Underwood v. Fluor Daniel, Inc.

• Decision Date: 28 January 1997
• Docket Number: No. 95-3036,95-3036
• Citation: 1997 WL 33123,106 F.3d 394
• Parties: NOTICE: Fourth Circuit Local Rule 36(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. Raymond A. UNDERWOOD; Linda Sue Underwood, Plaintiffs-Appellants, v. FLUOR DANIEL, INCORPORATED; Fluor Corporation Group Health Plan; Fluor Corporation; Fluor Corporation Group Health Plan, Plan Administrator, Defendants-Appellees, and FLUOR DANIEL, INCORPORATED, Group Health Plan; Fluor Daniel, Incorporated, Group Health Plan Claims Review Committee, Individually and Collectively, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 394

106 F.3d 394

NOTICE: Fourth Circuit Local Rule 36(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.

Raymond A. UNDERWOOD; Linda Sue Underwood, Plaintiffs-Appellants, v. FLUOR DANIEL, INCORPORATED; Fluor Corporation Group Health Plan; Fluor Corporation; Fluor Corporation Group Health Plan, Plan Administrator Defendants-Appellees and FLUOR DANIEL, INCORPORATED, Group Health Plan; Fluor Daniel, Incorporated, Group Health Plan Claims Review Committee, Individually and Collectively, Defendants.

No. 95-3036.

United States Court of Appeals, Fourth Circuit.

Argued Sept. 25, 1996.

Decided Jan. 28, 1997.

Appeal from the United States District Court for the District of South Carolina, at Greenville. G. Ross Anderson, Jr., District Judge. (CA-95-42)

ARGUED: Roy Franklin Harmon, III, HARMON LAW FIRM, P.A., Greenville, South Carolina, for Appellants.

Kristofer Karl Strasser, OGLETREE, DEAKINS, NASH, SMOAK & STEWART, L.L.P., Greenville, South Carolina, for Appellees.

ON BRIEF: Julie M. Bondura, HARMON LAW FIRM, P.A., Greenville, South Carolina; T. Preston Reid, HOWARD, HOWARD, FRANCIS & REID, Greenville, South Carolina, for Appellants. Fred W. Suggs, Jr., OGLETREE, DEAKINS, NASH, SMOAK & STEWART, L.L.P., Greenville, South Carolina, for Appellees.

Before HALL and ERVIN, Circuit Judges, and HALLANAN, United States District Judge for the Southern District of West Virginia, sitting by designation.

OPINION

PER CURIAM:

Raymond A. Underwood and his wife Linda appeal the order of the district court denying their motion, made pursuant to Fed.R.Civ.P. 59(e), to amend the court's entry of judgment on behalf of defendants Fluor Corporation, Fluor Daniel, Inc., and the Fluor Corporation Group Health Plan (hereinafter, collectively, "Fluor"), in the Underwoods' action for benefits, penalties, and injunctive relief under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1145.

Specifically, the Underwoods allege that Fluor wrongly refused to pay health insurance benefits due Mrs. Underwood under the Plan, and has failed to comply with the information and notice requirements of ERISA and the COBRA ¹ amendments thereto. The Underwoods contend that, as a result, Fluor has breached its fiduciary duties to administer the Plan "solely in the interest of the participants and beneficiaries," with "care, skill, prudence, and diligence," and "in accordance with the documents and instruments governing the plan[.]" 29 U.S.C.A. 1104(a)(1) (West 1985 & Supp.1996). Moreover, according to the Underwoods, Fluor's non-compliance with the information and notice requirements has rendered it liable for the statutory penalty of up to $100 per day for each violation. See 29 U.S.C. § 1132(c)(1) (West Supp.1996).

Following a bench trial, the district court entered judgment for Fluor on all of the Underwoods' claims, and it denied the Underwoods' subsequent motion to alter or amend the judgment. We affirm the judgment of the district court with respect to its denial of benefits and injunctive relief, and with respect to its excusing Fluor from the statutory penalty for not furnishing the Underwoods with requested plan documents and other information.

We hold, however, that the district court abused its discretion by not imposing the statutory penalty for Fluor's failure to provide Mrs. Underwood with notice of her rights upon the impending termination of the health insurance benefits to which she had been entitled under the Plan. We therefore reverse that aspect of the judgment and remand for the district court to impose the appropriate penalty.

I.

On June 29, 1992, Raymond Underwood was laid off from his engineering job with Fluor Daniel, Inc., in Greenville, South Carolina. Upon reporting for work that day, Mr. Underwood was escorted to the personnel department and given a printed notice explaining that, although he was being separated from his employment, he could elect to continue his and/or his wife's health insurance under the company's health benefits plan. ² Mr. Underwood decided to postpone his decision. He testified that he took the notice home and put it in his safe, never showing it to his wife.

Linda Underwood had been suffering from a chronic intestinal ailment since the first of the year; indeed, she had been taken to the hospital the very morning that her husband lost his job. She was released the next day, however, and Mr. Underwood quickly found employment with Sandwell Engineering in Atlanta. His new job was scheduled to begin on August 24, 1992, within the 60-day election period accorded him by the COBRA amendments. See note 2, supra. Mr. Underwood testified that he understood that there was no danger of any gap in his health insurance coverage; he also stated his belief that, in the event that he needed health benefits prior to starting work with Sandwell, he could simply elect to continue his coverage with Fluor Daniel and pay the back premiums.

Mrs. Underwood's coverage, however, was another matter; she would not be covered under Sandwell's insurance for any medical expenses related to her preexisting intestinal condition. The Underwoods testified that, as a result, they believed it necessary for her to obtain a continuation of the coverage provided by Fluor.

Fluor Daniel maintains that, during the first week of July 1992, it mailed a duplicate "COBRA notice" to Mr. Underwood, along with an election form for him to sign and return in the event that he decided to continue coverage. The Underwoods assert that they never received this mailing. ³ In any case, while out of town in early August, Mr. Underwood telephoned his wife and instructed her to send a check to Fluor Daniel to continue her coverage.

Mrs. Underwood testified that she phoned Fluor Daniel's benefits department and was told by an unnamed employee to remit $679.36. The amount quoted was exactly twice the monthly rate for joint coverage, as listed on the notice handed to her husband upon his termination. ⁴ Mrs. Underwood mailed a check for the quoted amount, dated August 10, 1992, to Fluor Daniel. On the check's memorandum line, Mrs. Underwood wrote "July & Aug. 92." A few days thereafter, Mr. Underwood submitted a completed election form to Fluor Daniel, see note 3, supra, that effectively continued coverage for both him and his wife. ⁵ September came and went without any further payments by the Underwoods to Fluor Daniel. Mrs. Underwood continued to require medical assistance for her condition, undergoing outpatient procedures in October and November. Her situation ultimately worsened, requiring her to enter the hospital on January 2, 1993.

The following day, Mr. Underwood was told that there was a "problem" certifying his wife's admission; he contacted Fluor Daniel, which informed him that the Underwoods' insurance had been cancelled as of August 31, 1992, for non-payment of premiums. See note 4, supra. ⁶ By telephoning Fluor's headquarters in California, Mr. Underwood was able to get his wife's admission certified by the Plan's precertification agent, and she received the surgery that she needed on January 11. In the end, however, Fluor rebuffed the Underwoods' repeated attempts to tender payment for back premiums, and it steadfastly refused to pay approximately $400,000 in medical expenses stemming from Mrs. Underwood's hospitalization and surgery.

The Underwoods filed suit in the district court, seeking to impose liability on Fluor for the costs of Mrs. Underwood's care. The complaint accused Fluor of having violated specific provisions of ERISA and its COBRA amendments by not giving the Underwoods sufficient notice of their rights to continued health insurance coverage under the Plan, and by refusing to provide Plan documents and other information they had requested. It was further alleged that Fluor's failure to comply with ERISA's notice and information requirements, along with its denial of Mrs. Underwood's insurance claims, constituted breaches of its fiduciary duties to the Underwoods.

The parties proceeded to trial before the district court, which, on August 17, 1995, entered judgment for Fluor on all of the Underwoods' claims. In so ruling, the court found that Mrs. Underwood knew she had a right to continued insurance coverage when her husband was terminated from Fluor Daniel. She knew that her husband elected COBRA coverage for her and that the premium amount had to be paid. She also knew the premium amount due. She knew the period covered by the premium amount because she wrote on her check that it was for July and August of 1992.... It is not necessary to reach the plaintiffs' complaints regarding notice because they elected and received continued insurance coverage under COBRA.... Fluor Daniel terminated the plaintiffs' coverage because the plaintiffs did not pay their premiums.

From the court's subsequent denial of their motion to amend its judgment, the Underwoods appeal.

II.

A.

The COBRA amendments require group health plan administrators to notify "any qualified beneficiary" of a plan participant of his right to temporarily continue his coverage upon the occurrence of certain "qualifying events" (including termination of the participant's employment) that would otherwise result in the beneficiary's loss of coverage. 29 U.S.C.A. §§ 1163(2), 1166(a)(4)(A) (West Supp.1996). The participant's employer must inform the administrator of the qualifying event within 30 days of its occurrence; the administrator then has 14 more days to notify any beneficiaries and explain to them their rights. See §§ 1166(a)(2), (c). The statute plainly identifies plan beneficiaries as a discrete class entitled to certain rights apart from plan participants; we are, therefore, compelled to conclude that a plan administrator may not, merely by...