Van Loo v. Cajun Operating Co., Case No. 14-cv-10604

• Decision Date: 04 December 2015
• Docket Number: Case No. 14-cv-10604
• Parties: DONALD AND HARRIET VAN LOO, Plaintiffs, v. CAJUN OPERATING COMPANY d/b/a CHURCH'S CHICKEN, a Delaware Corporation, RELIANCE STANDARD LIFE INSURANCE COMPANY GROUP LIFE POLICY (Policy Number GL 140042), an employee welfare benefit plan, and RELIANCE STANDARD LIFE INSURANCE COMPANY, an Illinois Corporation, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

DONALD AND HARRIET VAN LOO, Plaintiffs, v. CAJUN OPERATING COMPANY d/b/a CHURCH'S CHICKEN, a Delaware Corporation,RELIANCE STANDARD LIFE INSURANCE COMPANY GROUP LIFE POLICY(Policy Number GL 140042), an employee welfare benefit plan,and RELIANCE STANDARD LIFE INSURANCE COMPANY, an Illinois Corporation, Defendants.

Case No. 14-cv-10604

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

December 4, 2015

Honorable Laurie J. Michelson

Magistrate Judge David R. Grand

OPINION AND ORDER DENYING PLAINTIFFS' MOTION FOR JUDGMENT ON THE ADMINSTRATIVE RECORD [63], GRANTING DEFENDANT RELIANCE'S MOTION FOR JUDGMENT ON THE ADMINISTRATIVE RECORD [64], AND GRANTING IN PART AND DENYING IN PART CHURCH'S' MOTION TO AMEND SCHEDULING ORDER [77]

Plaintiffs Donald and Harriet Van Loo filed this lawsuit after Defendant Reliance Standard Life Insurance Company partially denied their claim for life insurance benefits following the death of their daughter, Donna Van Loo. Donna was an employee of Defendant Cajun Operating Company d/b/a/ Church's Chicken. Donna purchased life insurance coverage through Church's, which held a Reliance policy, and named her parents as beneficiaries. But because Van Loo never submitted proof of good health, Reliance found—and maintains—that Plaintiffs cannot recover life insurance benefits in excess of $300,000. At this time, the Court will address the cross-motions for judgment on the administrative record filed by Plaintiffs and Reliance. (Dkts. 63, 64.)

I. BACKGROUND

It is undisputed that Donna Van Loo never submitted proof of good health (otherwise known as "evidence of insurability") in support of her life insurance elections through Church's. Based on this missing evidence of insurability form ("EIF"), Reliance denied Plaintiffs benefits in excess of $300,000. Thus, the parties' disputes largely revolve around the proper interpretation of the Policy's good health requirement, whether Van Loo knew about it, and who between Van Loo, Church's, and Reliance was responsible for obtaining it. In this context, the Court must look solely to the Administrative Record to answer these questions. See Eriksen v. Metro. Life Ins. Co., 39 F. Supp. 2d 864, 865-66 (E.D. Mich. 1999). The Administrative Record includes the Policy, a Benefits Guide issued by Church's, personnel information on Donna Van Loo, and communication among Church's, Reliance, and Plaintiffs.

A. Relevant Policy Provisions

Reliance provided insurance to Church's employees under the terms of its Group Life Policy. (Dkt. 45-8, Policy.) Several portions of the Policy are relevant. First, the following provision governs the amount of coverage:

AMOUNT OF INSURANCE:

Basic Life and Accidental Death and Dismemberment:

CLASS 1: One (1) times Earnings, rounded to the next higher $1,000, subject to a maximum Amount of Insurance of $200,000.

CLASS 2: $20,000.

Supplemental Life (Applicable only to those Insureds who elect Supplemental coverage and are paying the applicable premium):

CLASS 1: Choice of: One (1), Two (2), Three (3), Four (4) or Five (5) times Earnings, rounded to the next higher $1,000, subject to a maximum Amount of Insurance of $750,000.

CLASS 2: Choice of: $20,000, $40,000, $60,000, $80,000 or $100,000.

Amounts of insurance over $300,000 are subject to our approval of a person's proof of good health. However, any proof of good health required due to late application for this insurance (See EFFECTIVE DATE OF INDIVIDUAL INSURANCE) will be at no expense to us.

(Policy at 0009.) Thus, this section ties "[a]mounts of insurance over $300,000" to Reliance's approval of the insured's good health.

Next, the "Approved Enrollment Periods" section describes conditions applicable when an employer offers an enrollment period to its employees, including a requirement that insureds provide proof of good health in certain circumstances:

Employees who exceed the combined Basic and Supplemental Life Insurance guarantee issue amount of $300,000 [and] employees and dependent spouses who exceed a one level increase in insurance are subject to our approval of proof of good health and such amounts of insurance will not be effective until approved by us.

(Id. at 0010.) Thus, the proof of good health requirement is also mentioned in connection with both a "guarantee issue amount of $300,000" and increases of more than one level in coverage.

Finally, the "Incontestability Clause" provides:

Any statement made in your application will be deemed a representation, not a warranty. We cannot contest this Policy after it has been in force for two (2) years from the date of issue, except for non-payment of premium.

Any statements made by you, any Insured or any Insured Dependent, or on behalf of any Insured or any Insured Dependent to persuade us to provide coverage, will be deemed a representation, not a warranty. This provision limits our use of these statements in contesting the amount of insurance for which an Insured or any Insured Dependent is covered. The following rules apply to each statement:

(1) No statement will be used in a contest unless:

(a) it is in a written form signed by the Insured or any Insured Dependent, or on behalf of the Insured or any Insured Dependent; and(b) a copy of such written instrument is or has been furnished to the Insured or any Insured Dependent, the Insured's or any Insured Dependents beneficiary or legal representative.

(2) If the statement relates to an Insured's or any Insured Dependent's insurability, it will not be used to contest the validity of insurance which has been in force, before the contest, for at least two years during the lifetime of the Insured or any Insured Dependent.

(Policy at 0013.)

B. Relevant Employee Materials

Certain Church's' Employee Benefit Guides are also part of the administrative record. (Dkt. 45-6, 2012 Benefits Guide, at 0454.) They mention the proof of good health requirement. For example, a section entitled "When is Evidence of Insurability Required?" states:

Supplemental Life Insurance- If you want to increase your coverage during open enrollment, you may increase by one level (such as from 1x salary to 2x salary). Increases of more than this, or more than $150,000, may require an Evidence of Insurability form.

(Id. at 0468; 0495.)

C. Donna Van Loo

Donna Van Loo began working for Church's on May 21, 2007. (AR at 0010, 407.) She enrolled in Church's' life insurance plan at that time, designating her parents as equal beneficiaries. (AR at 16, 20, 80.) On May 21, 2007, with a salary of $100,000, she elected "2x salary" in supplemental life benefits. (AR at 70, 130, 444.) On January 1, 2008, with a salary of $102,465, she elected "3x salary" in supplemental life benefits. (Id.) She did not submit an evidence of insurability form, Reliance's mechanism for evaluating an insured's good health, at this time.

While Reliance was the claims administrator and Church's the plan administrator, three years later, in December 2010, Reliance undertook to mail evidence of insurability forms tocertain plan participants. This was initiated in a December 2, 2010 e-mail exchange between Chandra Matthews, Senior Benefits Manager at Church's, and Taree Murphy, a Regional Account Manager at Reliance Standard. (AR at 0427.) Matthews asked Murphy to "confirm the following: [evidence of insurability] is needed for: 1. New hires who elect an amt of sup life that is over $300k; 2. Open enrollment changes who elect more than a 1-level increase in either supp or spouse life; OR 3. Open enrollment changes who elect more than $300k in sup life coverage[.]" (Id.) She further inquired whether Murphy could "provide me with your most recent EOI? If we provided you with a list of the employees who need EOI and their addresses, could you send?" (Id.)

Murphy responded the same day:

I will be back in the office tomorrow and will review your contract to confirm the EOI rules. What you have detailed below is our standard, but I want to make sure that there are no special provisions in place before I confirm. We do not typically send out EOI forms, b[ut] how many forms do you think will be needed? We might be able to do this as an exception this time.

(Id.)

As far as the administrative record reveals, the next communication between Murphy and Matthews occurred on December 29, 2010. (Id. at 0522-0526.) Murphy e-mailed Matthews, stating "we are just getting out the EOI forms to the employees this week." (Id. at 0523.) Attached to the e-mail was a draft cover letter to be sent along with the forms. The draft letter, with Matthews' changes, read as follows:

You are receiving the enclosed Evidence of Insurability form for completion due to your election of an amount over the Guaranteed Issue amount . . . . Your elected amount will not be active until you have been approved by our Medical Underwriting department.

(Id. at 0522.)

The final version of the cover letter is not in the record. However, Reliance did at some point send Church's a list of employees needing an EOI, some with "X" next to their names. (Id. at 0432.) Reliance's briefing indicates that an "X" meant that a form was sent to that individual (Reliance Mot. at 9). Indeed, in Reliance's appeal denial, Reliance Appeals Specialist Melissa Andre stated, "Ms. Murphy has confirmed that she mailed [the EOI forms] to those on the list. In fact, Ms. Murphy recalls the 'X' under the section marked 'form' indicated that an evidence of insurability [form] was sent to the employee at the address noted." (AR at 0093.) Van Loo's name is on this list and has an "X" next to it. (Id. at 0432.) However, it is undisputed that Van Loo did not submit an EIF after December 2010.

Van Loo's next coverage election came shortly thereafter. On January 1, 2011, with a salary of $117,500, she elected "4x salary" in supplemental life benefits. (Id.) She received a pay raise to an annual salary of $122,200 in 2012. (Id.) "Salary" also included bonuses. So as of April 2012, Van Loo was enrolled for a total of $614,000...