Van Loo v. Cajun Operating Co.

• Decision Date: 06 June 2016
• Docket Number: Case No. 14-cv-10604
• Citation: 190 F.Supp.3d 704
• 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

190 F.Supp.3d 704

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, E.D. Michigan, Southern Division.

Signed June 6, 2016

Daniel D. Swanson, Tad T. Roumayah, Sommers Schwartz, PC, Southfield, MI, for Plaintiffs.

Dennis J. Levasseur, Bodman, Detroit, MI, Edna S. Kersting, Wilson Elser Moskowitz Edelman & Dicker LLP, Chicago, IL, for Defendants.

OPINION AND ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT [78] AND DENYING DEFENDANT CHURCH'S MOTION FOR SUMMARY JUDGMENT [81]

LAURIE J. MICHELSON, UNITED STATES DISTRICT JUDGE

Donna Van Loo was a corporate attorney employed by Defendant Cajun Operating Company d/b/a Church's Chicken ("Church's"). She purchased life insurance (provided by former co-defendant, Reliance Standard Life Insurance Company) as part of her Church's benefits package. Van Loo increased her coverage throughout her employment, and Church's, as the Plan Administrator, represented to her—through its intranet site and communications by its benefits specialists—that her increases had become effective. But Van Loo did not know that she should have submitted an evidence of insurability form ("EIF") to Reliance in 2008, when her coverage crossed $300,000—Reliance's guaranteed-issue threshold amount. So when Van Loo's beneficiaries, Donald and Harriet Van Loo, filed a claim after Van Loo died of an aggressive form of esophageal cancer, Reliance gave them only $300,000 out of the $614,000 they sought. Plaintiffs have now shown that by misrepresenting Van Loo's level of effective life insurance coverage in its role as Plan Administrator, Church's breached its fiduciary duty to her. Accordingly, Plaintiffs are entitled to summary judgment on their claim against Church's, Van Loo's failure to submit the EIF notwithstanding.

I. FACTUAL BACKGROUND

On May 16, 2007, Church's offered Donna Van Loo full-time employment as a corporate attorney. (Dkt. 78-2, Offer Letter.) The offer letter advised that as an employee, Van Loo would be eligible for "Employee-Paid benefits includ [ing] Supplemental Life Insurance[.]" (Id. ) Church's held its Group Life Policy through Reliance Standard Life Insurance Company. (Dkt. 78-3, Policy at PageID 2014.) The "Schedule of Benefits" included two categories of life insurance—basic and supplemental:

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.

(Policy at PageID 2022.) According to an Appeal Letter that Reliance would later send to Plaintiffs, the Policy was "Self-Administered," which meant that Church's was "typically responsible for ensuring that coverage elections (including any required proof of good health) [were] processed in accordance with the terms and conditions of the applicable policy and that premium remittances are accurate and timely. Under this option (absent the submission of any proof of good health), [Reliance] typically ha[d] no record of individual coverage or premium amounts." (Dkt. 78-4, Appeal Letter at PageID 2045.)

Donna Van Loo enrolled in the Policy shortly after she began her employment. On June 29, 2007, Van Loo submitted an enrollment form and selected Supplemental Life benefits at "2x salary." (Dkt. 78-5, 2007 Enrollment Form at PageID 2048.) At that point, her salary was $100,000 per year. (Offer Letter.) She also designated her parents, Plaintiffs Donald and Harriet Van Loo, as her beneficiaries. (Id. ) Subsequently, Church's began deducting $14.80 per month from her paycheck for "Supp Life." (Dkt. 78-6, July 6, 2007 Pay Stub at PageID 2050.)

On November 13, 2007, Van Loo submitted an open enrollment change form for 2008. (Dkt. 78-7, 2008 Open Enrollment Change Form.) She indicated that she wanted to change her Supplemental Life coverage to "3x salary." (Id. at PageID 2057.) At that time, she still had a salary of $100,000 per year. (Dkt. 45, AR at. PageID 866.)¹ The form stated, "If you wish to increase your supplemental life coverage, you may be required to submit an evidence of insurability form. If so, one will be mailed to you." (Id. ) No EIF form was mailed to Van Loo.

On November 11, 2010, Van Loo submitted another enrollment change form for the year 2011. (Dkt. 78-8, Nov. 11, 2010 Benefit Enrollment Form.) She elected Supplemental Life in the amount of "4x Annual Salary." (Id. ) At that time, she had a salary of $107,650.52. (AR at PageID 866.)

Van Loo maintained her "4x Annual Salary" election in 2012 and 2013. (Dkt. 78-8, Oct. 18, 2012 Benefit Enrollment Form.) At that point, she had a salary of $117,500 and $122,200, respectively. (AR at PageID 866.) Upon completing her October 18, 2012 enrollment form, Church's computer system generated a message stating, "CONGRATULATIONS on completing your benefits enrollment for 2013." (Id. at PageID 2061.)

Throughout Van Loo's employment, Church's deducted premium payments directly from her paycheck. (See Dkt. 78-6, Pay Stubs.) Van Loo's final benefits election of "4x Annual Salary" in Supplemental Life resulted in a deduction of $97.31. (Id. )

Around December 2012, Van Loo became ill with esophageal cancer and left work on disability leave. (Dkt. 78-12, Proof of Loss Claim Statement.) Shortly thereafter, on February 21, 2013, Miikii Johnson, Church's Benefits, Compensation and Leave Specialist, sent Van Loo a letter informing her, "While you are not receiving paychecks from Church's, benefit premiums are not being deducted and you must pay these directly to Church's." (Dkt. 78-10, Feb. 21, 2013 Letter at PageID 1159.) Johnson further stated that Van Loo would need to pay $97.31 for "Supplemental Life." (Id. ) Van Loo paid these premium payments for the pay periods spanning February 11, 2013 through March 10, 2013; Johnson acknowledged these payments via letter on March 1, 2013. (Dkt. 78-11, Mar. 1, 2013 Letter at PageID 2063.)

At her deposition, Johnson testified, "Any employee that's out on any type of leave of absence and are no longer receiving a paycheck from Church's Chicken, we have to send out a notification to the employee to let them know that while they are not being paid by Church's, in order to keep their benefits active we must receive a benefit premium." (Dkt. 78-22, Johnson Dep. II at 59.) Johnson stated that she did not check Van Loo's eligibility for the supplemental coverage before mailing the letter. (Johnson Dep. II at 60.)

Van Loo passed away on March 4, 2013. (Dkt. 78-12, Proof of Loss Claim Statement.) At the time of her death, her annual salary was $122,200. (Id. ) Thus, her parents submitted a claim to Reliance for "4x" that amount. (Id. ) Reliance sent a letter to Johnson, with a copy going to Donald and Harriet Van Loo, on April 17, 2013. (Dkt. 78-13, Apr. 17, 2013 Letter at PageID 2069.) The letter stated that Reliance was partially denying the claim: "We note the group supplemental life insurance benefit of Four (4) times Earnings was claimed, but based upon our review of this claim and the policy provisions we have determined that the supplemental life insurance benefit payable is $175,000." (Id. at PageID 2067.) Citing the Policy's "Amount of Insurance" language, Reliance stated:

Based on the enrollment history provided, at the time of Donna Van Loo's date last worked on January 31, 2013, she elected four (4) times annual earnings ($122,200) which equates to $489,000 (rounded to the next higher $1,000). As the total amount of basic and supplemental life insurance coverage exceeded the guarantee issue amount of $300,000, proof of good health was required. Such proof was never received in our office. Consequently, the benefit available for the group life insurance is $300,000. We cannot honor the [claimed] benefit of $614,000.

(Id. at PageID 2068.)

Plaintiffs appealed. The basis of the appeal was that "there is no indication why the company collected premiums for more than five (5) years without requiring the submission of the required documentation." (Dkt. 78-7, Appeal Letter at PageID 2115.) Plaintiffs later supplemented their appeal. (Dkt. 45, Admin. Record at PageID 1076.) They pointed out that "there is no evidence that an EIF form was ever mailed to Ms. Van Loo for her to submit" even though Reliance took responsibility for that task in 2010, and argued that the benefits guides and enrollment forms provided to Ms. Van Loo were "ambiguous" as to when an EIF would be required. (Id. at PageID 1077.) Despite this, Plaintiffs argued, Van Loo paid all of her premiums in full for the coverage she had elected. (Id. at PageID 1081.)

On November 1, 2013, Reliance issued a letter upholding its April 2013 benefits determination. (Dkt. 78-18, Appeal Determination Letter.) In particular,

As to the 2010 e-mail correspondence regarding EIF mailing, "Further investigation into these emails revealed that [Reliance] made an exception in this situation and volunteered to mail the employees who required evidence of insurability forms on behalf of Church's Chicken. Ms. Murphy has confirmed that she mailed these necessary forms to those on this list. In fact, Ms. Murphy recalls the "X" under the section marked "Form" indicated that an evidence of insurability form was sent to

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