Silva v. Fortis Benefits Ins. Co.

• Citation: 437 F.Supp.2d 819
• Decision Date: 12 July 2006
• Docket Number: No. 05 C 3340.,05 C 3340.
• Parties: Kristen SILVA, Plaintiff, v. FORTIS BENEFITS INSURANCE COMPANY, a foreign corporation licensed to do business in the State of Illinois, Defendant.
• Court: U.S. District Court — Northern District of Illinois

Page 819

437 F.Supp.2d 819

Kristen SILVA, Plaintiff, v. FORTIS BENEFITS INSURANCE COMPANY, a foreign corporation licensed to do business in the State of Illinois, Defendant.

No. 05 C 3340.

United States District Court, N.D. Illinois, Eastern Division.

July 12, 2006.

Leonard J. Brenner, Northbrook, IL, Barry B. Berk, Law Offices of Barry B. Berk, Highland Park, IL, for Plaintiff.

Brianne M. Gruszka, Ian H. Morrison, Seyfarth Shaw LLP, Chicago, IL, Leigh M. Chiles, S. Russell Headrick, Baker, Donelson, Bearman, Caldwell & Berkowitz, Memphis, TN, for Defendants.

MEMORANDUM OPINION AND ORDER

JEFFREY COLE, United States Magistrate Judge.

INTRODUCTION AND BACKGROUND OF THE LITIGATION

Union Security Insurance Company ("USIC"), formerly known as Fortis Benefits Insurance Company ("Fortis"), moves for a protective order pursuant to Rule 26(c)(1), Federal Rules of Civil Procedure, precluding plaintiffs discovery requests for the production of documents, interrogatories, request for admission of facts and genuineness of documents, and notice of deposition of Tracie Hoffman ("the Discovery Requests"). For the reasons discussed below, the motion is granted.

Plaintiff filed a complaint on April 27, 2005, in the Circuit Court of Cook County, Illinois, alleging breach of contract and estoppel and seeking declaratory judgment. The complaint alleged that Fortis had wrongly refused to pay her $500,000 in additional life insurance benefits under a group life insurance policy issued by Fortis to her deceased husband, Edward Silva, through his former employer. The complaint charged that the carrier was estopped to deny coverage by virtue of two minimal payroll deductions by Mr. Silva's employer in January 2003 and a letter from a Fortis disability analyst (in response to an inquiry from a financial planner for the plaintiffs husband) stating that Mr. Silva had "elected" additional coverage. Although the letter did not say that Fortis had agreed to this election, the complaint alleged that it "clearly and unambiguously provided that a contract for additional life insurance existed by and between" Fortis and Mr. Silva. The requisite allegations of reasonable and detrimental reliance by Mr. Silva were conspicuous by their absence from the estoppel count.

Because the group life insurance policy under which plaintiff sought benefits was an "employee benefit plan" as defined by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1002(1), Fortis removed this case to federal district court pursuant to 28 U.S.C. § 1441.

The plaintiff served the Discovery Requests on January 26, 2006. By agreement of the parties, USIC's time to respond to the Discovery Request was tolled pending settlement discussions between the parties, which have recently concluded without success. USIC argues that the discovery sought is improper because in an ERISA case, the court's review is limited to the administrative record. USIC has already provided that record to plaintiff and the court, and as a result, seeks a protective order that the "discovery not be had" under Rule 26(c)(1), Federal Rules of Civil Procedure.

The lengthy administrative record tells a melancholy story: faced with a severe and ultimately terminal illness, Mr. Silva applied for an additional $119,000 in life insurance coverage in early 2002. A review of his medical records by Fortis predictably led to a denial of his application pursuant to a provision in the group policy which required proof of good health satisfactory to Fortis. Mr. Silva was informed that although he could reapply he would have to show proof of good health. By December 2002, Mr. Silva's condition had worsened considerably. He was uninsurable by any standards. Nonetheless, he made an online application to his employer for $500,000 in additional coverage. He was sent a paper application and a health questionnaire, which he never returned. He became disabled from his cancer in 2003 and died on October 6, 2004.

A. Mr. Silva's Employee Life Insurance

Mr. Silva began working for Kuehne & Nagel, Inc., on October 16, 2000. (Administrative Record ("AR") at 34). Shortly thereafter, Fortis issued a certificate of group life insurance to Kuehne & Nagel, which became effective on April 1, 2001. (AR at 3). At that time, all employees received the benefit of a base life insurance policy, apparently in the amount of two times their yearly salary. Mr. Silva's policy was worth $247,500.92, and the plaintiff received a check in that amount upon Mr. Silva's death. (Complaint for Declaratory Judgment and Related Relief, ¶ 16). All employees were also eligible to apply for any amount of voluntary life insurance coverage. If they did so within the first 31 days of eligibility, they would not need to complete a questionnaire regarding their health. (Id.).

Mr. Silva applied for $119,000 of voluntary life insurance by application dated December 31, 2001. The application was received about a week later, long after the 31-day unconditional enrollment period had expired. (AR at 104). The initial attempt to acquire additional life insurance appears to have been in response to concerns about persistent abdominal pains that began in July, 2001 and became "severe" by about late October, 2001. These pains became so severe that Mr. Silva had a CT scan on December 5, 2001. The scan revealed a differential diagnosis of lymphoma of the small bowel or metastases to the small bowel. (AR at 30-3; 114). In his December 31st application, however, Mr. Silva stated that the results of his CT scan were normal, even though scans taken on September 26 and December 6, 2001 were not. (AR at 114, 119). On December 12th, Mrs. Silva was notified of the test results. (AR 109).

On March 14, 2002, Fortis acknowledged receipt of Mr. Silva's application for additional life insurance coverage and informed him that quinder the terms of the group contract you are required to submit proof of good health before your application can be approved." (AR at 128). He was also informed that "[v]oluntary Life insurance coverage will not become effective until satisfactory evidence has been received," including a new CT scan. Id. Based upon the medical information obtained by USIC's Medical Underwriting Department over the course of the next few months, Fortis denied Mr. Silva's application, and he was informed of the denial in a letter dated May 15, 2002. In that letter, Mr. Silva was also informed that he could reapply for coverage only if he provided a current medical examination, follow-up tests regarding his abdominal pain, and a current CT scan. (AR at 100; 4).

In the meanwhile, Mr. Silva was forced to deal with increasingly alarming medical news. In April 2002, he was diagnosed with diffuse malignant mesothelioma. The symptoms had been present since July 2001, becoming severe later in the year. (AR 30-31, 55,74-83). This led to a summer of tests, treatments, and clinical trials conducted by a series of specialists both locally and in Washington, D.C., culminating in a diagnosis of primary peritoneal mesothelioma. (AR at 30-32; 52-82; 77). Mrs. Silva was aware of the seriousness of her husband's condition. (AR at 82). Sadly, by November 14, 2002, one of Mr. Silva's treating physicians counseled him to think realistically about his overall prognosis and its implications for his family. (AR at 64).¹

Despite the Silvas' awareness of the seriousness of Mr. Silva's condition and despite Mr. Silva's awareness that any application for life insurance must be accompanied by proof of good health satisfactory to Fortis, Mr. Silva, on December 20, 2002, utilized his employer's "EnrollOnline.com" services to inform his employer—not Fortis—that he had "selected" from among listed options "employee supplemental life" coverage in the amount of $500,000. (AR at 26, 92). Trion, the plan's third-party administrator, responded to Mr. Silva's online application by sending him a paper application with a health questionnaire. (AR at 90-95; 4-6). The application stated in bold-faced type that if the requested amount "elected" was "over the guaranteed issue amount [i.e., $200,000] . complete all health questions on the next page." (AR at 93).² The questionnaire was identical to the one that Mr. Silva had previously filled out in December 2001 (AR at 104), and asked, inter alia, whether he had lost 10 lbs. or more in the last 12 months—he had—whether he had received any medication in any clinic or other health related facility in that period—he had—and whether he had ever been diagnosed or treated for cancer—he had. (AR at 94). Predictably, Mr. Silva never returned this application or completed the questionnaire.

Despite the necessarily preliminary nature of Mr. Silva's online submission, Kuehne & Nagel inexplicably deducted $20 from Mr. Silva's paycheck on January 15th and 31st of 2003 for "S.E.Life," as if the $500,000 voluntary policy had been granted. (Plaintiffs Response, Exs. B, C; AR at 5). These deductions were paid to Fortis. (Answer and Additional Defenses, ¶ 84). The two paychecks affected would be Mr. Silva's last. He stopped working on January 24th due to the increasingly debilitating effects of the mesothelioma. (AR at 5). He thereafter claimed and received disability benefits through Fortis.

In April of 2003, Mr. Silva's financial planner, Jo Anne Pearson, sent Fortis a letter with some questions regarding her client's benefits. (AR at 50). Among other questions, she asked:

Life Insurance—Group policy amount of $736,000 or $750,000. Or does he still have coverage after termination? If not what are his options to keep Life coverage or what is the deadline to convert coverage. Divorce Decree may have deadlines to secure other coverage/options.

(AR at 50). In a letter dated April 14, 2003, Fortis Disability Claims Analyst, Tracie Hoffman, responded:

Base plan for Mr. Silva provide [sic] for 2 times his annual salary ($236,000.00). He has also elected to have...