Curtis v. Metro. Life Ins. Co.

• Decision Date: 04 May 2016
• Docket Number: CIVIL ACTION NO. 3:15-CV-2328-B
• Parties: DEWAYNE CURTIS, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Texas

DEWAYNE CURTIS, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant.

CIVIL ACTION NO. 3:15-CV-2328-B

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

May 4, 2016

MEMORANDUM OPINION & ORDER

Before the Court is Plaintiff DeWayne Curtis's First Amended Motion to Determine the Appropriate Standard of Review (Doc. 22) (Plaintiff's Motion) and Defendant Metropolitan Life Insurance Company's Motion Confirming that the Abuse-of-Discretion Standard Applies (Doc. 40) (Defendant's Motion). For the following reasons, the Court GRANTS Plaintiff's Motion and DENIES Defendant's Motion.

I.BACKGROUND

This case concerns a three-party contractual relationship between Plaintiff DeWayne Curtis (Plaintiff), Energy Future Holdings Corporation (EFH), and Defendant Metropolitan Life Insurance Company (MetLife), governed by the Employee Retirement Income Security Act of 1974 (ERISA) case. Pub. L. No. 93-406, 88 Stat. 829 (codified in relevant part at 29 U.S.C. § 1001 et seq.).

Three documents encapsulate the terms of this relationship: the EFH Master Plan Document (the Plan), the EFH Summary Plan Description (the SPD), and the MetLife Certificate of Insurance (the COI). Doc. 41, Def.'s Br. in Supp. of Def.'s Mot. 2 [hereinafter Def.'s Br. in Supp.]. Plaintiff worked as an employee of EFH, which provided its employees with long-term disability (LTD) benefits through an "employee welfare benefit plan"¹ (i.e., the EFH Master Plan Document). Doc. 1, Pl.'s Orig. Compl. ¶ 1. To fund the Plan, EFH purchased insurance from MetLife (as evidenced by the COI). Id. ¶ 2; Doc. 42, App. 23-41.

Plaintiff allegedly suffers from a medical condition that "would not and will not permit [him] to perform the duties of his occupation or any occupation as defined in the LTD policy." Doc. 1, Pl.'s Orig. Compl. ¶ 9. He sought benefits under the Plan, and "MetLife admits that Plaintiff received LTD benefits for the period of October 9, 2012 through November 24, 2014, but based on the documentation pertaining to Plaintiff's claim MetLife determined that after November 24, 2014, Plaintiff was no longer disabled pursuant to the terms of the Plan." Doc. 6, Def.'s Answer ¶ 10. Plaintiff appealed MetLife's determination, to no avail, and now brings suit under 20 U.S.C. § 1132(a)(1)(B) to recover his benefits.

In their current motions, the parties ask the Court to decide whether it will review MetLife's determination de novo or for abuse of discretion. See Docs. 22 & 40. Three issues affect this decision: (1) whether the EFH Master Plan Document or SPD contains one or more "discretionary clauses" that grant MetLife "discretionary authority to determine eligibility for benefits or to construe the terms of the plan," see Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); (2) whetherTexas law renders these discretionary clauses void, see Tex. Ins. Code Ann. § 1701.062; 28 Tex. Admin Code § 3.1201 et seq.; and (3) whether ERISA preempts the Texas laws that prohibit discretionary clauses. The parties have briefed each issue. See Docs. 22, 41, 43, 46. Their motions are now ready for review.

II.ANALYSIS

The Supreme Court announced the general rule in Bruch that "[a] denial of benefits challenged under [ERISA] 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." 489 U.S. at 115. If the benefit plan contains a discretionary clause, then the denial of benefits is to be reviewed for abuse of discretion. Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008) (citing Bruch, 489 U.S. at 111, 115); see also Green v. Life Ins. Co. of North America, 754 F.3d 324 (5th Cir. 2014). The Court will refer to this as the Bruch rule.

A. State-Law Prohibition of Discretionary Clauses

"Discretionary clauses are controversial." Standard Ins. Co. v. Morrison, 584 F.3d 837, 840 (9th Cir. 2009). According to the National Association of Insurance Commissioners, following Bruch, discretionary clauses may result in insurers engaging in inappropriate claim practice to the detriment of consumers. See id. To protect consumers, "states have moved to regulate - mainly by banning - such discretionary clauses within insurance contracts." Radha A. Pathak, Discretionary Clause Bans & ERISA Preemption, 56 S.D. L. Rev. 500, 502 (2011). Texas is among the states that prohibit discretionary clauses.

The Texas Insurance Code provides that:

(a) An insurer may not use a document described by Section 1701.002 [i.e., an insurance policy, contract, or certificate] in this state if the document contains a discretionary clause.

(b) A discretionary clause includes a provision that:

(1) purports or acts to bind the claimant to, or grant deference in subsequent proceedings to, adverse eligibility or claim decisions or policy interpretations by the insurer.

Tex. Ins. Code Ann. § 1701.062 (emphasis added). Similarly, the Texas Administrative Code prohibits using discretionary clauses² in "any form filed under Insurance Code Chapters 1701 or 1271," including forms for disability income protection coverage "offered, issued, renewed, or delivered on or after February 1, 2011." 28 Tex. Admin. Code § 3.1201.³

The first issue before the Court is whether the EFH Master Plan Document or SPD contain one or more discretionary clauses, defined in Bruch as clauses that grant a claims administrator "discretionary authority to determine eligibility for benefits or to construe the terms of the plan," which, in turn, confines a court's review of the claims administrator's determinations to an abuse of discretion standard. 489 U.S. at 115. Here, both the EFH Master Plan Document and the SPD contain possible sources of discretionary authority:

• Clause 1: "The Claims Administrator shall have such duties and authority as provided in the Incorporated Documents or by the Plan Administrator, including where applicable, the discretionary authority to make factual findings and construe the terms of the Program for purposes of reviewing and deciding Benefits claims." Doc. 42, App. 14, EFH Master Plan Doc. ¶ 9.4.

• Clause 2: "Disability Benefits shall be made available to Covered Persons in such amounts and subject to such terms and conditions as may be set forth in the Incorporated Documents for such Benefits [including the SPD]." Id., App. 11, EFH Master Plan Doc. ¶ 5.2.

• Clause 3: "The Plan Administrator may, however, delegate some of its interpretation and decision-making authority to the insurers or Claims Administrators of the Plan. Benefits under this Plan will be paid only if the Plan Administrator or its delegate decides in its discretion that the applicant is entitled to them." Id., App. 47, Summary Plan Description 6.

See Doc. 41, Def.'s Br. in Supp. 4-5. Clause 1, where applicable, provides the Claims Administrator (MetLife)⁴ discretionary authority to make factual findings and construe plan terms to decide benefit claims. Doc. 42, App. 14, EFH Master Plan Doc. ¶ 9.4. This comports with the Bruch definition. See 489 U.S. at 115. Clause 3, from the SPD, also provides MetLife with authority to make binding benefit decisions "in its discretion." Doc. 42, App. 47, Summary Plan Description 6. This implicitly grants discretionary authority to make benefit determinations, and is given binding effect by Clause 2 through incorporation by reference. See Burell v. Prudential Ins. Co. of Am., 15-50035, 2016 WL 1426092, at *3 (5th Cir. Apr. 11, 2016) (" [B]ecause the Plan expressly incorporates the SPD, the district court did not err in relying on its language."). Thus, Clause 3 also comports with Bruch. Therefore, the Court concludes that the EFH Master Plan Document and SPD contain Bruch discretionary clauses.⁵

The second issue before the Court is whether Texas law renders these Bruch discretionaryclauses void. For this to occur, the clauses must meet the Texas Insurance Code's and Texas Administrative Code's "discretionary clause" definitions. See, e.g., Tex. Ins. Code Ann. § 1701.062(b). The Texas definitions include provisions that act to "grant deference in adverse proceedings to, adverse eligibility or claim decisions or policy interpretations by the insurer." Id.

Here, the clauses at issue, identified above, indicate that, under Bruch, MetLife's determinations should receive deferential review "in adverse eligibility or claims decisions or policy interpretations by the insurer." See Tex. Ins. Code Ann. § 1701.062(b). As such, these discretionary clauses fall within the Texas Insurance Code's and Texas Administrative Code's discretionary clause definitions. Therefore, Texas law applies and voids the clauses.

B. ERISA Preemption

The third issue before the Court is whether ERISA preempts the Texas laws prohibiting discretionary clauses in insurance contracts. If it does, then under Bruch, an abuse of discretion standard of review applies. If it does not, then the discretionary language is removed from the EFH plan documents, and the standard of review becomes de novo.

The Fifth Circuit has not specifically addressed whether ERISA preemption principles bar state law prohibitions of discretionary clauses in insurance contracts. But a majority of other circuit courts have sustained such state law prohibitions, despite ERISA. See Fontaine v. Metro. Life Ins. Co., 800 F.3d 883 (7th Cir. 2015) (holding Illinois regulation prohibiting discretionary clauses not preempted); Standard Ins. Co. v. Morrison, 584 F.3d 837 (9th Cir. 2009) (same for Montana Commissioner of Insurance practice); American Council of Life Insurers v. Ross, 558 F.3d 600 (6th Cir. 2009) (same for Michigan administrative rule). But see Hancock v. Metro. Life Ins. Co., 590 F.3d 1141, 1145 (10th Cir. 2009) (holding Utah rule partially—but not completely—prohibitingdiscretionary clauses preempted).

The Fifth Circuit has, however, adopted a general standard for deciding whether ERISA preempts state laws...