Cultrona v. Nationwide Life Ins. Co., s. 13–3558

• Decision Date: 09 April 2014
• Docket Number: 13–3585.,Nos. 13–3558,s. 13–3558
• Citation: 748 F.3d 698
• Parties: Nicole CULTRONA, Plaintiff–Appellant/Cross–Appellee, v. NATIONWIDE LIFE INSURANCE COMPANY, Nationwide Death Benefit Plan, and StarLine Group, Defendants–Appellees, Nationwide Benefits Administrative Committee, Defendant–Appellee/Cross–Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

748 F.3d 698

Nicole CULTRONA, Plaintiff–Appellant/Cross–Appellee,

v. NATIONWIDE LIFE INSURANCE COMPANY, Nationwide Death Benefit Plan, and StarLine Group, Defendants–Appellees,Nationwide Benefits Administrative Committee, Defendant–Appellee/Cross–Appellant.

Nos. 13–3558, 13–3585.

United States Court of Appeals, Sixth Circuit.

Argued: March 19, 2014.

Decided and Filed: April 9, 2014.

ARGUED:Kelly S. Lawrence, Frantz Ward LLP, Cleveland, Ohio, for Appellant/Cross–Appellee. Daniel W. Srsic, Littler Mendelson, P.C., Columbus, Ohio, for Appellees in 13–3585 and Appellee–Cross–Appellant in 13–3585. ON BRIEF:Kelly S. Lawrence, Mark L. Rodio, Michael E. Smith, Frantz Ward LLP, Cleveland, Ohio, for Appellant/Cross–Appellee. Daniel W. Srsic, Lisa M. Kathumbi, Littler Mendelson, P.C., Columbus, Ohio, for Appellees in 13–3585 and Appellee–Cross–Appellant in 13–3585.

Before: GILMAN, COOK, and McKEAGUE, Circuit Judges.

OPINION

RONALD LEE GILMAN, Circuit Judge.

Nicole Cultrona filed suit against Nationwide Life Insurance Company (Nationwide), the Nationwide Death Benefit Plan (the Plan), the Nationwide Benefits Administrative Committee (the BAC), and StarLine Group (StarLine) following the denial of her claim for accidental-death benefits and her subsequent exhaustion of the Plan's internal administrative procedures. The claim was based on the death of Nicole's husband, Shawn Cultrona, in June 2011. Nicole, an employee of a Nationwide affiliate, was a participant in the Plan. Among other benefits, the Plan provided coverage in the event of an accidental death. Shawn was a covered person under the Plan, and Nicole was the designated beneficiary for any benefits paid as a result of Shawn's death. Following the parties' cross-motions for judgment on the administrative record, the district court entered judgment in favor of the defendants, but assessed a statutory penalty of $55 per day (for a total of $8,910) against the BAC for its delay in providing Nicole with a copy of the accidental-death policy after her written request for relevant documents.

Nicole argues that the denial of her claim was arbitrary and capricious. On the other hand, the BAC (on behalf of itself and the other defendants) asks us to affirm the judgment in its favor, but separately contends that the district court erred in the imposition of a penalty against the BAC as the Plan administrator. For the reasons set forth below, we AFFIRM the judgment of the district court in all respects.

I. BACKGROUND

Benefits are payable under the Plan if a covered person suffers an “injury” as a result of an “accident.” An accident is defined in the policy as “an unintended or unforeseeable event or occurrence which happens suddenly and violently.” But not every accident is covered under the Plan. One of the Plan's exclusions, Exclusion 12, provides that no benefits will be paid if the “ Covered Person [is] deemed and presumed, under the law of the locale in which the Injury is sustained, to be under the influence of alcohol or intoxicating liquors.” (emphasis in original).

Nicole discovered Shawn's body in the first-floor bathroom of their Twinsburg, Ohio home on June 5, 2011. Shawn had gone out drinking the night before, while Nicole and the couple's young child had spent the night at a friend's house. When Nicole found Shawn's body, it was cold to the touch. The Summit County Medical Examiner's Office performed an autopsy the next day. In the autopsy report, the examining pathologist concluded that the cause of death was “[a]sphyxia by extreme and restricted position (positional asphyxia)” and the manner of death was “[a]cute ethanol intoxication ... ACCIDENT: Prolonged and extreme hypertension of neck and torso while intoxicated.” Shawn's blood-alcohol level at the time of the autopsy was .22%.

Nicole filed a claim for accidental-death benefits with StarLine, the claims administrator for the Plan, later that same month. The total value of the claim was $212,000. After receiving the claim, StarLine obtained an investigative report from EMSI Investigative Services. That report incorporated a criminal-history search, Shawn's motor-vehicle records, the Summit County Medical Examiner's Office reports (autopsy, investigation, and toxicology), and the Twinsburg Police Department report. StarLine subsequently forwarded these materials to Nationwide for processing.

Nationwide, in turn, directed StarLine to deny Nicole's claim in October 2011. The denial letter explained that the claim was being denied because “the loss is precluded from coverage by Exclusion 12.” Unfortunately, the letter cited an earlier version of Exclusion 12 that provided as follows: “The Covered Person being deemed and presumed, under the law of the locale in which the Injury is sustained, to be driving or operating a motor vehicle while under the influence of alcohol or intoxicating liquors.” (emphasis in original). The letter continued:

The police report states that they responded to the deceased's home at 1146 hours on June 05, 2011 and found the deceased dead on the bathroom floor. According to interviews they conducted, Shawn Cultrona had a history of alcohol abuse and, in the hours before he died, had been out drinking with friends and was seen stumbling and walking into chairs prior to driving himself home.

The Medical Examiner's report determined that death occurred when the deceased became unconscious while intoxicated (passed out) [and] ... [t]he County of Summit Toxicology Report indicates that the deceased's blood ethanol level was 0.220.

As noted above ... [t]he requirements for coverage under the policy are not met on these facts given Shawn Cultrona's acute ethanol intoxication at the time of death. Additionally, since the deceased's blood level content was in excess of the level at which Ohio presumes intoxication as a matter of law; the loss is precluded from coverage by Exclusion 12 above.

Nicole's attorney responded to StarLine's denial letter by calling the denial “completely unfounded, and either made in bad faith or with a complete misreading of the Policy and Exclusion 12.” The response explained that the version of Exclusion 12 cited in the denial letter applied only in cases involving the operation of motor vehicles.

StarLine responded to counsel's letter seven days later. In its reply, StarLine acknowledged that the initial denial letter contained an erroneous reference to an earlier version of Exclusion 12. The reply further explained:

[A]s you noted, this “was a complete misreading of the Policy and Exclusion 12.” The Exclusion cited in our denial letter dated October 21, 2011, was quoted incorrectly. The policy was amended in January, 2010 effectively changing Exclusion 12 as follows:

“It is also hereby noted and agreed that Exclusion # 12 as found under Section X—‘Exclusions' on page 18 of the Policy is amended to remove the reference to ‘driving or operating a motor vehicle’ ...

Amendment I was inadvertently overlooked when the letter was prepared. Please accept our sincere apologies for the error and the confusion it caused and extend the same to Mrs. Cultrona. A copy of Amendment I is included for your reference.

Based on the amended Exclusion 12 language, Nationwide has determined that the denial shall prevail. As noted in the original letter, this Plan of Insurance is covered by ERISA and as such, Mrs. Cultrona has the right to appeal the denial. That process is set forth in the original denial letter, a copy of which is enclosed.

Nicole's attorney responded to the second denial letter the next day, simultaneously appealing the denial and requesting “all documents that you contend prove that Nationwide provided notice of Amendment No. 1 ... and all documents comprising the administrative record and/or supporting Nationwide's decision.” StarLine forwarded the appeal to Nationwide for review by the BAC.

In January 2012, the BAC denied Nicole's appeal. The BAC explained that Exclusion 12 precluded the payment of benefits because “Shawn Cultrona's death was caused by ... [a]cute ethanol intoxication.” Nicole then filed suit in federal court, asserting claims under the Employee Retirement Income Security Act of 1974 (ERISA) and a common-law breach-of-fiduciary-duty claim against Nationwide, the Plan, the BAC, and StarLine. Her ERISA claims were twofold. First, Nicole sought payment of the death benefits pursuant to the Plan. She next sought statutory penalties as a result of the BAC's failure to timely provide her with a copy of the accidental-death policy.

The parties subsequently filed cross-motions for judgment on the administrative record. After extensive briefing, the district court entered judgment in favor of the defendants. See Cultrona v. Nationwide Life Ins. Co., 936 F.Supp.2d 832, 859 (N.D.Ohio 2013). The defendants' victory, however, was only partial. Agreeing with Nicole that the BAC had breached its statutory duty to provide her with Plan-related documents upon written request, the court imposed a penalty of $55 per day (for a total of $8,910) against the BAC. These timely cross-appeals followed.

II. ANALYSIS

A. Standard of review

We review de novo the “decision of a district court granting judgment in an ERISA disability action based on an administrative record.” Helfman v. GE Grp. Life Assurance Co., 573 F.3d 383, 392 (6th Cir.2009) (internal quotation marks omitted). Because the Plan administrator in this case had discretion to interpret the Plan, the denial of benefits is reviewed under the arbitrary-and-capricious standard. Id. This means that the decision denying benefits must be upheld so long as it is “the result of a deliberate, principled reasoning process and if it is supported by substantial evidence.” Id. (internal quotation marks omitted). Finally, where the “plan administrator both decides a claimant's eligibility for benefits and pays [those benefits], we may consider the resulting potential for a conflict of interest when...