Sawyer v. Potash Corp. of Saskatchewan

• Decision Date: 01 March 2006
• Docket Number: No. 4:04-CV-78-H2.,4:04-CV-78-H2.
• Citation: 417 F.Supp.2d 730
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: D'Anna Russo SAWYER, Individually and as Administratrix of the Estate of Douglas Gray Sawyer, Plaintiff, v. POTASH CORPORATION OF SASKATCHEWAN (POTASHCORP) a/k/a and d/b/a PCS Administration (USA), Inc. as Policy Holder, Plan Sponsor, and Participating Employer; PCS U.S. Flexible Benefits Plan, PCS Administration (USA), Inc., Employee Benefits Committee as Plan Administrator; John Does I through V; PCS Phosphate Company, Inc., Plan Sponsors and Plan Administrators of Health and Welfare Plans; American International Group, Inc. (AIG) as Plan Insurers; AIG Life Insurance Company (AIG Life) as Plan Insurers; AIG Claim Services, Inc. as Plan Insurers and Administrators, Defendants.

Page 730

417 F.Supp.2d 730

D'Anna Russo SAWYER, Individually and as Administratrix of the Estate of Douglas Gray Sawyer, Plaintiff, v. POTASH CORPORATION OF SASKATCHEWAN (POTASHCORP) a/k/a and d/b/a PCS Administration (USA), Inc. as Policy Holder, Plan Sponsor, and Participating Employer; PCS U.S. Flexible Benefits Plan, PCS Administration (USA), Inc., Employee Benefits Committee as Plan Administrator; John Does I through V; PCS Phosphate Company, Inc., Plan Sponsors and Plan Administrators of Health and Welfare Plans; American International Group, Inc. (AIG) as Plan Insurers; AIG Life Insurance Company (AIG Life) as Plan Insurers; AIG Claim Services, Inc. as Plan Insurers and Administrators, Defendants.

No. 4:04-CV-78-H2.

United States District Court, E.D. North Carolina, Eastern Division.

March 1, 2006.

COPYRIGHT MATERIAL OMITTED

Mark Van Lanier Gray, Gray, Newell, Johnson & Blackmon, LLP, Paul D. Coates, Pinto, Coates, Kyre & Brown, Greensboro, NC, for D'Anna Russo Sawyer Individually and as Administratrix of the Estate of Douglas Gray Sawyer, Plaintiff.

Jeremy R. Sayre, Ward and Smith, PA, Raleigh, NC, Samuel McKinley Gray, III, Ward and Smith, New Bern, NC, Ann S. Estridge, Cranfill, Sumner & Hartzog, Edward C. LeCarpentier, III, Cranfill Sumner & Hartzog, Raleigh, NC, for Potash Corporation of Saskatchewan a/k/a and d/b/a PCS Administration (USA), Inc. as Policy Holder, Plan Sponsor, Participating Employer, PCS U.S. Flexible Benefits Plan, PCS Administration (USA), Inc., Employee Benefits as Plan Administrator, John Does PCS Phosphate Company, Inc. Plan Sponsors and Plan Administrators of Health and Welfare Plans, American International Group, Inc. (AIG) as Plan Insurers, AIG Life Insurance Company (AIGLife) as Plan Insurers, AIG Claim Services, Inc. as Plan Insurers and Administrators, Defendants.

ORDER

MALCOLM J. HOWARD, Senior District Judge.

This matter is before the court on the parties' cross-motions for summary judgment [DE # 38, 43, 45], plaintiff's motion for voluntary dismissal and remand to the administrator [DE # 40], and numerous other motions.¹ Appropriate responses and replies have been submitted, and the time for further filings has expired. This matter is ripe for adjudication.

STATEMENT OF THE CASE

This case involves an alleged wrongful denial of accidental death and dismemberment ("AD & D") benefits and an alleged breach of fiduciary duty under an employee welfare benefit plan. Plaintiff is the wife of the deceased, Mr. Douglas Gray Sawyer, and the administratrix of Mr. Sawyer's estate, as well as a third-party beneficiary under the plan at issue. She has brought this action against her husband's former employer, PCS Phosphate Company, Inc., its parent company, PCS Administration (USA), Inc., and PCS U.S. Flexible Benefits Plan (collectively the "PCS Defendants"), as well as the insurer of the benefit plan, AIG Life Insurance Company, and AIG Claim Services, Inc. (collectively "AIG"), under the Employee Retirement Income Security Act of 1974 ("ERISA"). 29 U.S.C. § 1001, et seq.

Defendants argue that benefits were properly denied and that there was no breach of fiduciary duty, citing an AIG claim investigation that concluded that Mr. Sawyer was intoxicated at the time of his death, rendering AD & D benefits unpayable under an "intoxicant exclusion" in the benefit plan and related insurance policies. Plaintiff disputes the factual conclusion of the AIG claim investigation and argues that defendants gave plaintiff inadequate notice of the denial of plan benefits and misconstrued the language of the relevant policy provisions. Plaintiff also argues that defendant AIG's dual role as insurer and fiduciary presents a conflict of interest that requires the court to modify the "abuse of discretion" standard typically employed in cases like the case at bar.²

STATEMENT OF THE FACTS

Mr. Douglas Gray Sawyer worked as a Master Filter Operator at PCS Phosphate Company, Inc., from August 23, 1983 until May 31, 2002, when he perished in a single-vehicle collision in Washington, North Carolina. The company provided basic non-contributory AD & D coverage and gave eligible employees, including Mr. Sawyer, the opportunity to purchase AD & D insurance through the PCS U.S. Flexible Benefits Plan ("Plan"). The Plan was insured under two policies issued to PCS Administration (USA), Inc. (the parent company of PCS Phosphate) by AIG. Mr. Sawyer elected to purchase an AD & D policy totaling three hundred fifty thousand dollars ($350,000) in addition to the basic coverage provided by PCS ($80,000). At the time of Mr. Sawyer's death, plaintiff was the sole primary beneficiary of Mr. Sawyer's AD & D policy and his estate was the sole contingent beneficiary.

Of particular relevance to the instant case, the Plan and the related policies contained "intoxicant exclusions" that provided exceptions to the general rule of coverage for death or injury resulting from accidents. The Plan's Summary Plan Description ("SPD") stated, in pertinent part:

AD & D benefits will not be paid for losses due to: . . . The insured person being under the influence of drugs or intoxicants, unless taken under the advice of a physician;

(See Def.'s Mem. Summ. J. Ex. D-1 at 6-14 & 6-15.) Both of the relevant policies in this case contained the following exclusion:

This Policy does not cover any loss caused in whole or in part by, or resulting in whole or in part from, the following: ... the Insured Person being under the influence of drugs or intoxicants, unless taken under the advice of a Physician.

(See id. Ex. D-2 ("Group Accident Insurance Policy," Policy No. PAI 8054380) at 6; Ex. D-3 ("Group Accident Insurance Policy," Policy No. BSC 8054381) at 6.) The SPD explained that in the event of a conflict between the language of the SPD and the insurance policy, the policy language would govern operation of the Plan. (See id. Ex. D-1 at 6-27.)

In the first week of June 2002, plaintiff contacted PCS Administration (USA) regarding the benefits available to her as primary beneficiary of her husband's policy. On June 18, 2002, PCS Administration submitted a claim to AIG on plaintiff's behalf. On December 9, 2002, AIG sent a letter to plaintiff informing her that it had conducted an investigation and had concluded that Mr. Sawyer was intoxicated at the time of the collision, and that her claim was being denied on that basis pursuant to the policy provisions noted supra.

In reaching its conclusion, AIG relied on several pieces of evidence, including: (1) a toxicology report from the Office of the Chief Medical Examiner, dated June 12, 2002, listing the level of ethanol in Mr. Sawyer's bloodstream as 170 mg/DL, corresponding to a blood alcohol content (BAC) of 0.17, (2) a report of investigation from the same office, dated June 18, 2002, and (3) a North Carolina Crash Report (Form DMV-349), dated May 31, 2002.³ (See Zimmerman Aff., Admin. Record [hereinafter "AR"] at 78 (Letter from Seven T. Hale, AD & D Claims Examiner, to plaintiff, dated December 9, 2002).) The claim investigation is further detailed in two documents titled "Report of Investigation," both prepared by Steve Midkiff of the AIG Investigative Services Division, dated August 4, 2002 and November 15, 2002. (Id. at 79-80, 92-93.)

The December 9, 2002 denial letter from AIG to plaintiff included the following notice of plaintiff's right to appeal:

. . . [In] accordance with the terms and conditions of [ERISA] . . ., you have the right to review through appeal. Your appeal must be submitted in writing to this office no later than 60 days after you receive this written notice. The appeal must include the reason you disagree with our determination. In addition, you must submit evidence that your spouse's motor vehicle accident [was] not caused in whole or in part by, or [did not result] in whole or in part from his being under the influence of alcohol[.]

(See AR at 78.)

On January 3, 2003, plaintiff's attorney sent a letter to AIG notifying the company that he had been retained to represent plaintiff and requesting that the company "accept this correspondence as our Notice of Representation, Request for Reconsideration and as our Notice of Appeal of your initial determination that no benefits are payable." (Id. at 75.) (emphasis in original) Of paramount importance in this case, the letter then stated:

In support of our appeal, we believe that your reading and interpretation of the policy is unfair, improper and not supported by the plain language of the policy. Rather, we believe your most recent correspondence misrepresents the terms of the policy issued and/or the benefits or advantages promised thereby. In short, you are obliged and we are entitled to have the terms of the exclusions strictly construed and confined to the language of the policy.

(Id.) Plaintiff did not object to AIG's finding that Mr. Sawyer was intoxicated, and plaintiff submitted no evidence with her notice of appeal to counter or otherwise call into question the factual conclusions of AIG's investigation.

On October 1, 2003, plaintiffs attorney sent another letter inquiring about the status, of plaintiffs appeal and reiterating plaintiffs objection to AIG's reading of the policy provisions. (Id. at 71.) Again, this letter omitted any mention of plaintiffs objection to AIG's factual conclusions or any other grounds for plaintiffs appeal. The letter concluded with the request, "Please process our appeal forthwith." (Id.) (emphasis in original) On November 10, 2003, Seven Hale, an AD & D Claims Examiner with AIG Claims Services, Inc., sent a letter to plaintiffs attorney acknowledging the October letter and stating, "This claim will be forward[ed] to the ERISA Appeal Committee meeting to be heard. Once the meeting is schedule[d], I will advise you of the date."

Defendants claim that Ms. Hale sent another letter to plaintiffs attorney on January 13, 2004, advising him that plaintiffs appeal...