Buce v. National Service Industries, Inc.

• Citation: 74 F.Supp.2d 1272
• Decision Date: 16 November 1999
• Docket Number: No. 1:98-CV-112-TWT.,1:98-CV-112-TWT.
• Parties: Patricia W. BUCE, Plaintiff, v. NATIONAL SERVICE INDUSTRIES, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Georgia

74 F.Supp.2d 1272

Patricia W. BUCE, Plaintiff, v. NATIONAL SERVICE INDUSTRIES, INC., et al., Defendants.

No. 1:98-CV-112-TWT.

United States District Court, N.D. Georgia, Atlanta Division.

November 16, 1999.

John Edward Robinson, Gregory H. Blazer, McLarty Robinson & Van Voorhies, William Phillips Tinkler, Jr., Office of William Tinkler, Jr., Decatur, GA, Plaintiff.

Joseph M. English, nam, Howard B. Jackson, Fisher & Phillips, Douglas Neil Campbell, Edward H. Nicholson, Jr., Pamela Byrd Gray, McGuire Woods Battle & Boothe, Atlanta, GA, for Defendants.

ORDER

THRASH, District Judge.

This action is brought pursuant to the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. ("ERISA"). At issue is the denial of death benefits under an accidental death policy. The Court previously granted in part and denied in part the motions for summary judgment of the Defendants. On November 8 and 9, 1999, the Court conducted a bench trial regarding Plaintiff's claim for death benefits. The Court's findings of fact and conclusions of law are set forth below.

FINDINGS OF FACT

1. Mr. Walter H. Buce, Jr. was a long time employee of NSI. He was enrolled in NSI's optional Personal Accident Insurance Plan. Plaintiff Patricia Buce brings this action as the surviving beneficiary for the death benefits provided by the Plan.

2. Mr. Buce died in a car crash while driving on Interstate 75 near Cleveland, Tennessee on December 13, 1995. Around 2:00 A.M., his car struck a guard rail, rolled over, and burst into flames. According to the Tennessee Bureau of Investigation, Mr. Buce had a blood alcohol content of .22%. There were no witnesses to the accident and no other vehicles involved. The coroner's death certificate attributed Mr. Buce's death to multiple third degree burns as a consequence of a motor vehicle wreck.

3. NSI offered the Personal Accident Insurance Plan as an optional fringe benefit of employment. Mr. Buce enrolled in the Plan on or about April 1, 1985. He designated his wife as the beneficiary and elected coverage in the amount of $150,000. All premiums were paid and the policy was in force and effect at the time of Mr. Buce's death.

4. On or about April 1, 1985, Mr. Buce was given a Summary Plan Description as required by ERISA. The Summary Plan Description and a Certificate of Insurance were included in a booklet entitled Personal Accident Insurance Plan. Based upon the responses of NSI to Plaintiff's interrogatories, the Court finds as a matter of fact that the 1985 Summary Plan Description was the only one ever issued to either Mr. or Mrs. Buce.

5. The Summary Plan Description contains a section entitled "EXCLUSIONS." It lists the following four exclusions for injury or loss due to: (1) riding in an aircraft other than as a passenger for transportation; (2) suicide; (3) war; and (4) service in the armed forces.

6. The Summary Plan Description states: "The insurance company has the exclusive right to interpret the provisions of the Plan, so its decision is conclusive and binding."

7. The Plan was initially underwritten by Firemen's Fund. When NSI changed carriers¹, it issued a new plan booklet and added language to the Summary Plan Description. For example, the new Summary Plan Description added an exclusion for injuries or death caused by or resulting from intoxication. At the time of his death, Mr. Buce was not in possession of the revised Summary Plan Description, and the Defendants have offered no evidence that he ever actually received the revised Summary Plan Description.

8. After her husband's death, Plaintiff submitted a claim for benefits under the plan to NSI. NSI sent the claim to their underwriter, Defendant Allianz Life Insurance Company. Allianz submitted the claim to its third-party administrator, American Special Risk Management (hereafter "ASRM"). At the time, ASRM's sole client was Allianz. ASRM denied the claim based upon an intoxication exclusion. [Joint Ex. 16].

9. The intoxication exclusion is not mentioned in the Summary Plan Description sent to the Buces, but appears in the Certificate of Insurance issued by Fireman's Fund with the Summary Plan Description. The Certificate of Insurance states: "The Company shall not be liable for any loss sustained in consequence of the person whose injury is the basis of the claim being intoxicated or under the influence of any narcotic unless administered on the advice of a physician." [Plaintiff's Ex. 2, pg. 13].

10. The Certificate of Insurance also defines "injury" to mean "bodily injury caused by an accident ... and resulting directly and independently of all other causes ..." [Id. at 11].

11. Plaintiff appealed the denial of benefits and submitted affidavits on her behalf to ASRM. The Affidavits are Joint Exhibits 5, 6, 7, 8 and 9.

12. Considering this evidence, Allianz rejected Plaintiff's claim. Allianz, through its attorney, took the position that the policy was an "accidental means" policy which requires that the act preceding the loss must be "sudden, unexpected and unforeseen." Alternatively, and in response to the doctor's affidavit, Allianz took the position that even if Mr. Buce died of a heart attack, this did not constitute an "accident" as defined by the policy. Under the policy, death from a heart attack would be from natural causes. [Joint Ex. 18].

13. After exhausting her administrative remedies, Plaintiff filed this lawsuit pursuant to 29 U.S.C. §§ 1024(b)(1), 1022(a)(1), and 1022(b).

CONCLUSIONS OF LAW

A. ERISA STANDARD OF REVIEW.

Plaintiff's Complaint alleges violations of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, 1140. In adopting ERISA, Congress sought to protect participants in employee benefit plans and their beneficiaries by requiring disclosure and reporting of financial and other information; establishing standards of conduct for fiduciaries of those plans; and providing for appropriate remedies, sanctions, and ready access to the federal courts. 29 U.S.C. § 1001(b). At the outset in an action such as this, the Court must determine the standard by which to review the Defendants' decision to deny the death benefits claimed by Plaintiff. The Act itself does not provide a standard of review for decisions of a plan administrator or fiduciary. In the absence of statutory guidance, the Supreme Court has established a range of standards for judicial review of benefits determinations under ERISA. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the Supreme Court held:

[A] denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.... Of course, if a benefit plan gives discretion to an administrator or fiduciary operating under a conflict of interest, that conflict must be weighed as a facto[r] in determining whether there is an abuse of discretion.

Id. at 115, 109 S.Ct. 948 (citations and quotation marks omitted).

Consistent with Firestone, the Eleventh Circuit has adopted three standards for judicial review of an administrator's benefits determination: (1) de novo review where the plan administrator is not afforded discretion; (2) arbitrary and capricious standard when the plan grants discretion to the plan administrator; and (3) heightened arbitrary and capricious standard where there is a conflict of interest. Brown v. Blue Cross and Blue Shield of Alabama, Inc., 898 F.2d 1556, 1561 (11th Cir.1990), cert. denied, 498 U.S. 1040, 111 S.Ct. 712, 112 L.Ed.2d 701 (1991); Paramore v. Delta Air Lines, Inc., 129 F.3d 1446, 1449-50 (11th Cir.1997); Buckley v. Metropolitan Life, 115 F.3d 936, 939 (11th Cir.1997). Under the heightened arbitrary and capricious standard, the burden shifts to the plan administrator or fiduciary, acting under a conflict of interest, to show that its interpretation of plan terms committed to its discretion was not tainted by self-interest. Florence Nightingale Nursing Service, Inc. v. Blue Cross/Blue Shield of Alabama, 41 F.3d 1476, 1481 (11th Cir.1995), cert. denied, 514 U.S. 1128, 115 S.Ct. 2002, 131 L.Ed.2d 1003 (1995). The Eleventh Circuit has held that "the heightened arbitrary and capricious standard must be used when the plan was administered by an insurance company which paid benefits out of its own assets." Buckley, 115 F.3d at 939. The Eleventh Circuit in Brown reasoned that "[b]ecause an insurance company pays out to beneficiaries from its own assets rather than the assets of a trust, its fiduciary role lies in perpetual conflict with its profit-making role as a business." Brown, 898 F.2d at 1561.

Here, it is undisputed that the de novo standard does not apply because of the discretion afforded the insurer by the plan. The Summary Plan Description provides: "The insurance company has the exclusive right to interpret the provisions of the Plan, so its decision is conclusive and binding." The parties disagree as to which of the remaining two standards of review applies. Defendants argue that the proper standard is whether the benefits determination was arbitrary and capricious. See Guy v. Southeastern Iron Workers' Welfare Fund, 877 F.2d 37, 38 (11th Cir.1989); Jett v. Blue Cross & Blue Shield of Alabama, Inc., 890 F.2d 1137, 1138 (11th Cir. 1989). They deny that the benefits determination was affected by self-interest. Plaintiff argues for the heightened scrutiny version of the arbitrary and capricious standard. See Lee v. Blue Cross/Blue Shield of Alabama, 10 F.3d 1547 (11th Cir.1994).

The Court finds that there is a conflict of interest. A judgment in favor of Plaintiff will have to be paid by Allianz. This creates the "direct, immediate expense" that the Court of Appeals in Brown identified. Brown, 898 F.2d at 1561. There, Blue Cross determined whether it would pay benefits from its own coffers...