Lake v. Metropolitan Life Ins. Co.

Decision Date29 March 1996
Docket NumberNo. 94-3852,94-3852
Citation73 F.3d 1372
PartiesMary Ellen LAKE; Calvin Pauley; Genevieve Blanton; Anna Mink; Vestil Perry; Russell Buffington, and all other persons similarly situated, Plaintiffs-Appellants, v. METROPOLITAN LIFE INSURANCE COMPANY and General Electric Company, Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

Dianne R. Newman, Sternberg, Newman & Associates, Akron, OH, Jon F. Holder (argued and briefed), Holder & Grover, Portland, ME, for Mary Ellen Lake, Calvin Pauley, Genevieve Blanton, Anna Mink, Vestil Perry and Russel Buffington.

John T. Meredith (argued and briefed), Squire, Sanders & Dempsey, Cleveland, OH, Joseph Trovato (briefed), New York City, Linda Wintner, Metropolitan Life Ins. Co., New York City, Allen M. Marcus (argued), Metropolitan Life Ins. Co., New York City, for Metropolitan Life Ins. Co. and General Electric Co.

Before: NORRIS, SUHRHEINRICH, and GIBSON, * Circuit Judges.

SUHRHEINRICH, Circuit Judge.

Plaintiffs, former General Electric Company ("GE") employees who became disabled We conclude that the district court applied an incorrect standard in reviewing Met Life's interpretation of the insurance contract. However, because the results do not change when the correct standard is applied, we AFFIRM the grant of summary judgment.

while at GE, brought suit under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C.A. Secs. 1001-1461 (West 1985 & Supp.1995), to recover insurance benefits allegedly due them. At issue is the proper interpretation of an employee welfare plan providing long-term disability insurance coverage administered by GE and underwritten by Metropolitan Life Insurance Company ("Met Life"). The district court granted summary judgment in favor of defendants, holding that Met Life could (1) recoup the amount of retroactive social security disability insurance ("SSDI") awards, and (2) reduce monthly payments by the amount of social security early retirement benefits payable to its insureds. Plaintiffs appeal from each of these holdings.

BACKGROUND

GE established the Long-Term Disability Income Plan for Hourly Workers (the "GE Plan" or "Plan") in 1970 as the result of a collective bargaining agreement. To meet its obligations to the unions, GE purchased from Met Life a group long-term disability insurance policy incorporating the terms of the Plan. Participation is open to union and nonunion employees, and is entirely voluntary. All contributions to the GE Plan have been made by participants.

Plaintiffs are six former GE employees who became disabled while at GE and who received long-term disability ("LTD") benefits under the Plan. 1 Mary Ellen Lake, Genevieve Blanton, and Anna Mink (collectively, the "Lake Plaintiffs") each had her benefits reduced after receiving a retroactive lump-sum SSDI award. Calvin Pauley, Russell Buffington, and Vestil Perry (collectively, the "Pauley Plaintiffs") each received reduced benefits as a result of being eligible for social security early retirement benefits. Both groups of plaintiffs challenge these reductions as violations of the terms of the GE Plan.

With respect to the Lake Plaintiffs, Met Life's initial practice under the Plan was to reduce the LTD benefits payable to Plan beneficiaries by the amount of SSDI benefits either actually received or anticipated. GE and Met Life revised this procedure in 1971 to permit Plan beneficiaries to receive LTD benefits without a reduction for anticipated SSDI benefits provided that the insured signed a reimbursement agreement (the "Reimbursement Agreement"). The Reimbursement Agreement obligated the insured to reimburse Met Life in the amount of any retroactive SSDI award received, and permitted Met Life to reduce or "carve-out" future LTD benefits to recover such amount if necessary.

Lake filed a claim under a version of the Plan in effect in 1985; Blanton and Mink filed claims under the Plan in effect in 1982. All three signed a Reimbursement Agreement and received unreduced LTD benefits. As required by the Plan, the Lake Plaintiffs applied for SSDI benefits. The Social Security Administration initially denied these applications, but subsequently reversed itself. Lake, Blanton, and Mink each received a retroactive lump-sum SSDI award. Met Life collected or is collecting the amount of this award by withholding a portion of each of the Lake Plaintiffs' monthly LTD benefits.

The Pauley Plaintiffs also had their benefits reduced as the result of a long-standing practice by Met Life. Beginning in 1971, when the matter first arose, until the Plan was amended in 1988, 2 Met Life reduced a participant's LTD benefits by the amount of social security retirement benefits paid or Pauley, Buffington, and Perry became disabled, respectively, under the 1985, 1982, and 1976 versions of the GE Plan. Each had his LTD benefits reduced as a result of being eligible to receive social security early retirement benefits. The Pauley Plaintiffs elected to receive these early retirement benefits, and, as a result, now receive lower monthly social security payments than if they had waited until age sixty-five. This reduction is permanent even though the Pauley Plaintiffs have ceased to receive LTD benefits.

payable to the participant. A Plan beneficiary who turned sixty-two, and who thereby became eligible to receive social security early retirement benefits, received reduced Plan benefits.

GE distributes to participating employees a document containing the terms of the Plan (the "Plan Document") and a summary of the Plan Document (the "SPD") as a single package. Section II of the Plan, entitled "Your Benefits," describes the benefits payable upon disability. The relevant portion of Section II, as it appeared in 1982, 1985, and 1988, is set forth below. (The italicized portions were added in 1985; the bracketed portions in bold were added in 1988.)

Benefits will be paid monthly and will be one twenty-fourth of your normal straight-time annual earnings reduced by (1) any disability pension benefits paid under the GE Pension Plan ... (2) any primary Social Security [disability] benefits [or primary Social Security retirement benefits payable at age 65], (3) benefits under a Workers' Compensation or Occupational Disease Law, and (4) any benefits available in conformity with Federal, State, Commonwealth or Dominion laws, of the United States or Canada. If an overpayment of benefits occurs for any reason under this Plan, the amount of the overpayment will be then due and owed to the carrier.

If the benefits referred to in (2), (3), or (4) above would have been payable to you upon timely application, you will be considered as receiving such benefits....

You are responsible for promptly notifying the carrier if any award or settlement of benefits derived from any source described in (2), (3), or (4) above is, or will become, payable retroactively. The carrier may, in addition to other remedies it may have to recover any overpayment, reduce future benefits otherwise payable under the Plan. ...

(Respectively, J.A. at 549, 560, 570.) The 1976 Plan is identical in all pertinent aspects to the 1982 Plan.

The corresponding SPDs also describe the benefits payable to Plan beneficiaries. The 1985 SPD states in relevant part:

You receive 50% of your monthly pay from the LTD Insurance Plan in combination with other disability income benefits subject to a minimum benefit of $50 per month.

Your monthly LTD benefit depends upon the monthly income you're entitled to from the following sources:

-- Primary Social Security (just the benefit payable to you)

-- Workers' Compensation or similar laws (payable for job-related illness or injury)

-- any disability benefits you apply for and are granted under the GE Pension Plan, and

-- any disability benefits available under any government laws.

(J.A. at 157.) The above-quoted language is representative of all of the SPDs; any variations between the SPDs of different years are immaterial for purposes of this litigation.

The Lake and Pauley Plaintiffs filed a class action under 29 U.S.C.A. Sec. 1132(a)(1)(B), 3 claiming that the various reductions in benefits violated Section II of the Plans in effect when they became disabled. In addition, the Lake Plaintiffs claimed that Met Life's practice of recouping retroactive SSDI awards violated the clear notice requirement of 29 U.S.C.A Sec. 1022.

The district court granted defendants' motion for summary judgment, thereby rendering the issue of class certification moot. The court ruled that Met Life's interpretation of Section II of the various Plans was neither arbitrary nor capricious, and that Met Life had therefore acted within the meaning of Section II in reducing the LTD benefits of both the Lake and Pauley Plaintiffs. The district court also held that the 1982 and 1985 SPDs properly notified Plan participants of Met Life's practice of recoupment.

On appeal, the Lake and Pauley Plaintiffs first contend that the district court erred in employing an arbitrary and capricious standard of review. The Lake Plaintiffs also argue that Met Life's practice of withholding future LTD benefits to recover the amount of retroactive SSDI awards is impermissible under the 1982 Plan because Section II does not explicitly authorize recoupment. They further contend that the recoupment provision in the 1985 Plan is ineffective because the term "overpayment" is ambiguous and should be construed against defendants under the doctrine of contra proferentem. Similarly, the Pauley Plaintiffs argue that the carve-out for "primary Social Security benefits" in the pre-1988 Plans refers, in context and in light of the relevant SPDs, to SSDI benefits only and not to retirement benefits.

ANALYSIS

We review the district court's grant of summary judgment de novo. Wells v. United States Steel &...

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