Van Loo v. Cajun Operating Co.
| Decision Date | 17 September 2015 |
| Docket Number | Case No. 14–cv–10604 |
| Citation | 130 F.Supp.3d 1097 |
| 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. Cajun Operating Company d/b/a Church's Chicken, a Delaware Corporation, and The Church's Chicken Welfare Benefits Plan, Cross–Plaintiffs, v. Reliance Standard Life Insurance Company, an Illinois Corporation, Cross–Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
Daniel D. Swanson, Tad T. Roumayah, Sommers Schwartz, PC, Southfield, MI, for Plaintiffs.
Dennis J. Levasseur, Bodman, Rebecca D. O'Reilly, RDO Benefits Counsel PLLC, Detroit, MI, for Defendants and Cross–Plaintiffs.
Edna S. Kersting, Wilson Elser Moskowitz Edelman & Dicker LLP, Chicago, IL, for Cross–Defendant.
Donna Van Loo was an employee of Cross–Plaintiff Cajun Operating Company d/b/a Church's Chicken ("Church's"). Church's provided life insurance to Van Loo and its other employees through Cross–Defendant Reliance Standard Life Insurance Company. The Policy required that insureds submit an evidence of insurability form ("EIF") in order for certain amounts of insurance to be effective. But Van Loo never submitted an EIF, and so when her parents, Plaintiffs Donald and Harriet Van Loo, submitted a claim after her death, Reliance denied benefits in excess of the guaranteed-issue amount.
Alleging that their daughter was never informed that to qualify for supplemental coverage over $300,000, she had to submit an EIF certifying the state of her health at the time her coverage crossed the $300,000 threshold, Plaintiffs sued Church's and Reliance, asserting various causes of action under the Employee Retirement Income Security Act ("ERISA"). After initial motion practice, the Court dismissed all but a denial-of-benefits claim against Reliance and a fiduciary-breach claim against Church's. SeeVan Loo v. Cajun Operating Co., 64 F.Supp.3d 1007 (E.D.Mich.2014)
. Shortly thereafter, Church's filed a cross-claim against Reliance, asserting that Reliance caused Van Loo's failure to submit the EIF and, in turn, the underlying suit against Church's. Now before the Court are Reliance's Motions to Dismiss the Cross Claim and to Stay Discovery, and Church's' Motion to Amend the Cross Claim. After careful consideration of the briefs and thorough review of the pleadings, the Court finds that oral argument will not aid in resolving the pending motions. See E.D. Mich. LR 7.1(f)(2).
For the reasons set forth below, the motion to amend will be denied, the motion to dismiss will be granted, and the motion to stay will be denied as moot.
The Court first describes the procedural posture of the case and then recites the allegations of the proposed amended cross-complaint, taking the allegations as true and drawing reasonable inferences in favor of Church's.
The Van Loos' breach-of-fiduciary-duty claim against Church's is that Church's "misrepresent[ed] Ms. Van Loo's eligibility for Supplemental Life Insurance Benefits under the Group Life Policy...." Id. at 1016
. In essence, that Church's communications and dealings with Ms. Van Loo led her to reasonably believe she was covered for supplemental life insurance despite the lack of an EIF. Id . at 1019.
Following the ruling on the Van Loos' Complaint, in December 2014, Church's filed a cross-claim against Reliance, on behalf of itself and the "Church's Chicken Welfare Benefits Plan [the "Plan"]." (Dkt.38, Cross–Compl.) Church's alleges that "[b]y way of a delegation of responsibility from CHURCH'S [,] expressly accepted by RELIANCE in 2010, RELIANCE became responsible for the Evidence of Insurability Forms ("EIF") requirement for many PLAN participants, including Donna Van Loo." (Cross–Compl. at ¶ 7.) The EIF itself "directed PLAN participants to return the form to RELIANCE." (Id. at ¶ 9.) Church's says that once Reliance accepted responsibility for EIFs, Reliance should have known that Church's would rely "on RELIANCE to track the return of those forms and would rely on RELIANCE to communicate to CHURCH'S any changes in benefits required under the PLAN as a result of the EIF." (Id. at ¶ 9.) Church's says that only after Reliance denied Plaintiffs' claim did it realize that Van Loo needed an EIF for her coverage level to become effective. (Id. at ¶ 15.)
Based on these allegations, Church's has asserted against Reliance claims for breach of fiduciary duty, misrepresentation, and indemnification. (See Cross–Compl.) Reliance filed a motion to dismiss the cross-complaint. (Dkt. 41, Mot. to Dismiss.) Shortly thereafter, Church's filed a motion to amend the cross-complaint. (Dkt. 50, Mot. to Amend.) Church's seeks to amend the cross-complaint to add allegations regarding a "Plan Administrator's Guide" issued by Reliance and relevant omissions regarding the EIF therein, and also seeks to assert a new interpretation of the EIF requirement as stated in the Policy. (Id. at 3.) As noted above, Reliance opposes the motion to supplement the allegations as untimely and futile. So the Court will consider whether the allegations of the amended cross-complaint are sufficient to withstand a motion to dismiss.
The Policy's guaranteed-issue amount is the crux of this dispute. In the proposed amended cross-complaint, Church's asserts that "the POLICY states that elections of ‘[a]mounts of’ Supplemental Life insurance ‘over $300,000 are subject to [RELIANCE's] approval of a person's proof of good health.’ " (Dkt. 50–2, Proposed Am. Cross–Compl. at ¶ 14.) Moreover, the Policy states that if a proposed election "would result in an increase in the amount of Supplemental insurance of 10% or more," proof of good health would be required. (Id. at ¶ 16.) Reliance issued a "Plan Administrator's Guide" to Church's, but the Guide "does not address who is responsible for administering any EIF required under the POLICY." (Id. at ¶¶ 22–23.)
Employees were to select their own level of coverage under the Policy. "Subject to its terms, the PLAN allowed eligible CHURCH'S employees, including Van Loo, to elect basic life and accidental death and dismemberment insurance ("Basic Life") as well as supplemental life insurance benefits ("Supplemental Life")." (Id. at ¶ 8.) In 2007, with an annual salary of $100,000, Van Loo elected Basic benefits and Supplemental benefits in an amount equal to two times her salary. (Id. at ¶ 9.) In 2008, with an annual salary of $100,000, Van Loo elected Basic and Supplemental benefits in an amount equal to three times her salary. (Id. at ¶ 10.) Church's asserts that ‘[b]ecause Van Loo's elections for 2007 through 2010 neither sought Supplemental Life insurance benefits greater than $300,000, nor resulted in those benefits increasing by 10% or more than the preceding year, none of the POLICY's EIF provisions were triggered." (Id. at ¶ 17.)
The crux of the proposed amended cross-complaint is Van Loo's 2011 election. That year, Van Loo increased her Supplemental election to "4x salary." (Id. at ¶ 18.) Church's contends that it recognized at this time that Van Loo may have triggered the EIF requirement. (Id. at ¶ 20.) Thus, Church's "ask [ed] [Reliance] to administer any EIF requirement for Van Loo and other PLAN participants." (Id. ) Church's also says that it wanted Reliance to take on this task because there had been "unclear communication" regarding the EIF requirement. (Id. at ¶ 21.) Specifically, the Guide did not address who would be responsible for administering the EIF requirement, how it should be administered, or what effect the lack of an EIF would have. (Id. at ¶¶ 24–25.)
Church's alleges that Reliance "expressly accepted responsibility for administering the EIF requirement for Van Loo and other PLAN participants." (Id. at ¶ 26.) But Reliance "did not track EIF submissions or tell CHURCH'S or Van Loo that it never received [an] EIF from Van Loo." (Id. at ¶ 29.) Relying on Reliance's acceptance of responsibility for the EIF requirement, Church's "accepted and transmitted to RELIANCE Van Loo's premium payments and benefit elections, unaware that RELIANCE would later deny Plaintiffs' claim." (Id. at ¶ 31.)
After Van Loo's death, Plaintiffs Donald and Harriet Van Loo submitted a claim on the Policy in the amount of $614,000—$125,000 in Basic Life and $489,000 in Supplemental Life, or approximately four times Van Loo's most recent annual salary of $122,200. (Id. at ¶ 33.) Reliance denied the claim in part, citing the EIF provisions. (Id. at ¶ 35.) Stating that there was no EIF on file for Van Loo, Reliance tendered only $300,000—$125,000 in Basic Life and $175,000 in Supplemental Life. (Id. at ¶ 37.) Reliance affirmed this decision on appeal. (Id. at ¶ 42.) The underlying lawsuit ensued.
Based on the foregoing, the proposed amended cross-complaint asserts four counts against Reliance: breach of fiduciary duty for failure to administer EIF (Count I), breach of fiduciary duty for failure to pay claim (Count II), breach of fiduciary duty based on misrepresentation (Count III), and indemnification (Count IV).
First, Church's asserts that Reliance accepted responsibility for administering the EIF requirement and thereby became a fiduciary for that purpose and that Reliance breached that duty by failing to send Van Loo an EIF, failing to advise Church's that Van Loo needed an EIF but had not submitted one, and failing to tell Church's to adjust Van Loo's premium. (Id. at ¶¶ 45–49.) Worse, says...
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Van Loo v. Cajun Operating Co.
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