Kishter v. Principal Life Ins. Co.

• Decision Date: 20 February 2002
• Docket Number: No. 00 CIV. 0013(MBM).,00 CIV. 0013(MBM).
• Citation: 186 F.Supp.2d 438
• Parties: Lenard KISHTER, as Trustee of the Alice A. Russell Trust and as the Executor of the Estate of Alice A. Russell, Plaintiff, v. PRINCIPAL LIFE INSURANCE COMPANY and Lamalie Associates, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

186 F.Supp.2d 438

Lenard KISHTER, as Trustee of the Alice A. Russell Trust and as the Executor of the Estate of Alice A. Russell, Plaintiff, v. PRINCIPAL LIFE INSURANCE COMPANY and Lamalie Associates, Inc., Defendants.

No. 00 CIV. 0013(MBM).

United States District Court, S.D. New York.

February 20, 2002.

Paul L. Dashefsky, Esq., Smithtown, for Plaintiff.

Neil G. Sparber, Esq., Fulbright & Jaworski LLP, New York, for Defendant Lamalie Associates, Inc.

OPINION AND ORDER

MUKASEY, District Judge.

Plaintiff Lenard Kishter is the executor of Alice Russell's estate, as well as the trustee of a trust set up by Russell to receive benefits from life insurance policies provided by her employer. Kishter sues under section 502 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132 (1994 & Supp. V 1999), and also under state law, alleging that Russell's insurance carrier, Principal Life Insurance Company ("Principal"), wrongfully denied her estate life insurance benefits, and that her employer, Lamalie Associates, Inc. ("LAI"), breached its fiduciary duty when it failed to inform Russell accurately as to the extent of her coverage. All of Kishter's claims against defendant Principal have been dismissed by agreement of the parties. Defendant LAI now moves for summary judgment on all claims. Kishter cross-moves for summary judgment on his breach of fiduciary duty claims. For the reasons set forth below, LAI's motion for summary judgment is granted, and Kishter's cross-motion is denied.

I.

The following facts are undisputed. Alice Russell was the Director of Finance for Ward Howell International, Inc. ("Ward Howell") when she was diagnosed with cancer in late August or early September 1997. (Def. 56.1 ¶¶ 1, 2) In connection with her employment with Ward Howell, Russell was entitled to life insurance benefits through First Fortis Life Insurance Company ("First Fortis") in the amount of $210,000, and an additional $40,000 through Allmerica Financial ("Allmerica"). (Id. ¶ 1)

On September 5, 1997, Russell stopped going to work because of her illness, but made arrangements with Ward Howell that allowed her to do a limited amount of work from home. (Id. ¶ 2; Pl. 56.1 ¶ 6) On February 1, 1998, Ward Howell was acquired by LAI. (Def. 56.1 ¶ 4) LAI personnel records show that Russell was transferred to LAI's payroll on February 1.¹ (Dashefsky Affirm. Ex. G) The same records indicate that she remained on the LAI payroll until March 31, 1998, shortly after she began receiving long-term disability benefits from First Fortis on March 5, 1998. (Id.) Russell applied for Social Security disability benefits on March 30, 1998. (Id. Ex. D) Neither party has presented evidence that her employment was ever formally terminated.

Between February and August 1998, LAI enrolled all former employees of Ward Howell, including Russell, in the LAI benefits plan, which included life insurance coverage with Principal. (Def. 56.1 ¶¶ 4-5) LAI paid a total of $342 in life insurance premiums on Russell's behalf from August 1, 1998 to January 31, 1999 (Kornrich Aff. Ex. H), providing her with at least $200,000 worth of coverage (Def. 56.1 ¶ 15; Pl. 56.1 ¶¶ 13-14).² Although Russell's coverage with First Fortis and Allmerica might ordinarily have lapsed at this point, coverage continued under those policies because she was receiving long-term disability benefits, and premiums were therefore no longer required. (Kornrich Aff. Ex. E; Dashefsky Affirm. Ex. A at 118)

On September 9, 1998, Russell wrote to Marilyn Long, the benefits administrator for LAI, to tell her that she had confirmed her $210,000 coverage with First Fortis, and to inquire whether she was still covered by the $40,000 policy from Allmerica. (Kornrich Aff. Ex. E) Long responded that until questions could be answered by her broker, Russell was covered for $270,000 through Principal. (Kornrich Aff. Ex. F; Dashefsky Affirm. Ex. E) "If that needs to be adjusted later," Long stated, "we will make sure that you have at least $40,000 through Principal as long as you have $210,000 through First Fortis." (Id.) Long cautioned that she did not yet know how the benefits would be coordinated among the various carriers. (Id.)

Russell died on January 13, 1999. (Def. 56.1 ¶ 10) Upon her death, the Alice A. Russell Trust received $210,000 in life insurance benefits from First Fortis and $40,000 from Allmerica Financial. (Def. 56.1 ¶ 13) However, when plaintiff Kishter, who is both the executor of Russell's estate and the trustee of the Alice A. Russell Trust, filed an additional claim with Principal, the claim was denied. (Def. 56.1 ¶ 12) In a letter to Kishter dated September 2, 1999, Principal explained that it had denied coverage because Russell was not a "Member" who was "Actively at Work," as defined in the Group Policy of LAI, on the date coverage was to begin. (Kornrich Aff. Ex. H)

Kishter sues LAI,³ claiming that Marilyn Long's inaccurate statements about the extent of Russell's life insurance benefits and the subsequent denial of those benefits constituted a breach of fiduciary duty under ERISA, as well as a breach of contract and common-law fraud. (Compl.¶¶ 17-19, 24-28) Defendant LAI counters that Kishter has no standing to sue under ERISA § 502 because he is not a proper "beneficiary" of an ERISA plan. (Def. Mem. at 9-14, 27-29) Moreover, LAI argues that even if Kishter has standing under ERISA, he cannot recover because he has failed to prove a breach of fiduciary duty. (Id. at 14-21) Finally, LAI asserts that Kishter's state-law claims are preempted by ERISA. (Id. at 27-30)

II.

Summary judgment will be granted on Kishter's breach of fiduciary duty claim because, even assuming that a breach occurred, Kishter may not obtain the relief he seeks under ERISA's statutory framework, as recently clarified by the Supreme Court in Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002).

Kishter alleges that LAI, through its agent Marilyn Long, breached its fiduciary duty by telling Russell that she was covered for life insurance with Principal when, in fact, she was not (Compl.¶¶ 17-19). Plaintiff requests "judgment against the Defendants in the sum of Two Hundred and Seventy Thousand ($270,000.00) Dollars, together with costs, disbursements, attorneys fees, and punitive damages, and such other legal or equitable relief as the Court deems appropriate." (Compl.¶ 29) Kishter's complaint does not specify the precise subsection of ERISA § 502 under which he is suing for breach of fiduciary duty and, therefore, the court is left to determine the precise statutory basis for the action. Section 502 of ERISA authorizes "beneficiaries" to bring five different types of civil actions to obtain the following relief:

— to obtain relief from an administrator who fails to supply requested information, 29 U.S.C. § 1132(a)(1)(A);

— to "recover benefits due to [the beneficiary ...] 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," 29 U.S.C. § 1132(a)(1)(B);

— to obtain "appropriate relief under Section [409]" of ERISA which imposes personal liability on fiduciaries who breach their fiduciary duties, 29 U.S.C. § 1132(a)(2); — "to enjoin any act or practice which violates any provision of [ERISA] or the terms of the plan, or ... to obtain other appropriate equitable relief ... to redress such violations or ... to enforce any provisions of [ERISA] or the terms of the plan," 29 U.S.C. § 1132(a)(3);

— to obtain appropriate relief for failure of a plan administrator to provide a statement setting forth information in the administrator's report to the Internal Revenue Service ["IRS"], 29 U.S.C. § 1132(a)(4).

Lee v. Burkhart, 991 F.2d 1004, 1008 (2d Cir.1993).

Two of the above provisions can be immediately eliminated from consideration, as they are inapplicable on their face. Section 502(a)(1)(A) authorizes a beneficiary to sue for statutory damages of up to $100 per day when an administrator refuses to provide certain plan information. 29 U.S.C. 1132(a)(1)(A) (1994). Similarly, § 502(a)(4) allows a beneficiary to sue for failure of a fiduciary to provide information submitted to the IRS. 29 U.S.C. 1132(a)(4) (1994). Neither section is implicated in this case because Kishter has not alleged that LAI has failed to provide either type of information.

ERISA § 502(a)(1)(B) is also not a viable basis for a claim because Kishter's breach of fiduciary duty claim cannot be construed as one to "recover benefits due." 29 U.S.C. § 1132(a)(1)(B) (1994). In a separate claim in his complaint, Kishter explicitly included a claim for wrongful denial of benefits and, significantly, that claim was asserted only against Principal (Compl.¶¶ 20-22), the life insurance carrier that has already been dismissed from this action with the consent of the parties.⁴ The present breach of fiduciary duty claim is separate from that claim; unlike the wrongful denial of benefits claim, Kishter here admits that Russell was not entitled to benefits under the LAI plan itself, but alleges that LAI should be liable for telling Russell that she was covered when, in fact, she was not. (Compl.¶ 18). Because plaintiff has admitted, for the purposes of this claim, that he is not entitled to benefits under the plan, the claim cannot be construed as one to recover benefits wrongfully withheld.

Relief under § 502(a)(2) is also unavailable because, although the section will support a breach of fiduciary duty claim when the facts justify it, the section allows damages to be recovered only by the ERISA plan itself, and plaintiff has made clear in his complaint that he seeks an individual remedy payable to himself rather than to the LAI benefits plan. Section 502(a)(2) authorizes a "participant or beneficiary" to bring a civil action for appropriate relief under ERISA § 409, which, in...