EDWARDS v. LIBERTY LIFE ASSURANCE CO., No. 1:01CV111-T (W.D.N.C. 12/21/2001)
| Decision Date | 21 December 2001 |
| Docket Number | No. 1:01CV111-T.,1:01CV111-T. |
| Parties | ELLEN EDWARDS, Individually and as Administratrix of the Estate of Richard Donovan Edwards, Plaintiff, v. LIBERTY LIFE ASSURANCE COMPANY OF BOSTON, Defendant |
| Court | U.S. District Court — Western District of North Carolina |
THIS MATTER is before the court upon defendant's Motion for Judgment on the Pleadings or, Alternatively, for Summary Judgment. Having carefully considered that motion and reviewed the pleadings, including plaintiff's response, the undersigned enters the following findings, conclusions, and recommendation.
This action was commenced in the North Carolina General Court of Justice, Superior Court Division, for Burke County, on April 23, 2001. In such complaint, plaintiff alleged a common-law claim for breach of a contract of life insurance entered into by her decedent with defendant through a group plan made available through the decedent's employer. Plaintiff alleged that the contract had been breached by defendant's refusal to pay the full death benefit.
Defendant timely removed this action on May 25, 2001, by invoking this court's original, preemptive, and exclusive jurisdiction under the Employee Retirement Income Security Act ("ERISA"). Under ERISA, common-law claims that relate to an employee benefit plan are preempted under Section 514(a) of the Act. 29 U.S.C. § 1144 (a). While the complaint has not been amended, the undersigned has construed the contract claim to be a claim under Section 502(a)(1)(B) of ERISA. Hoeflicker v. Central States, Southeast & Southwest Areas Health & Welfare Fund, 644 F. Supp. 195, 200 (W.D. Mo. 1986).
The following facts are not in dispute. Plaintiff's decedent, who died as a result of suicide, was covered by defendant's policy of insurance No. SA3-8 11-250084-NU. The "Policy Reissue Agreement," which is attached to defendant's answer, was in effect at the time of death of plaintiff's decedent. Under the plan, plaintiff's decedent had "basic" life insurance coverage from his employer in the amount of $31,595, for which his employer paid the entire premium, and "voluntary" life insurance coverage of $127,000, for which the plaintiff paid at least part of the premium.
It is undisputed that the policy contained both an incontestability clause and a suicide clause. The former provided that coverage under the policy became incontestible (except for nonpayment of premiums) after it had been in force for two years; the latter provided, as follows:
If the covered employee dies by suicide or attempted suicide, while sane or insane, benefits payable under this policy will be limited to contributions paid, if any, by the covered person for his insurance.
See Answer, Ex. A, at § 5. It is undisputed that at the time of the decedent's death, the policy had been in force at least two years. Plaintiff timely filed a claim with defendant, indicating that suicide was the cause of death; thereafter, defendant, citing the suicide provision, paid $726.19, which represented the amount of premiums plaintiff's decedent had paid, plus interest accruing from the date of his death.
The premise of plaintiff's common-law claim, as well as the ERISA claim which preempts it, is that the incontestability clause barred application of the suicide provision. Plaintiff is the widow of the decedent, the administratrix of his estate, and the sole beneficiary of the policy.
A motion for judgment on the pleadings is appropriate where ultimate facts are not in dispute. A. S. Abell Co. v. Baltimore Typographical Union Co., 338 F.2d 190, 193 (4th Cir. 1964). Under Rule 12(c), Federal Rules of Civil Procedure, judgment on the pleadings should be entered where it is apparent that there are no issues of material fact and that only questions of law exist. Moreno v. University of Maryland, 420 F. Supp. 541 (D.Md. 1970), aff'd, 556 F.2d 573 (4th Cir. 1977). When there are no factual issues, judgment on the pleadings should be granted where it is clear that the moving party is entitled to the judgment it seeks as a matter of law. Jadoff v. Gleason, 140 F.R.D. 330, 331 (M.D.N.C. 1991).
On a motion for summary judgment, the moving party has the burden of production to show that there are no genuine issues for trial. Upon the moving party's meeting that burden, the nonmoving party has the burden of persuasion to establish that there is a genuine issue for trial.
When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. In the language of the Rule, the nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving [sic] party, there is no "genuine issue for trial."
Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (citations omitted; emphasis in the original) (quoting Fed. R. Civ. P. 56). There must be more than just a factual dispute; the fact in question must be material and readily identifiable by the substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986). By reviewing substantive law, the court may determine what matters constitute material facts. Id. "Only disputes over facts that might affect the outcome of the suit under governing law will properly preclude the entry of summary judgment." Id. at 248. A dispute about a material fact is "genuine" only if the evidence is such that "a reasonable jury could return a verdict for the nonmoving party." Id.
[T]he court is obliged to credit the factual asseverations contained in the material before it which favor the party resisting summary judgment and to draw inferences favorable to that party if the inferences are reasonable (however improbable they may seem).
Cole v. Cole, 633 F.2d 1083, 1092 (4th Cir. 1980). Affidavits filed in support of a motion for summary judgment are to be used to determine whether issues of fact exist, not to decide the issues themselves. United States ex rel. Jones v. Rundle, 453 F.2d 147 (3d Cir. 1971). When resolution of issues of fact depends upon a determination of credibility, summary judgment is improper. Davis v. Zahradnick, 600 F.2d 458 (4th Cir. 1979).
Inasmuch as evidentiary matters outside the pleadings need not be and have not been considered, the motion for judgment on the pleadings is appropriate, especially where judicial review is limited to the administrative record that was presented to the plan administrator/fiduciary.
It is undisputed that the employee benefit plan granted defendant, acting as plan administrator, discretion in interpreting plan terms. Where a plan administrator is granted discretionary authority by the terms of the plan to determine eligibility or to construe the terms of the plan, the denial of benefits must be reviewed for abuse of discretion, not de novo. See Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (1989).
Under this deferential standard, the administrator or fiduciary's decision will not be disturbed if it is reasonable, even if this court would have come to a different conclusion independently.
Ellis v. Metropolitan Life Ins. Co., 126 F.3d 228, 232 (4th Cir. 1997). In determining whether discretion has been abused, the Court of Appeals for the Fourth Circuit has identified eight factors for consideration by a reviewing court:
(1) the language of the plan;
(2) the purposes and goals of the plan;
(3) the adequacy of the materials considered to make the decision and the degree to which they support it;
(4) whether the fiduciary's interpretation was consistent with other provisions in the plan and with earlier interpretations of the plan;
(5) whether the decision-making process was reasoned and principled;
(6) whether the decision was consistent with the procedural and substantive requirements of ERISA;
(7) any external standard relevant to the exercise of discretion; and
(8) the fiduciary's motives and any conflict of interest it may have.
Under ERISA, a plan fiduciary is obligated to act "solely in the interest of the participants and beneficiaries." 29 U.S.C. § 1104 (a)(1). ERISA anticipates that conflicts of interest are inherent in benefit determinations and provides that such conflicts be considered as a factor in determining whether a plan administrator and fiduciary abused its discretion Id., at 233. Where a conflict is shown, the deference to the decision of the fiduciary "will be lessened to the degree necessary to neutralize any untoward influence resulting from the conflict." Id.
In this case, no argument has been made by plaintiff that a conflict of interest actually exists. This court, however, has tempered its review under the assumption that the plan administrator is the party who would have been liable for payment of the full benefit, see defendant's Memorandum in Support, at 9, but doing so will be only a slight departure from a strict "abuse-of-discretion" standard, inasmuch as no subjective factual determinations were made.
The more incentive for the administrator or fiduciary to benefit itself by a certain interpretation of benefit eligibility or other plan terms, the more objectively reasonable the administrator or fiduciary's decision must be and the more substantial the evidence must be to support it.
Id. In such circumstances, the "abuse-of-discretion" standard is modified on a sliding scale to counterbalance such impact:
When a fiduciary exercises discretion in...
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