Connecticut General Life Ins. Co. v. Cole, No. 91 CIV 7408.

• Decision Date: 07 May 1993
• Docket Number: No. 91 CIV 7408.
• Citation: 821 F. Supp. 193
• Parties: CONNECTICUT GENERAL LIFE INSURANCE CO. OF NEW YORK, et al. v. Allen B. COLE, et al.
• Court: U.S. District Court — Southern District of New York

821 F. Supp. 193

CONNECTICUT GENERAL LIFE INSURANCE CO. OF NEW YORK, et al. v. Allen B. COLE, et al.

No. 91 CIV 7408.

United States District Court, S.D. New York.

May 7, 1993.

COPYRIGHT MATERIAL OMITTED

Patricia A. Smith, Dwyer & Brennan, New York City, for plaintiffs.

Juliana Maugeri, Van de Water & Van de Water, Poughkeepsie, NY, for defendants.

AMENDED MEMORANDUM ENDORSEMENT

CONBOY, District Judge.

Plaintiffs INA Life Insurance Company of New York ("LICONY") and Connecticut General Life Insurance Company ("Connecticut General") bring this action seeking a declaration of the rights and obligations of the parties concerning the proceeds of an accident insurance policy and two life insurance policies. Defendant Allen B. Cole, who was convicted in New York State Supreme Court of murdering the insured, is one of the designated beneficiaries under each policy. Defendant Marguerite O'Reilly is an equal beneficiary under the accident policy, and defendants Judith Eidel, Patricia Spots, and Shauna Ferguson are contingent beneficiaries under the life insurance policies.

Pending before the Court are the following motions: 1. Plaintiff LICONY moves for an order granting it summary judgment and declaring that its payment of the entire proceeds of the accident policy to defendant O'Reilly was proper; 2. Defendant O'Reilly moves for an order granting her summary judgment and declaring that payment of the entire accident policy proceeds to her was proper; and 3. Plaintiff Connecticut General moves for an order authorizing it to pay into Court, or to a person(s) designated by this Court, the proceeds of the basic and supplemental life insurance policies.¹ Connecticut General requests that upon such payment it be discharged from any liability under the basic and supplemental life insurance policies, and that each defendant be permanently enjoined from instituting any action against Connecticut General for the recovery of the basic and supplemental life insurance proceeds or any part of them. Connecticut General also requests that this Court grant such other and further relief as it deems proper.

For the reasons that follow, we grant LICONY's motion for summary judgment and defendant O'Reilly's motion for summary judgment. Moreover, we direct Connecticut General to pay directly to defendants Eidel, Spots, and Ferguson, the proceeds of the basic and supplemental life insurance policies, according to the terms of those policies, with interest from January 28, 1990. Upon such payment, Connecticut General shall be discharged of any liability under the basic and supplemental life insurance policies, and defendants will be permanently enjoined from instituting any action against Connecticut General for the recovery of the basic and supplemental life insurance proceeds or any part of them.

BACKGROUND

The following facts are not in dispute. Sharyn O'Reilly Cole (the "insured") was an employee of Hilton International. LICONY issued to Hilton International an accident policy which protected the insured against accidental death and has a benefit of $150,000. The insured designated her husband, defendant Allen B. Cole ("Cole"), and her mother, defendant Marguerite O'Reilly ("O'Reilly"), as equal beneficiaries under the accident policy.

Connecticut General issued to Hilton International a basic and supplemental group life insurance policy, and the insured was covered under this policy. The basic policy has a $15,000 benefit and the supplemental policy has a $175,000 benefit. The insured designated Cole as the primary beneficiary under the life insurance policies, and designated her sisters, defendants Judith Eidel ("Eidel"), Patricia Spots ("Spots"), and Shauna Ferguson ("Ferguson") as contingent beneficiaries who were each to receive one third of the proceeds in the event of Cole's death. The above-mentioned insurance policies were part of an employee welfare benefit plan covered by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 (1988 & Supp. II 1990) ("ERISA").²

The insured died as a result of a battering to the head. On February 6, 1991, Cole was convicted in New York State Supreme Court of the depraved mind murder³ of the insured, his wife. On March 27, 1991, Cole was sentenced to a prison term of from 22 years to life. Cole filed a notice of appeal on April 19, 1991, but he has not yet perfected his appeal.⁴

LICONY decided that Cole was disqualified as a beneficiary under the accident policy due to his murder conviction, and therefore, LICONY paid the entire proceeds of the accident policy to defendant O'Reilly. Cole contends that payment of the accident policy proceeds to defendant O'Reilly was not proper, and requests that the accident policy proceeds be held in escrow pending the outcome of his appeal of his conviction. (See defendant Cole's Reply Memorandum of Law of 8/23/92, at 7-8.)

Connecticut General has not yet paid out the proceeds of the basic and supplemental life insurance policies. Defendants Cole, Eidel, Spots, and Ferguson assert claims to the basic and supplemental life insurance proceeds. Cole consents to Connecticut General's request that it be permitted to pay into court the proceeds of the basic and supplemental life insurance policies. Although they have not made a motion, defendants Eidel, Spots, and Ferguson request in their Answer, Counterclaim and Crossclaim that this Court 1. issue a declaratory judgment that Cole is disqualified from collecting any of the basic and supplemental life insurance proceeds; 2. direct Connecticut General to pay the basic and supplemental life insurance proceeds directly to them, with interest from December 28, 1989;⁵ and 3. grant such other and further relief that the Court deems just and proper, together with the costs and disbursements of this action.

DISCUSSION

A. Subject Matter Jurisdiction for this Action Exists Under the Declaratory Judgment Act, 28 U.S.C. § 2201(a) (1988)

Plaintiffs LICONY and Connecticut General assert that jurisdiction for this declaratory judgment action exists under 29 U.S.C. § 1132(e)(1) (1988 & Supp. II 1990). (Compl. ¶ 2.) Section 1132(e)(1) states that except for actions brought under subsection (a)(1)(B) of that section, the United States District Courts shall have exclusive jurisdiction over civil actions brought under subchapter I⁶ by the Secretary of Labor, or by a participant, beneficiary, or fiduciary of an ERISA plan. 29 U.S.C. § 1132(e)(1) (1988 & Supp. II 1990). Neither LICONY nor Connecticut General is a "participant" or "beneficiary" of an ERISA plan as these terms are defined by the ERISA statute.⁷ Moreover, plaintiff insurance companies have not provided us with sufficient information to determine whether they qualify as fiduciaries under ERISA. See 29 U.S.C. § 1002(21)(A) (1988 & Supp. II 1990). However, as we discuss below, even if we assume that plaintiffs are fiduciaries, they have not established jurisdiction under ERISA.

A fiduciary of an ERISA plan may bring an action "(A) to enjoin any act or practice which violates any provision of ERISA or the terms of the plan, or (B) to obtain ... equitable relief (i) to redress such violations or (ii) to enforce any provisions of ERISA or the terms of the plan ...;" 29 U.S.C. § 1132(a)(3)(A)-(a)(3)(B) (1988 & Supp. II 1990). Subsections 1132(a)(3)(A) and 1132(a)(3)(B)(i) are inapplicable here because plaintiff insurance companies do not claim that defendants violated any provision of ERISA or the terms of the plan. Therefore, plaintiffs are apparently asserting jurisdiction under § 1132(a)(3)(B)(ii). See 29 U.S.C. § 1132(a)(3)(B)(ii) (1988 & Supp. II 1990). The issue thus becomes whether plaintiffs' suit is an action either to obtain "equitable relief" or to "enforce" the terms of the plan.

A declaratory judgment is not always a form of "equitable" relief. Transamerica Occidental Life Ins. Co. v. Digregorio, 811 F.2d 1249, 1251 (9th Cir.1987). If the nature of the underlying controversy is "legal" rather than "equitable", a declaratory judgment will be considered a form of legal relief. Id. at 1251-52. The underlying controversies in this case are defendants' contractual claims to benefits under the accident insurance policy and the life insurance policies. Since a contractual claim to benefits is a legal claim, the declaratory judgment plaintiffs seek is a form of legal relief, and therefore, plaintiffs' action is not to obtain equitable relief. See Id. (holding that an insurance company's declaratory judgment action presented a legal claim where the underlying controversy was a beneficiary's contractual claim for double indemnity benefits under a life insurance policy covered by ERISA).

Moreover, we do not believe that through this action plaintiffs are seeking to "enforce" the terms of their ERISA plan. A declaratory judgment "enforces" the terms of an ERISA plan if 1. "it seeks to establish the primacy of an ERISA obligation over some independent, potentially conflicting federal or state law duty", or 2. it seeks to establish that the party against whom the action is brought has an obligation under ERISA that it is allegedly disregarding. Transamerica, 811 F.2d at 1252. An action brought solely to clarify one's obligations as an insurer is not a suit to "enforce" the terms of an ERISA plan. See Id.; Reynolds v. Stahr, 758 F.Supp. 1276, 1280 (W.D.Wis. 1991). Thus, the instant case, which plaintiffs brought solely to clarify their obligations as insurers, is not seeking to enforce the terms of an ERISA plan.

As is apparent, plaintiffs' assertion that we have jurisdiction over this case under ERISA is erroneous. However, we conclude that we have jurisdiction under the Declaratory Judgment Act.

The Declaratory Judgment Act, 28 U.S.C. § 2201(a), provides that federal jurisdiction in a declaratory judgment action exists if the defendant against whom the declaratory judgment is sought could have brought a coercive action in federal...