McBean v. United of Omaha Life Ins. Co., Case No.: 18cv166-MMA (JLB)

• Decision Date: 05 April 2019
• Docket Number: Case No.: 18cv166-MMA (JLB)
• Parties: KEITH MCBEAN, Plaintiff, v. UNITED OF OMAHA LIFE INSURANCE COMPANY; and BY REFERRAL ONLY, INC., Defendants.
• Court: U.S. District Court — Southern District of California

KEITH MCBEAN, Plaintiff, v. UNITED OF OMAHA LIFE INSURANCE COMPANY;and BY REFERRAL ONLY, INC., Defendants.

Case No.: 18cv166-MMA (JLB)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

April 5, 2019

ORDER RE: MOTIONS FOR SUMMARY JUDGMENT

[Doc. Nos. 32, 36]

Plaintiff Keith McBean, Trustee of the Teresa McGee Living Trust dated January 4, 2012 ("Plaintiff"), filed this action for relief under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. §§ 1001 et seq., against Defendants United of Omaha Life Insurance Company ("United") and By Referral Only, Inc. ("Referral") alleging causes of action for benefits pursuant to 29 U.S.C. § 1132(a)(1)(B), and for breach of fiduciary duties pursuant to 29 U.S.C. § 1132(a)(3). Doc. No. 14 ("FAC"). Plaintiff filed a motion for summary judgment. Doc. No. 32-1 ("PMSJ"). United and Referral filed responses in opposition. Doc. Nos. 35 ("U Oppo."), 38 ("R Oppo."). Plaintiff replied to each opposition. Doc. Nos. 39 ("Reply to U"), 40 ("Reply to R"). United cross-moves for summary judgment. Doc. No. 36-1 ("U MSJ"). Plaintiff filed a response in opposition [Doc. No. 42 ("P Oppo.")], to which United replied [Doc. No. 43 ("Reply to P")]. Referral also filed a response to United's cross-motion for summary judgment. Doc. No. 44. The Court found the matters suitable for determination on the papers and without oral argument pursuant to Civil Local Rule 7.1.d.1. Doc. Nos. 41, 45. For the reasons stated herein, the Court GRANTS IN PART AND DENIES IN PART Plaintiff's motion and GRANTS United's cross-motion.

MATERIAL FACTS¹

A. Background Facts

Referral, a small company with fifteen employees that provides coaching to real estate agents in sales and marketing, employed Teresa McGee ("Decedent"). Doc. Nos. 32-7 - 37-14, Administrative Record ("AR")² at 284, 304; Doc. No. 21, Referral's Answer ("R Answer") ¶ 4; PMSJ at 8. Referral offered its employees several insured benefits, including medical, dental, disability, basic life and accidental death and dismemberment ("AD&D"), and voluntary life insurance through an employee welfare benefit plan (the "Plan"). AR at 301-02; Doc. No. 4, United's Answer ("U Answer") ¶ 4.

On March 1, 2011, United issued Basic Life Insurance Policy GLUG-AIRQ ("Basic Life Policy") and Voluntary Life Insurance Policy GVTL-AIRQ ("Voluntary Life Policy" and collectively, the "Policies") to Referral to fund benefits under the Plan. AR at 304-05. United was the Claims Administrator of the Policies and Referral was the Plan Sponsor and Plan Administrator. U Answer ¶ 6; R Answer ¶ 6. In 2011, Decedent first enrolled in United's disability and both of its life insurance coverages under the Plan. AR at at 279, 301-02. Decedent was covered under the Basic Life Policy in the amount of $43,550.00 and under the Voluntary Life Policy in the amount of $100,000.00. AR at 407. Decedent designated Plaintiff, as the Trustee of the Teresa McGee LivingTrust, as her beneficiary under the Policies. AR at 307-08. Premiums for the Basic Life Policy were paid for by Referral and premiums for the Voluntary Life Policy were paid by Decedent as a deduction from her paychecks. AR at 302.

In June of 2015, when she was 67 years-old, Decedent was diagnosed with breast cancer. AR at 290. Consequently, Decedent ceased working 40 hours a week and left work on June 9, 2015 to undergo surgery. Doc. Nos. 32-15—32-16. United's Disability Claim File on Decedent's claim for long term disability benefits ("LTD")³ at 1044-45; AR at 476-78. Decedent returned to work on a part-time basis working four hours a day on October 26, 2015. LTD at 1045. By August 10, 2016, Decedent's cancer precluded her from working. LTD at 1045. On August 5, 2017, Decedent died. AR at 300, 482.

Jeff Robbins, the managing Director of Referral, handled the monthly payment of premiums. AR at 49, 129, 275-76; Doc. No. 32-2 ("Stennett Decl."), Exhibit 4 at 3-4. After Decedent became ill, Robbins told her he would continue to pay premiums to make sure she continued to maintain her life insurance. AR at 264, 275-76; Stennett Decl., Exhibit 4 at 3-4. When Decedent stopped getting paychecks, Referral paid the premiums for the Voluntary Life Policy. AR at 263-64; Stennett Decl., Exhibit 4 at 4. The payments were accepted by United through the date of Decedent's death. AR at 263-64; Stennett Decl., Exhibit 4 at 4. Referral paid these monthly premiums to United pursuant to a bill it received from United. AR at 285-88. Each bill itemized premiums due for each employee for each of their coverages elected. AR at 285-88, 265-69.

B. The Policies and Relevant Provisions

Under the Policies, coverage ends "the last day of the month in which . . . [y]ou are no longer Actively Employed . . . ." AR at 30, 95. The Policies define "Actively Employed" or "Active Employment" as "(a) Actively Working on a regular and continuous basis for the Policyholder 40 hours or more hours each week; and (b)receiving compensation from the Policyholder for work performed for the Policyholder. NOTE: Employees who are Totally Disabled will not be considered actively employed." AR at 25, 89.

The Policies provide for continuation of coverage after an employee is no longer "Actively Employed." The Basic Life Policy provides such continuation of coverage under provisions for layoff or leave of absence, waiver of premium benefit, family and medical leave, and conversion. AR at 30, 31-35. The Voluntary Life Policy provides for continuation of coverage after an employee is no longer "Actively Employed" under provisions for layoff or leave of absence, waiver of premium benefit, portability, family and medical leave, and conversion. AR at 95, 98-99, 107-08.

The Basic Life Policy's layoff or leave of absence provision provides:

You may be able to continue life and accidental death and dismemberment insurance under this provision until the last day of the month You are no longer Actively Employed in the event of an involuntary layoff or personal leave of absence approved by the Policyholder.

Under this provision, insurance will continue subject to the following conditions:

(a) We must continue to receive uninterrupted premium payment;

(b) the Policyholder may be able to continue Your life and accidental death and dismemberment insurance for up to 12 months if You are no longer Actively Employed due to Injury or Sickness;

(c) We must receive written notification from the Policyholder within 31 days from the date You are no longer Actively Employed; and

(d) the amount of insurance will not be increased while You are laid off or on approved leave of absence.

AR at 31. The Voluntary Life Policy's layoff or leave of absence provision is identical, except that subsection (b) requires that "the layoff or leave of absence is not due to Injury or Sickness[.]" AR at 96.

The Policies' conversion privilege provision provides in relevant part that "[i]f any of Your life insurance ends because Your employment or membership in a class ends, You may apply for an individual policy of life insurance (called a conversion policy)without giving information about Your health." AR at 34, 107. Moreover, the Policies' conversion provisions explains that "[i]f Your group life insurance ends because of termination of the Policy or termination of a class, and you have been insured under the Policy at least five years, You may apply within 31 days for a conversion policy." AR at 35, 108.

The Voluntary Life Policy's portability provision states that "when insurance ends prior to age 70 [because] You are not Actively Employed . . . [i]nsurance under this Portability provision is available without providing Evidence of Good Health, subject to the following conditions: (a) You must submit a written request and the first premium within 31 days after insurance ends . . . ." AR at 98.

The Policies' waiver of premium provisions state that "You may be able to continue life insurance under this provision without payment of premium if You become Totally Disabled while insured under the Policy prior to age [60 under the Basic Life Policy and 65 under the Voluntary Life Policy]. If You are over age [60 or 65] You may apply for an individual life insurance conversion policy according to the terms of the Conversion Privilege described in this Certificate." AR at 31, 96.

Under the Policies, participants and beneficiaries of plan provisions are directed to reach out to the Plan Administrator with any questions about their coverages. AR at 51, 131. Additionally, the Basic Life Policy provides that "[i]f any questions or problems arise regarding this insurance, you may contact [United.]" AR at 18.

The Policies also require Referral to inform United of any changes in its employees' eligibility status. AR at 5, 60. The Policies state:

The Policyholder shall provide the Company written notice within 60 days after any Insured Person's eligibility for coverage under this Policy ends. If the Company does not receive such written notice within this 60 day time period, the Policyholder shall pay to the Company a late notice charge equal to the amount of the premium that would otherwise be payable for the coverage for such person from the date the person's eligibility ended until 60 days prior to the date on which the Company received written notice of ineligibility from the Policyholder.

In addition to the Policyholder's obligation to pay the late notice charge, at its sole discretion, the Company may require the Policyholder to reimburse the Company in an amount equal to:

(a) the amount of any claims paid on behalf of the ineligible person during the time the person was ineligible; less

(b) the amount of the late notice charge.

AR at 5, 60.

C. Enrollment Updates

Carrie Crew, the Manager of Group Services at Mutual of Omaha Insurance Company declares that "[e]ach new group that comes to United goes through an implementation process with a dedicated implementation manager to guide the group through the set up process....