Halbach v. Great-West Life & Annuity Ins. Co.

• Decision Date: 13 April 2009
• Docket Number: No. 07-3865.,No. 07-3867.,07-3865.,07-3867.
• Citation: Halbach v. Great-West Life & Annuity Ins. Co., 561 F.3d 872 (8th Cir. 2009)
• Parties: Heather HALBACH, as personal representative of the estate of John Lewis, and on behalf of a class of long-term disability recipients denied benefits under defendants' health insurance plans; Barbara Schield, on behalf of a class of long-term disability recipients denied benefits under defendants' medical, dental, vision, prescription drug, and life insurance plans, Appellees/Cross-Appellants, v. GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY; Great-West Life & Annuity Insurance Company Employee Welfare Benefit Plan; Great-West Life & Annuity Company Employee Health & Welfare Plan; Great-West Life & Annuity Insurance Company Flexible Benefits Plan; Great-West Life Staff & Agents' Plan, Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

561 F.3d 872

Heather HALBACH, as personal representative of the estate of John Lewis, and on behalf of a class of long-term disability recipients denied benefits under defendants' health insurance plans; Barbara Schield, on behalf of a class of long-term disability recipients denied benefits under defendants' medical, dental, vision, prescription drug, and life insurance plans, Appellees/Cross-Appellants, v.GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY; Great-West Life & Annuity Insurance Company Employee Welfare Benefit Plan; Great-West Life & Annuity Company Employee Health & Welfare Plan; Great-West Life & Annuity Insurance Company Flexible Benefits Plan; Great-West Life Staff & Agents' Plan, Appellants/Cross-Appellees.

No. 07-3865.

No. 07-3867.

United States Court of Appeals, Eighth Circuit.

Submitted: October 16, 2008.

Filed: April 13, 2009.

Waldemar Jacob Pflepsen, Jr., argued, Washington, DC, Stephen H. Goldberg, Robin Sanders, on the brief, Washington, DC, Bradley J. Baumgart, on the brief, Kansas City, MO, for appellants/cross-appellees.

Mark Alan Potashnick, argued, St. Louis, MO, Sheldon Weinhaus, on the brief, St. Louis, Mo, for appellees/cross-appellants.

Before GRUENDER, BEAM and SHEPHERD, Circuit Judges.

BEAM, Circuit Judge.

Great-West Life & Annuity Insurance Company appeals from the district court's grant of summary judgment reinstating benefits in favor of a class of disabled employee claimants("Plaintiffs") receiving long-term disability benefits under an employee benefit plan provided by the company (the Plan).Plaintiffs cross-appeal, challenging the relief, or lack thereof, awarded them by the district court.Although we find that Great-West properly amended its Plan and gave the requisite notice, there remains a genuine issue of material fact as to whether the welfare benefits at issue were previously vested.Accordingly, we reverse the district court and remand that issue for trial.We affirm the district court's determination regarding the issue raised in Plaintiffs' cross-appeal-the dismissal of Plaintiffs' request for damages in the nature of certain past-due benefits and COBRA "overpayments."

I.BACKGROUND

Generally speaking, until December 31, 2004, Great-West provided a package of medical coverages to former employees receiving long-term disability benefits on the same terms as the medical coverages offered active employees.The Plan was an "employee welfare benefit plan" for purposes of the Employee Retirement Income Security Act of 1974 (ERISA).29 U.S.C. § 1002(1).The menu of medical coverage includes health, vision, dental, and prescription drug benefits, and life insurance coverage.

Article V of the Plan provides:

5.1 Amendment of Plan.The Company reserves the right at any time or times to amend the provisions of the Plan to any extent and in any manner that it may deem advisable, by a written instrument signed by an officer of the Company; provided, however, that no such modification shall divest a Participant of benefits under the Plan to which he has become entitled prior to the effective date of the amendment.

5.2 Termination of Plan.The Company has established the Plan with the bona fide intention and expectation that it will be continued indefinitely, but the Company has no obligation whatsoever to maintain the Plan in whole or in part for any given length of time and may terminate the Plan in whole or in part by a written instrument signed by an officer of the Company at any time without liability; provided, however, that such termination shall not divest a Participant of benefits under the Plan to which he has become entitled.

We will refer to these sections as the reservation-of-rights clause.This procedure complies with ERISA, which requires that all plans have a procedure for amending the plan, and for identifying the persons who have the authority to amend the plan.29 U.S.C. § 1102(b)(3).

In late 2004, Great-West decided to cease providing medical coverage to long-term disability claimants.Great-West mailed all Plan participants a letter advising them of the changes that would become effective January 1, 2005.Great-West relies upon this letter as the actual Plan amendment, as it is the only document announcing the amendment that is signed by an officer of the company.The letter stated that effective December 31, 2004, "medical benefits will no longer be continued for current or future Long Term Disability claimants."Further, the letter stated that "[d]ue to the change in the 2005 benefit package, your health coverage will terminate December 31, 2004, and you will be offered the option to elect coverage under COBRA."The letter did not clearly elucidate that the health, vision, dental and prescription drug benefits would be eliminated, but it did enclose and reference "a summary of all plan changes, decision-making tools, health plan overviews and a health care resource guide."The enclosed summary plan document (SPD) was entitled "Great-West Summary of Benefit Plan Changes 2005."

Plaintiffs sued Great-West alleging that its Plan amendment and denial of benefits violated the Plan and ERISA.On cross motions for summary judgment, the district court ruled in Plaintiffs' favor.The court determined that Great-West's letter along with the enclosed SPD did not validly amend the Plan because even though the letter was signed by an officer, the SPD was not.Nor, according to the court, was it properly incorporated within the amendment, and thus did not satisfy the written instrument requirement of the Plan.Then, looking at the letter in isolation, the court held that the letter failed to enumerate the benefits that were being eliminated and failed to notify the Plan participants of the specific changes to the Plan documents.

As to whether Plaintiffs had vested rights to welfare benefits for the length of their disability, the court, applied a de novo standard of review.It also permitted the use of extrinsic evidence because it determined that the Plan's language was ambiguous as to vesting.The court then determined that the benefits were vested.The district court granted summary judgment in Plaintiffs' favor and ordered that their medical coverage be reinstated.Great-West appeals.

II.DISCUSSION

A.Standard of Review

We review the decision to grant summary judgment de novo and will affirm if, viewing the evidence in the light most favorable to the nonmoving party, we conclude there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.Sanders v. City of Minneapolis,474 F.3d 523, 526(8th Cir.2007).In our review, however, "we apply the same standard as the District Court, which brings us to the first issue we must address: what standard do we, the federal courts, apply in reviewing this particular" decision?Hillstrom v. Kenefick,484 F.3d 519, 524(8th Cir.2007)."We review de novo the District Court's determination of the appropriate standard."Id.

The usually cursory exercise of articulating a standard of review is complicated in this case because there are varying standards applicable to the different issues presented.We address each in turn.First, we review the process used in carrying out the Plan amendment, that is, the way Great-West communicated the amendment to Plaintiffs.Second, we examine Great-West's articulated amendment and analyze whether it seeks to eliminate already vested benefits.And finally, we address the remedies claimed in the Plaintiffs' cross-appeal.

B.Carrying Out the Plan Amendment

The parties disagree about what standard of review to apply.Great-West claims that because the Plan gave the plan administrator discretion to interpret the Plan, the validity of the amendment is subject to an abuse of discretion standard.Great-West focuses on the communication of the amendment to Plan participants, or the process of amendment.Plaintiffs respond that the overall decision to amend the Plan in the first place was a task undertaken by Great-West as plan sponsor and thus is subject to a de novo standard, focusing on the decision to amend the Plan.The fact that the parties approach the standard of review question from different angles confounds the issue only slightly.In the end, both parties make valid arguments.Great-West acted as plan sponsor when it sought to amend the Plan, but carried out its duties as plan administrator in communicating that decision to Plaintiffs.At the bottom line, though, the fighting issue between the parties is whether Great-West "validly amended" the Plan.Here, we easily reach this bottom line without necessarily deciding the dispute regarding the appropriate standard of review to apply.Under either standard, we hold that Great West validly amended the Plan.

The sole issue here is whether Great-West validly complied with its Plan amendment requirements by mailing a letter to Plan participants that enclosed and referenced the SPD brochure.This act must constitute "a written instrument signed by an officer of the Company" as the Plan requires for amendments.There is no dispute of material fact as to how Great-West communicated the amendment, only whether the process satisfies the Plan requirement, and thus ERISA.

The district court, without citation to legal authority, first discussed whether the SPD, standing alone, constituted a valid Plan amendment.Because the SPD was not signed by an officer of the company, the district court held it did not.Next, the district court held that the letter's reference to the SPD was insufficient to incorporate the SPD into the Plan amendment.The district court then turned to the letter itself.The court specifically reviewed the letter and discussed only one statement in it that stated "medical benefits will no longer be continued for current or future Long Term Disability claimants."The court analyzed whether the term "medical" was sufficient to encompass all welfare benefits...