciary duties when her husband was requested to sign a reimbursement agreement making Aetna the beneficiary of his life insurance if there was any overpayment of long-term disability benefits still owing at his death. Plaintiff alleges this "request," the veiled implication is that Mr. Anweiler was led to believe he must sign the agreement in order to receive his benefits, was a breach of defendants' fiduciary duties because Mr. Anweiler was not told the agreement was revocable at any time, nor required for receipt of his benefits, and nor was it in his interest. Plaintiff further claims the...