Weaver Bros. Ins. Assocs., Inc. v. Braunstein
| Decision Date | 25 March 2013 |
| Docket Number | CIVIL ACTION NO. 11-5407 |
| Parties | WEAVER BROS. INSURANCE ASSOCIATES, INC., Plaintiff, v. JACQUELINE BRAUNSTEIN, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
TABLE OF CONTENTS
I. INTRODUCTION ................................................................................................................. 1
II. BACKGROUND ................................................................................................................... 2
A. Statement Of Facts ..................................................................................................... 2
B. Provisions Of The Certificate Of Group Insurance ................................................... 5
C. Procedural History ..................................................................................................... 9
III. STANDARD OF REVIEW ................................................................................................... 9
IV. ANALYSIS .......................................................................................................................... 10
C. Braunstein Beneficiaries May Seek “Appropriate Equitable Relief” Under 29 U.S.C. § 1132(a)(3)(B) ................................................... 25
D. Braunstein Beneficiaries Are Entitled To Relief In Their Individual Capacities ..... 27
E. Negligence Claim Is Preempted ............................................................................... 28
V. CONCLUSION .................................................................................................................... 28
I. INTRODUCTION
Under the Employee Retirement Income Security Act of 1974 ("ERISA"), a "plan administrator" has a fiduciary duty to provide a summary of the rights and benefits offered to plan participants. The summary is referred to as a "summary plan description" ("SPD"). In this case, the benefit made available was life insurance. Deborah Braunstein, the plan participant, was covered by a life insurance plan provided as a benefit by her employer, Weaver Bros. Insurance Associates, Inc. ("Weaver Bros."). The employer was the administrator of the plan, which provided that upon death of the insured, a sum of money would be paid to designated beneficiaries.
In October 2009, Deborah Braunstein was diagnosed with cancer. After the diagnosis, she stopped working full-time and began collecting disability payments from Weaver Bros. She asked a Weaver Bros. employee if her life insurance benefits would continue after she began collecting disability payments. The employee told her that her benefits would continue as though she was an active employee. Later, Weaver Bros. faxed paperwork to her, requesting that she update her life insurance beneficiaries. She filled out the forms and asked Weaver Bros. to look over the documents and make sure that she included all the necessary information. Weaver Bros. did not inform her that she needed to make any changes to her submitted paperwork.
Deborah Braunstein died in January 2011. When her beneficiaries filed a claim for benefits under the life insurance plan, their claim was denied. Unbeknownst to Deborah Braunstein, her policy lapsed one year after she stopped "active work," or on October 10, 2010. Although she had the right to continue her benefits by converting her policy to an individual policy within thirty-one days after her policy lapsed, she did not exercise this right. Her beneficiaries blame Weaver Bros. for not informing her of the conversion right, and claim thatWeaver Bros. breached its fiduciary duty to Deborah Braunstein under ERISA by: (1) providing an inadequate "summary plan description" of her rights under the life insurance plan; and (2) misleading Deborah Braunstein by informing her that her life insurance plan would not lapse during her period of disability.
In response to the beneficiaries' allegations, Weaver Bros. filed this action under the Declaratory Judgment Act, asking this Court to interpret the life insurance plan documents, find that Weaver Bros. did not have a duty to inform Deborah Braunstein about her conversion right, and hold that coverage under the life insurance plan lapsed. Deborah Braunstein's beneficiaries filed a counterclaim for breach of fiduciary duty and negligence, and request that the Court award the equitable remedy of "surcharge"1 to cover the loss of life insurance benefits resulting from Weaver Bros.' alleged violation of ERISA. Weaver Bros. has moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). For reasons that follow, the Court will grant in part and deny in part the Motion.
II. BACKGROUND
A. Statement Of Facts
In 2009, Deborah Braunstein was diagnosed with cancer. At that time, she was a Commercial Liaison Senior Account Manager at Weaver Bros., where she had worked since October 2, 2006. (Doc. No. 50 at 9.) On October 11, 2009, at age sixty-one, she took a medical leave of absence in order to undergo intense chemotherapy to treat her cancer.2 (Id.) As an employee of Weaver Bros., she was covered by two group life insurance policies (hereafter the"Life Insurance Plan" or "Plan") administered by Fortis Benefits Insurance Company ("Fortis").3 The Plan is subject to the provisions of ERISA.
On October 30, 2009, after a two-week waiting period from the date she was no longer an active employee, Deborah Braunstein began to receive benefits under Weaver Bros.' short-term disability plan. (Doc. No. 1 at 9.) She then inquired about the status of her life insurance benefits, and Weaver Bros. informed her that her life insurance would be maintained during her disability as though she was an active employee. (Doc. No. 44 at 9-10.) Although she continued to work part-time during her leave of absence until about January 14, 2010, her condition deteriorated and she became permanently disabled. (Doc. No. 1 at 10.) She therefore began collecting long-term disability benefits from Weaver Bros. (Id.)
On February 16, 2010, Weaver Bros. faxed a form to Deborah Braunstein requesting that she update her life insurance beneficiary designations. (Doc. No. 44 at 10.) The beneficiary designation form read in part:
+--------------------------------------------------------------------------+
¦ ¦All beneficiaries in this section will be considered primary. ¦
¦PRIMARY ¦ ¦
¦ ¦Proceeds will be paid in equal shares to primary beneficiaries¦
¦BENEFICIARY¦ ¦
¦ ¦who survive you unless you indicate percentages. ¦
¦(IES) ¦ ¦
¦ ¦Percentages must equal 100%. ¦
+--------------------------------------------------------------------------+
(Id.) Weaver Bros. explained on the cover sheet sent with the blank form that it was updating the beneficiary designations for all employees' life insurance plans. (Id.) On March 8, 2010, Deborah Braunstein returned her completed beneficiary designation form to Weaver Bros., noting on the cover sheet that the form was intended to replace her previous designations. (Id.) She also asked Weaver Bros. to "look [the form] over to make sure [she] included the necessary information." (Id.) Weaver Bros. did not inform her that any changes were needed. (Id.) She designated as beneficiaries her children, Jacqueline and Micah Braunstein, and her grandchildren, Isaiah Jones and Tayler Mayne (collectively "the Braunstein Beneficiaries").
On January 21, 2011, Deborah Braunstein passed away. (Doc. No. 1 at 10.) The Braunstein Beneficiaries submitted a timely claim for benefits to Fortis, the Claims Administrator. (Doc. No. 50 at 9.) On June 3, 2011, Fortis rejected their claim, informing them that Deborah Braunstein was not entitled to benefits under the Life Insurance Plan because her coverage had lapsed. (Id. at 10.) The Life Insurance Plan contained a provision that terminated her benefits one year after October 11, 2009, the day she ceased "active work" at Weaver Bros. Although she had the option for thirty-one days thereafter to convert her group Life Insurance Plan to an individual plan and maintain her life insurance benefits, she did not exercise the option because she was unaware of the need to do so.
On June 29, 2011, R. Scott Gardner, Esquire, prior counsel for the Braunstein Beneficiaries, sent a letter to Sandra J. Colangelo, an employee of Weaver Bros., asserting that the denial of benefits by Fortis was due to Weaver Bros.' failure to inform Deborah Braunstein of her right to convert the Life Insurance Plan to an individual policy. (Doc. No. 1 at 109-10.) The letter also alleged that this failure was a breach of fiduciary duty under ERISA. (Id.)
On August 26, 2011, in response to the letter, Weaver Bros. filed the instant lawsuit under the Declaratory Judgment Act, 28 U.S.C. § 2201, requesting a determination from the Court that Weaver Bros. did not have a duty to inform Deborah Braunstein about her conversion right and that her coverage under the...
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