Smith v. Life Ins. Co. of North America

• Decision Date: 28 September 2006
• Docket Number: No. 1:05-CV-2215-JEC.,1:05-CV-2215-JEC.
• Citation: 466 F.Supp.2d 1275
• Parties: James SMITH, Plaintiff, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant.
• Court: U.S. District Court — Northern District of Georgia

466 F.Supp.2d 1275

James SMITH, Plaintiff, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant.

No. 1:05-CV-2215-JEC.

United States District Court, N.D. Georgia, Atlanta Division.

September 28, 2006.

Jeffrey S. Warncke, Dietrick Evans Scholz & Williams, Atlanta, GA, for Plaintiff.

Elizabeth Johnson Bondurant, Nikole Marie Crow, Carter & Ansley, Atlanta, GA, for Defendant.

ORDER & OPINION

CARNES, District Judge.

This case is presently before the Court on Plaintiffs Request for Oral Argument on Defendant's Motion for Summary Judgement [9]; Plaintiffs Motion for Summary Judgment or, in the Alternative, for Preliminary Injunction [11]; Defendant's Motion for Summary Judgment [12]; Plaintiffs Motion to Strike Portions of Affidavit of James Lodi [16]; Motion to Correct the Reply Memorandum in Support of Defendant's Motion for Summary Judgment [22]. The Court has reviewed the record and the arguments of the parties and, for the reasons set out below, concludes that Plaintiffs Request for Oral Argument on Defendant's Motion for Summary Judgement [9] should be DENIED; Plaintiffs Motion for Summary Judgment or, in the Alternative, for Preliminary Injunction [11] should be GRANTED; Defendant's Motion for Summary Judgment [12] should be DENIED; Plaintiffs Motion to Strike Portions of Affidavit of James Lodi [16] should be DENIED as moot; Motion to Correct the Reply Memorandum in Support of Defendant's Motion for Summary Judgment [22] should be GRANTED.

BACKGROUND

Plaintiff James Smith brings this action pursuant to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001 et seq. to recover long term disability ("LTD") benefits plaintiff contends are due under a LTD plan sponsored by Technology Solutions Company ("the Plan" or "the LTD Plan") issued by defendant Life Insurance Company of North America ("LINA"). Plaintiff seeks not only to recover LTD benefits, but also to clarify his rights to future benefits under 29 U.S.C. § 1132(a)(1)(B). In addition, plaintiff seeks equitable relief under 29 U.S.C. § 1132(a)(3) in the form of an injunction prohibiting LINA from reducing or offsetting his disability benefits. (Compl.("Compl.") [1] at ¶ 1.)

The benefits under the Plan were funded by Group Policy Number FLK-008143, which was issued by LINA to TSC, with an effective date of April 1, 1995 (Administrative Record ("A.R."), attach. as Ex. 2 to Mem. in Supp. of Def.'s Mot. for Summ. J. (hereinafter "Def.'s Summ. J.") [12] at 834-814.¹) LINA is both the claims administrator and the insurer. (Id.)

Under the terms of the Plan, plaintiff is entitled to LTD benefits for so long as he remains "disabled" as defined by the Plan. (A.R. at 827, 821.) Both parties agree that, on May 17, 2002, plaintiff became disabled within the meaning of the Plan as a result of a severe head-on collision. (Def.'s Summ. J. at 4; Plaintiffs Motion for. Summary Judgment or, in the Alternative, for Preliminary Injunction, ("Pl.'s Summ. J.") [8] at 3; Defendant's Answer ("Ans.") [3] at 15; A.R. at 771.)

The impact of the collision shattered the bones of plaintiffs left hip, pelvis and left knee. (Plaintiffs Statement of Facts as to which No Genuine Issue Remains to be Tried ("PSMF") [8] at ¶ 4; Defendant's Response to Plaintiffs Statement of Fact as to which No Genuine Issue Remains to be Tried ("Def.'s Response to PSMF") [18] at ¶ 14.) Plaintiffs hip bones were so splintered and fragmented that many of the pieces could not be used during plaintiffs surgical reconstruction. (Id.; A.R. at 504-502.) Additionally, plaintiffs right ankle was struck with such force that the majority of his talus or heel bone was ejected out of his foot and into the passenger floor board of the vehicle he was driving. (PSMF at ¶ Def.'s Response at & 4; A.R. at 301.) As of December 3, 2003, plaintiff. had undergone various surgeries to address his injuries. (Id.) Defendant does not dispute the fact that, to date, plaintiff remains disabled.² (PSMF at ¶ 5; Def.'s Response to PMSF at ¶ 15; Ans. at ¶ 15.)

At the time he was rendered disabled, plaintiff was the "Senior Vice President-Practice Area Leader" for Technology Solutions Company ("TSC") a consulting company in the information technology industry. Among other demands, the position required extensive business travel. (PSMF at ¶ 5; Def.'s Response to PSMF at ¶ 5; A.R. at 216-215.) After the May 2002 accident, and expiration of the relevant waiting period under the Plan, defendant accepted plaintiffs claim for benefits and began paying LTD benefits in the amount of $22,167.00 per month. (Id. at ¶ 6; A.R. at 772.)

Plaintiff filed suit in the Superior Court of Fulton County, State of Georgia against the driver of the vehicle with which plaintiff collided, Matthew Thomas Steinmetz ("Steinmetz"), and his employer, Beers Skanska, Inc. ("Beers") (PSMF at ¶ 9; Def.'s Response to PSMF at & 9; A.R. at 733-732.) In the state action, plaintiff sought damages for his medical bills (past, present, and future), lost wages (past, present, and future) and pain and suffering. (PSMF at ¶ 9; Def.'s Response to PSMF at ¶ 9.) After five days of trial, in December 2004, the parties agreed to settle for $5 million. (Id. at ¶ 10; Def.'s Response to PSMF at ¶ 10; A.R. at 733-710.) After accounting for attorney's fees, costs and $25,000, to be placed in escrow, the net proceeds distributed to plaintiff equaled $3,087,194.21. (Defendant's Statement of Undisputed Material Facts ("DSMF") [12] at ¶ 12; Plaintiffs Statement of Facts as to Which a Genuine Issue Remains to be Tried ("Pl.'s Response to DSMF") [15] at ¶ 12; A.R. at 878). All but $1 million of the $5 million settlement was paid at the time of settlement. According to the terms of the settlement, the last $1 million is to be paid in periodic payments of $6,435.00, guaranteed for 20 years and beginning on July 1, 2005, with the last payment on June 1, 2025. (DSMF at ¶ 10; Pl.'s Response to DSMF at ¶ 10; A.R. at 729.)

As defendant admits, the settlement reflected a serious compromise by Mr. Smith, born out of concern that the jury might find the driver's employer not liable, leaving only the driver's personal insurance of $250,000 to pay any judgment. (PSMF at ¶ 10; Def.'s Response to PSMF at ¶ 10.) At the time of the settlement, plaintiff had already incurred medical expenses in the amount of $516,175.69. (PSMF at ¶ 12; Def.'s Response to PSMF at ¶ 12; A.R. at 708-707.) In addition, plaintiffs expected future medical expenses were calculated by licensed vocational rehabilitation consultants and a doctor of economics who valued the cost of plaintiffs expected future health and medical costs in the range of $1,123,471 to $5,588,804. (PSMF at ¶ 13; Def.'s Response to PSMF at ¶ 13; A.R. at 705-704.) A separate report, prepared by a professor of economics, calculated plaintiffs loss in earning capacity at $14,079,411.98, reduced to present value, and assuming plaintiff would have continued working until age 65. (PSMF at ¶ 14; Def.'s Response to PSMF at ¶ 14; A.R. at 863-847.)

On March 15, 2005, after terminating plaintiffs benefits in January 2004 (A.R. at 233) and then reinstating those same benefits in October 2004 (A.R. at 548), defendant began inquiring whether plaintiff had received any third-party funds as a result of the accident. (PSMF at ¶ 6, 8; A.R. at 580.) By letter dated April 7, 2005, plaintiff advised defendant that he had recovered a settlement from a third party as a result of the accident. (Id. at ¶ 8; A.R. at 748-704.) The April 7, 2005 letter also expressed plaintiffs position that Mr. Smith had not received anything, other than his social security benefits, that would qualify as "Other Income Benefits" so as to reduce the amount of plaintiffs LTD benefit award. (A.R. at 745.) In support of this position, plaintiff relied on both the "common fund" and "make whole" doctrines. (Id. at 748-704; DSMF at 1116; Pl.'s Response to DSMF at ¶ 16.)

On May 31, 2005, defendant made an offer to plaintiff to pay a lump sum settlement ("the lump sum") of $1.4 million in full discharge of any further obligation to pay monthly benefits under the policy. (DSMF at ¶ 18; Pl.'s Response to DSMF ¶ 18; A.R. at 672-669.) Defendant based the lump sum offer on a 5.48% discount rate and a range of scenarios, which placed the present value of plaintiffs benefits with the social security offset at somewhere between $1.9 and $2.9 million, depending on whether or not an offset was taken for the settlement. (A.R. at 671.) On June 6, 2005, plaintiff's attorney indicated that he could not properly evaluate the lump sum until he could understand defendant's grounds for taking an offset for the settlement. (DSMF at ¶ 20; Pl.'s Response to DMSF at ¶ 20; A.R. at 679.) On June 8, 2005, plaintiff rejected the lump sum. (Id. at ¶ 21; A.R. at 896-895.)

On June 13, 2005, defendant informed plaintiff of its decision to reduce plaintiff's LTD benefits from $22,167.00 per month to $50.00 per month based on the settlement.³ (PSMF at ¶ 18; Def.'s Response to PSMF at ¶ 18; A.R. at 680A-681.) In this letter, defendant also requested that plaintiff review the "Other Income Benefits" provision of the plan. Under the "Other Income Benefits" provision, "[a]n employee for whom disability benefits are payable under this policy may be eligible for benefits from Other Income Benefits. If so, the Insurance Company may reduce the disability benefits, by the amount of such other income benefits." Under the terms of the Plan, "Other Income Benefits" include: "2. any Social Security disability or retirement benefits the Employee or any third party receives ..." "5. Any amounts paid because of loss of earnings or earning capacity through settlement, judgment, arbitration or otherwise . " (A.R. at 695-694.)

On June 16, 2005, plaintiff appealed defendant's benefit reduction decision reiterating plaintiffs position that the make whole doctrine precluded defendant from offsetting the third-part...