Hyde v. Benicorp Ins. Co.

• Decision Date: 29 March 2005
• Docket Number: No. 05-2006-JWL.,05-2006-JWL.
• Citation: 363 F.Supp.2d 1304
• Parties: David Warren HYDE and Mary E. Hyde, Plaintiffs, v. BENICORP INSURANCE COMPANY and Tony Torchia, Defendants.
• Court: U.S. District Court — District of Kansas

363 F.Supp.2d 1304

David Warren HYDE and Mary E. Hyde, Plaintiffs, v. BENICORP INSURANCE COMPANY and Tony Torchia, Defendants.

No. 05-2006-JWL.

United States District Court, D. Kansas.

March 29, 2005.

Joseph A. Kronawitter, K. Christopher Jayaram, Horn, Aylward & Bandy LLC, Kansas City, MO, for Plaintiffs.

Kevin J. Breer, Timothy J. Sear, Polsinelli Shalton Welte & Suelthaus, P.C., Overland Park, KS, Michael E. Callahan, Neely L. Fedde, Blackwell Sanders Peper Martin LLP, Kansas City, MO, for Defendants.

MEMORANDUM AND ORDER

LUNGSTRUM, District Judge.

David Warren Hyde and Mary Hyde originally brought this suit in the District Court of Johnson County, Kansas against Benicorp Insurance Company ("Benicorp") alleging improprieties actionable under the Employee Retirement Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., and alleging professional negligence against Tony Torchia, relating to plaintiffs' health insurance plan.¹ Mr. Torchia and Benicorp removed the case to the United States District Court for the District of Kansas.

In Count I of their petition, plaintiffs state a claim for wrongful denial of benefits under ERISA § 502(a)(1)(B), 29 U.S.C. 1132(a)(1)(B), against Benicorp, and plaintiffs, in Count II of their petition, state a claim for breach of fiduciary duty pursuant to ERISA § 502(a)(3), 29 U.S.C. 1132(a)(3), against Benicorp. This matter is currently before the court on Benicorp's motion to dismiss Count II of plaintiffs' petition pursuant to Federal Rule of Civil Procedure 12(b)(6).² (Doc. # 8).

The court finds that ERISA § 502(a)(1)(B) provides plaintiffs with adequate remedies, as the court may determine benefits due and award them, order prejudgement interest for benefits due, reinstate benefits, and clarify future benefit rights. Because ERISA § 502(a)(1)(B) provides adequate relief for plaintiffs, equitable relief under ERISA § 502(a)(3) is not appropriate, and therefore, the court dismisses Count II of plaintiffs' petition.

I. Background

In their petition, plaintiffs allege that they received insurance coverage as part of an employee benefit plan (the "plan") that Mr. Hyde's employer, Zephyr Products, Inc., sponsored. Zephyr Products contracted with Benicorp to provide the group health insurance coverage under the plan for its employees, and plaintiffs submitted their application for insurance to Benicorp on December 18, 2002. Mr. Hyde was diagnosed with prostate cancer in early 2003, and plaintiffs submitted claims for benefits to Benicorp for Mr. Hyde's treatment. In a letter dated July 21, 2003, Benicorp notified plaintiffs that it was rescinding their coverage due to alleged material misrepresentations that plaintiffs made on their application.

Plaintiffs brought suit against Benicorp in the District Court of Johnson County, Kansas under ERISA § 502(a)(1)(B) and ERISA § 502(a)(3), filing their petition on November 18, 2004. Tony Torchia and Benicorp removed the case to the United States District Court for the District of Kansas because federal courts have exclusive jurisdiction over ERISA claims except for those brought under ERISA § 502(a)(1)(B). See 29 U.S.C. § 1132(3)(1).

This matter is currently before the court on Benicorp's motion to dismiss plaintiffs claim brought under ERISA § 502(a)(3).

II. Standard

The court will dismiss a cause of action for failure to state a claim only when "it appears beyond a doubt that the plaintiff can prove no set of facts in support of his [or her] claims which would entitle him [or her] to relief," Aspenwood Investment Co. v. Martinez, 355 F.3d 1256, 1259 (10th Cir.2004) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)), or when an issue of law is dispositive. Neitzke v. Williams, 490 U.S. 319, 326, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). The court accepts as true all well-pleaded facts, as distinguished from conclusory allegations, and all reasonable inferences from those facts are viewed in favor of the plaintiff. Adams v. Kinder-Morgan, Inc., 340 F.3d 1083, 1088 (10th Cir.2003). The issue in resolving a motion such as this is "not whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).

III. Analysis

In plaintiffs' petition, two claims are asserted against Benicorp. In Count I, plaintiffs seek recovery of wrongfully denied insurance benefits pursuant to ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), and plaintiffs request that the court award them "[p]ayment of all of plaintiffs' unpaid health-care claims." In Count II, brought under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), plaintiffs allege that Benicorp, as claims administrator, is a fiduciary under 29 U.S.C. § 1104, and that Benicorp breached its fiduciary duty by retroactively rescinding plaintiffs' coverage in violation of 29 U.S.C. § 1182. As relief for this claim, plaintiffs request an "[a]n order permanently enjoining Benicorp from rescinding plaintiffs' health-care coverage" in violation of applicable law and "[a]n order requiring Benicorp to retroactively reinstate plaintiffs' health-care coverage under the terms and conditions originally agreed to and to pay all claims for benefits accruing during the period from January 1, 2003, to the present."

Benicorp asks the court to dismiss Count II of plaintiffs' petition, arguing that plaintiffs' seek the same remedy in Count II and in Count I, and therefore, the remedy sought in Count I is adequate to make plaintiffs whole. Benicorp asserts that since the remedy requested in Count I is adequate, the court must dismiss Count II as a matter of law.

ERISA § 502(a)(1)(B) provides that a participant or beneficiary may bring a civil action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." ERISA § 502(a)(3) states that a civil action may be brought by a participant, beneficiary, or fiduciary "(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan."

However, a participant or beneficiary is not permitted to seek equitable relief under § 502(a)(3) if he or she has another adequate ERISA remedy available to him or her. Moore v. Berg Enter., Inc., 201 F.3d 448, 449 n. 2 (10th Cir.1999) (citing Varity Corp. v. Howe, 516 U.S. 489, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996)); Arocho v. Goodyear Tire & Rubber Co., 88 F.Supp.2d 1175, 1185 (D.Kan.2000).

Plaintiffs argue that a judgment in their favor only for their wrongful denial of benefits claim pursuant to ERISA § 502(a)(1)(B) is unable to make them whole because they seek separate and independent equitable relief that can only be pursued under ERISA § 502(a)(3). Specifically, plaintiffs state in their opposition to Benicorp's motion to dismiss that they seek "injunctive relief from the court to preclude Benicorp from violating applicable federal and state laws vis-a-vis plaintiffs as well as an order requiring Benicorp to retroactively reinstate its coverage to fully cover plaintiffs, pursuant to the original term of the applicable plan." Plaintiffs further argue that because they seek relief that is separate and distinct in nature, they are entitled to pursue a claim under § 502(a)(3).

In support of their argument, plaintiffs cite Mohr v. Benicorp Insurance Co., 2002 WL 731684 (D.Neb., April 24, 2002), where Judge Bataillon held that the plaintiffs' claim under ERISA § 502(a)(1)(B) for monetary relief for wrongfully denied benefits did not preclude the plaintiffs from bringing a claim under ERISA § 502(a)(3) for injunctive relief permanently enjoining the defendants from rescinding health insurance coverage in violation of ERISA and requiring the defendant to retroactively reinstate the plaintiff's coverage. This holding is based on Eight Circuit precedent that requires courts to allow two causes of action where the plaintiff is claiming relief that is different from the benefits due under the plan. See Hall v. Lhaco, Inc., 140 F.3d 1190, 1197 (8th Cir.1998) (allowing one claim for benefits and a second claim for injunctive relief and an accounting); Wald v. Southwestern Bell Corp., 83 F.3d 1002, 1006 (8th Cir.1996) (plaintiff sought no different relief under claim for benefits and claim for fiduciary breach, so cause of action not appropriate).

This court believes that the Tenth Circuit follows a different approach. First, it is clear that part of the remedy sought by plaintiffs here for the alleged breach of fiduciary duty is legal relief and not equitable relief, which is not available under ERISA § 502(a)(3), as plaintiffs ask for an order requiring Benicorp "to pay all claims for benefits accruing during the period from January 1, 2003 to the present." See Zimmerman v. Sloss Equipment, Inc., 72 F.3d 822, 828 (10th Cir.1995) (compensatory damages are not available under section 502(a)(3)(B); see also Lefler v. United Healthcare of Utah, Inc., 72 Fed.Appx. 818, 820 (10th Cir.2003) (claim brought under ERISA § 502(a)(3) was properly dismissed as a matter of law when ERISA § 502(a)(1)(B) provided adequate relief). The Supreme Court, in Great-West & Annuity Insurance Company v. Knudson, identified what constitutes "equitable relief" under ERISA § 502(a)(3)(B). 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2003). The Supreme Court stated that "the term `equitable relief' in section 502(a)(3) must refer to `those categories of relief that were typically available in equity.'" Id. at 210, 122 S.Ct. 708 (quoting Mertens v. Hewitt Assocs., 508 U.S. 248, 113 S.Ct....