Yafei Huang v. Life Insurance Co. of North America , 801 F.3d 892 ( 2015 )

United States Court of Appeals
For the Eighth Circuit
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No. 14-3401
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Yafei Huang
lllllllllllllllllllll Plaintiff - Appellant
v.
Life Insurance Company of North America
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
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Submitted: June 9, 2015
Filed: September 3, 2015
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Before GRUENDER, MELLOY, and BENTON, Circuit Judges.
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MELLOY, Circuit Judge.
Plaintiff Yafei Huang appeals the district court's1 grant of summary judgment
on claims related to a denial of life insurance benefits by Life Insurance Company of
North America ("LINA"), the ERISA plan administrator for her deceased husband’s
1
The Honorable Audrey G. Fleissig, United States District Judge for the
Eastern District of Missouri.
former employer. LINA denied benefits, determining that Huang’s deceased
husband, Ping Liu, breached a requirement in the application by failing to notify
LINA of a cancer diagnosis he received after applying for insurance but before a
policy issued. In granting summary judgment, the district court held LINA’s
determination and the underlying interpretation of the plan were not unreasonable.
We affirm the judgment of the district court.
I.
On November 12, 2009, Liu, a physician in a residency program, elected basic
life insurance coverage from LINA through his employer’s ERISA plan in the amount
of his salary, $46,858.49. He also elected supplemental coverage in the amount of
approximately four times his salary.
The summary plan description provided by Liu’s employer stated, “To enroll
for supplemental life insurance coverage, you must complete a separate Cigna
enrollment form. Please note: evidence of good health may be required to enroll.”2
The application for insurance was a short, 2 ½ page form containing several short
health questions, notifying the applicant of a possible need for medical tests, and
setting forth an ongoing change-of-health disclosure requirement.
A portion of the application entitled “Section A” sought “yes” or “no” answers
and asked:
Within the last 5 years has the proposed insured been:
• diagnosed with any of the conditions shown in items A
through J below,
2
Emphasis in original. Cigna owns LINA.
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• told by a medical professional he/she has or may have any
of the conditions shown in items A through J below,
• or been treated by a medical professional for any of the
conditions shown in items A through J below?
...
J. Cancer, Tumor, Leukemia, Hodgkin’s Disease, Polyps or Mole?
The final half page of the form contained two lines at the top for the applicant's name
and social security number. Below those lines, a box with centered text stated,
“——— AGREEMENTS AND AUTHORIZATION———” in six-point font, the same
font used in the balance of the document. Beneath this boxed header the following
text appeared:
To the best of my knowledge and belief all written, telephonic and
electronic info I gave is true and complete. I understand that my
insurance will not go into effect unless I am actively at work on the
effective date. I also understand that coverage for each of my
dependents will not go into effect unless the person is not confined in a
hospital or institution, or receiving certain medical treatment. The
conditions for the requested insurance to be effective are described in
the policy and certificate. The approval of this request by the Insurance
Company is one of those conditions. I understand and agree that:
(1) This request will be a part of the policy that provides the
insurance.
(2) I may need to provide more medical info.
(3) I may need to take medical tests and report the results to
the Insurance Company.
(4) I must report any change in my health that happens before
the insurance is effective.
(5) Requested insurance will not be effective for a person if
the person does not meet the underwriting requirements on
the date insurance is to be effective.
Liu and Huang both signed the third page shortly beneath this quoted material.
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On December 14, 2009, approximately one month after submitting his
application, Liu received a cancer diagnosis. On March 1, 2010, the insurance
became effective. And, on April 23, 2010, Liu passed away.
Huang requested a payment of benefits under Liu’s policies on May 15, 2010.
On July 7, 2010, LINA paid Huang the basic life insurance benefit of $46,858.49. At
that time, LINA asserted that an investigation was required prior to payment of
supplemental benefits because Liu passed away less than two years after the
insurance went into effect. LINA obtained and reviewed Liu’s medical records,
which revealed that Liu had been experiencing symptoms without a diagnosis for at
least two months prior to submitting his November 12 application. It is undisputed
LINA first received notice of Liu’s cancer diagnosis during this review of medical
records.
On January 19, 2011, LINA sent Huang a copy of Liu’s application with a
denial letter stating:
The medical records received were reviewed by our Medical
Underwriting Department to determine insurability on the date that the
Evidence of Insurability form was completed. While the form was
completed accurately at the time it was submitted, a diagnosis of cancer
prior to the coverage approval date was not disclosed to Life Insurance
Company of North America. The Evidence of Insurability Form states
under the Agreement Authorization Section that any changes in your
health prior to the insurance effective date must be reported. If the new
diagnosis had been submitted, it would have resulted in a decision that
Mr. Liu would not be insurable for additional life insurance.
On March 16, 2011, Huang notified LINA she intended to appeal the denial of
benefits. In her notice, she requested, “a copy of the claims file,” “all documents
relied upon in denying . . . and evaluating his claim,” and “a copy of the plan
documents.” On May 16, 2011, LINA provided the requested documents. On July
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14, 2011, Huang filed an appeal, asserting that the denial of benefits was improper.
She also asserted that she and Liu had allowed other insurance to lapse based on a
representation from LINA that Liu could obtain the supplemental insurance benefits.
In response, LINA requested additional information about the alleged
representation. Huang responded that Liu was told he would not have to provide
evidence of good health or insurability, but she did not identify the person who made
the alleged representation by name, job description, or title. She explained that,
through her own employer, she had held $100,000 of life insurance on Liu and that,
in reliance on the representation, she allowed the $100,000 of life insurance to lapse.
She did not identify when the statement was made or when she allowed the other
insurance to lapse. On March 20, 2012, LINA denied Huang’s appeal.
Huang then filed a six-count suit in the district court. In Count 1, she sought
reformation of particular plan language to bring the plan into compliance with
Missouri law. In Count 2, she sought a payment of benefits under the supplemental
policy. In Count 5, she alleged a breach of fiduciary duty and sought a $100,000
equitable surcharge representing harm in the form of the death benefit under the
lapsed policy on Liu’s life through Huang’s employer.3
Huang did not contest the assertion that Liu failed to notify LINA of the cancer
diagnosis he received between submission of his application and issuance of the
policy. Rather, she argued LINA was precluded by Missouri law and plan language
from relying on the disclosure requirement in the application because LINA had
failed to provide Liu with a copy of the policy containing the application prior to
Liu’s death. Huang argued that Missouri law requires insurers to give insureds copies
of their insurance applications prior to death as a means to allow the insureds to
correct any misstatements that might later defeat coverage.
3
Counts 3, 4, and 6 are not at issue in this appeal.
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On her fiduciary-duty claim, Huang argued the alleged representation from the
unnamed person at LINA caused her to allow the other insurance to lapse. She also
argued the application was presented in a format that was so misleading and generally
difficult to understand that the application itself amounted to a breach of the plan
administrator's fiduciary duty toward covered employees.
On cross motions for summary judgment, the district court ruled in favor of
Huang on Count 1, finding that Missouri insurance law required that the plan
language be changed as shown below:
No statement will be used to deny or reduce benefits or as a defense to
a claim, unless a copy of the instrument containing the statement has
been furnished to the claimant insured. In the event of death or legal
incapacity, the beneficiary or representative must receive the copy.
The district court ruled in favor of LINA on all other claims. Regarding Count
2, the claim for benefits under the policy, the district court extended deference to the
ERISA plan administrator’s (LINA’s) interpretation of the plan. The court
concluded LINA had interpreted the plan reasonably when determining that delivery
of the application to Huang during the claims process satisfied the plan’s delivery
requirement. In reaching this conclusion, the court noted that both the plan language
and a Missouri statute governing the contents of insurance policies expressly
permitted delivery of the application to “the beneficiary or representative.”
Regarding Count 5, the breach-of-fiduciary-duty claim, the district court stated
the representation, as described by Huang, remained vague: she did not identify the
speaker or the date of the representation; she did not identify the date on which she
allowed the other insurance to lapse; and she, “at most,” made the vague assertion
that someone at LINA had stated Liu would qualify for coverage if he submitted an
application. The court also concluded the representation was not actually untrue
because Liu did qualify for coverage at the time he submitted the application. The
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denial of benefits was based on his later failure to satisfy an express condition of the
application. The representation had accurately indicated an application was required,
and Huang did not allege the representation had indicated there was an absence of a
duty to comply with conditions in the application.
The district court held in the alternative that the representation was not material
and reliance on the representation was unreasonable. In reaching this conclusion, the
court described a representation as material “if there is ‘a substantial likelihood that
it would mislead a reasonable employee in the process of making an adequately
informed decision regarding . . . benefits to which she might be entitled.’” Kalda v.
Sioux Valley Physician Partners, Inc., 481 F.3d 639, 644 (8th Cir. 2007) (quoting
Krohn v. Huron Mem’l Hosp., 173 F.3d 542, 551 (6th Cir. 1999)). The district court
found that, because the representation as described by Huang still made clear that an
application was required, it would not have been reasonable to allow the other
insurance to lapse without reviewing the application to see its requirements. The
court concluded review of the application put Liu and Huang “on clear notice” that
Liu “must report any change in [his] health status that happens before the insurance
is effective.”
Finally, the court found the format of the application sufficiently clear to reject
Huang’s formatting-based fiduciary-duty argument as a matter of law. Huang appeals
the judgment as to Counts 2 and 5.
II.
We review the district court’s summary judgment ruling de novo, including the
question of “whether the district court applied the appropriate standard of review to
the administrator’s decision.” Wakkinen v. UNUM Life Ins. Co. of Am., 531 F.3d
575, 580 (8th Cir. 2008) (citation omitted).
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On appeal, Huang raises three arguments. First, she argues the district court
erred in deferring to LINA’s interpretation of the plan finding the application could
be relied upon to deny benefits. Second, she argues the district court erred in finding
no misrepresentation or omissions upon which to base a breach of fiduciary duty.
And third, she argues the district court erred in rejecting her claim that the font size
and overall appearance of the application was so infirm and misleading as to amount
to a breach of fiduciary duty.
A. Interpretation of the Policy and Missouri Law
The ERISA plan for Liu’s employer granted LINA “the authority, in its
discretion, to interpret the terms of the Plan documents, to decide questions of
eligibility for coverage or benefits under the Plan, and to make any related findings
of fact.” When an ERISA plan grants the plan administrator discretion to interpret
a plan, we generally review the interpretation and the resulting grant or denial of
benefits only for an abuse of discretion. See Johnson v. United of Omaha Life Ins.
Co., 775 F.3d 983, 986–87 (8th Cir. 2014). When the plan administrator is also the
claims-paying entity, we take the financial conflict of interest into consideration when
conducting our review. See Brake v. Hutchinson Tech. Inc. Grp. Disability Income
Ins. Plan, 774 F.3d 1193, 1196 (8th Cir. 2014). The simple fact a conflict exists,
however, does not eliminate the administrator’s discretion or change our review of
the administrator’s decision to de novo review. See id. (“[W]e take this inherent
financial conflict of interest into account in deciding whether an abuse of discretion
has occurred.”). Applying this deferential standard, we will not disturb the plan
administrator’s decision “if it is reasonable, that is, supported by substantial evidence
. . . [which] means ‘more than a scintilla but less than a preponderance.’” Darvell v.
Life Ins. Co. of N. Am., 597 F.3d 929, 934 (8th Cir. 2010) (citations omitted).
The reformed plan language as quoted above precludes the insurer from relying
on a “statement” in an “instrument” unless a copy of that instrument is provided to
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the insured. The plan also states, “In the event of death or legal incapacity, the
beneficiary or representative must receive the copy.” In light of this language and the
absence of any express plan language requiring that the copy be provided to the
insured prior to death, we conclude it was reasonable for LINA to find that delivery
of the application to Huang during the claims process satisfied the plan language.
Huang was Liu’s personal representative as well as the beneficiary under the policy.
Huang nevertheless argues that the plan language requiring LINA to furnish
a copy of the application to the representative or beneficiary is a duty in addition to,
rather than a substitute for, the duty to furnish a copy to the insured himself prior to
his death. To support this argument, Huang raises two related points. We find
neither sufficient to show that LINA’s interpretation is unreasonable.
First, Huang argues LINA interpreted only the original plan language, not the
reformed plan language, and as such, there is no underlying decision to which we
must defer. Had the district court’s reformation under Count 1 effected a material
change to the language at issue in the present dispute, we might agree. The change
in the plan language, however, merely replaced the word “claimant” with the word
“insured” as noted above. Using either the reformed or the original language, the
next sentence in the plan permitted delivery of the application to a “beneficiary or
representative.” We, therefore, do not view the reformation as material to LINA’s
interpretation of the particular language at issue in this appeal. This reformation of
the plan language does not permit us to amend our standard of review.
Second, Huang argues that LINA’s interpretation of the plan language fails to
comport with Missouri law, the purpose of the disclosure requirement, and caselaw
from other states interpreting similar requirements. Specifically, Huang notes that
ERISA does not preempt otherwise generally applicable state insurance law directed
towards insurance companies and regulating the business of insurance. See, e.g.,
United of Omaha v. Bus. Men’s Assurance Co. of Am., 104 F.3d 1034, 1040–41 (8th
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Cir. 1997) (discussing application of the “savings clause” of 29 U.S.C. §
1144(b)(2)(A), which limits the scope of ERISA preemption). And, Huang cites
Missouri Revised Statutes § 376.697(3) and Johnson v. Prudential Life Ins. Co., 519
S.W.2d 111 (Tex. 1975), for the proposition that delivery of an application to an
insured must occur prior to the insured’s death. According to Huang, the disclosure
requirement is intended to permit an insured to correct errors that might later defeat
coverage. Relying on Johnson, Huang asserts that LINA’s interpretation of the plan
unfairly permits insurers to catch unsuspecting policyholders by waiting silently, until
the policyholder has died, to comb through the application for statements that might
defeat coverage. See Johnson, 519 S.W.2d at 113 (“It has often been held that it is
the underlying legislative intention to require that the insured have the material terms
of the contract at hand during his lifetime in order that he might examine and correct
any misrepresentations which have been made the basis of the insurance coverage.”).
Looking first at section 376.697(3), we conclude the statute does not support
Huang’s argument. Rather, section 376.679(3) illustrates why LINA’s interpretation
of the plan is reasonable. The relevant language of section 376.697(3) provides, “no
statement made by any person insured shall be used in any contest unless a copy of
the instrument containing the statement is or has been furnished to such person or, in
the event of death or incapacity of the insured person, to his beneficiary or personal
representative.” (Emphasis added). Use of the word “or” plainly sets off delivery of
the instrument to the representative as a permissible alternative duty, not merely as
an additional duty. The plan language, in contrast, sets forth the duty to furnish the
instrument in two separate sentences without use of the conjunction “or.”
Accordingly, the plan language at least arguably is ambiguous as to whether the duty
to provide the instrument to the representative is an alternative duty or an additional
duty. Given this arguable ambiguity, LINA exercised its discretion and interpreted
the plan in a manner consistent with the statutory language.
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Further, it is important to note that LINA indicated in its initial denial letter that
Liu had completed the application completely and accurately. Liu did not receive his
cancer diagnosis until after he submitted his application, and LINA at no time alleged
that Liu’s application itself contained any coverage-defeating statements. Therefore,
Huang’s policy argument, which is based on the need for an applicant to receive and
review his own statements to ensure the absence of errors, lacks any real application
in this case. Huang seeks to exclude reliance on the application in an effort to prevent
LINA from relying upon the disclosure duty; she does not seek to prevent LINA from
relying on any statement Liu made in his application.
Because the express statutory language in Missouri plainly sets forth delivery
of the instrument to the beneficiary as an alternative, rather than an additional duty,
and because Huang’s public-policy/legislative-intent argument is contrary to the plain
language (and inapplicable to the present facts), we reject her arguments. While her
arguments are not uncompelling in the abstract, they cannot defeat the plain language
of the statute. At a minimum, they cannot establish that LINA abused its discretion
when interpreting the plan and denying benefits.
B. Breach of Fiduciary Duty—Representation
The district court held as a matter of law that the fiduciary-duty claim failed
even if an unknown representative from LINA had represented that Liu would qualify
for coverage upon submission of an application. The court found this purported
representation was not, in fact, untrue because Liu qualified for coverage after
submitting his application. The court also found in the alternative that the
representation was not material, or reliance upon the representation was unreasonable,
because the representation referenced the need for an application and said nothing
that might excuse compliance with conditions in the application.
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The Supreme Court in Cigna Corp. v. Amara, 131 S. Ct. 1866, 1881 (2011),
recognized that an equitable claim for surcharge may be permitted in some situations
based upon an ERISA fiduciary’s breach of a duty towards a covered employee. The
Court also noted that “detrimental reliance” is not always required to prove an
equitable claim alleging a breach of fiduciary duty. Id. Rather, “[t]o the extent any
such requirement arises, it is because the specific remedy being contemplated imposes
such a requirement.” Id. To explain when such proof would and would not be
required, the Court stated, “[A]ctual harm may sometimes consist of detrimental
reliance, but it might also come from the loss of a right protected by ERISA or its
trust-law antecedents.” Id.
Here, the harm alleged is of the type that requires reliance. Huang does not
allege harm in the form of a loss of an ERISA-protected right. Rather, she alleges
specifically that she and Liu relied upon the representation when deciding to let a
different policy lapse. To prove her claim, however, the reliance must be reasonable
and the statement by the fiduciary must be material. Kalda, 481 F.3d at 644 (“a
substantial likelihood that it would mislead a reasonable employee in the process of
making an adequately informed decision”) (emphasis added) (quoting Krohn, 173
F.3d at 551).
We agree with the district court that reliance on the representation in this case
was not reasonable. First, the questions in the application seeking health information
were routine questions to identify health concerns that might trigger further inquiry.
The ongoing duty to report changes in health post-application simply ensured the
answers to the questions in the application remained current until the time of policy
issuance. There is nothing unclear or unusual about these written requirements, and
these requirements are consistent with the language of the summary plan description
stating that “evidence of good health may be required to enroll.” Second, the
representation Huang relies upon is a vague oral representation from an unknown
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source uttered at an unidentified time that does not speak to the actual basis for
coverage denial.
Here, the clarity and pedestrian nature of the written requirements, coupled
with the uncertainty and vagueness surrounding the purported oral representation,
establish that the district court was correct to deem any reliance on the oral
representation unreasonable. Cf. Murphy v. FedEx Nat’l LTL, Inc., 618 F.3d 893,
900 (8th Cir. 2010) (“We have held that an estoppel-based FMLA claim cannot
succeed based on vague representations, the reason being that a reasonable person
would not be entitled to rely on those representations.”).4
C. Breach of Fiduciary Duty–Application Clarity/Format
Finally, we agree with the district court that, as a matter of law, the application
and summary plan description adequately and fairly presented to Liu and Huang the
requirements for supplemental insurance. The document was clear. As already noted,
it was a short, 2 ½ page document. The final half page contained scant text, but, as
quoted above, stated than an applicant “may need to provide more medical info,”
“may need to take medical tests and report the results,” and “must report any change
4
LINA also argues that, as a matter of law, an equitable claim based on oral
representations cannot succeed where the oral representations are contrary to express
plan or application language. We need not in this appeal identify the outer limits of
permissible equitable claims against plan administrators. Even if we were to
conclude as a general matter that an oral statement contrary to written plan or
application language might, in some circumstances, support equitable or fiduciary-
duty claims for relief (relief of a type different from plan benefits), the purported
representation in this case could not. See Amara, 131 S. Ct. at 1878–80 (not
addressing oral representations, but clarifying that “other appropriate equitable relief”
in 29 U.S.C. § 1132(a)(3) may be available for breach-of-fiduciary-duty claims);
Silva v. Metro. Life Ins. Co., 762 F.3d 711, 723–27 (8th Cir. 2014) (not addressing
oral representations, but applying Amara).
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in . . . health that happens before the insurance is effective.” This duty was not
buried in a lengthy document nor hidden in text smaller than the balance of document.
It was sandwiched conspicuously between a line where Liu was required to write his
name and social security number and a signature block where Liu and Huang signed
and dated the policy. In addition, the section at issue was offset with a clear header,
and the font size, while small, is readable even in a copied form provided to our court.
No reasonable jury could find a breach of fiduciary duty based on the appearance of
the application. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52 (1986)
(stating that the inquiry on summary judgment is “whether the evidence presents a
sufficient disagreement to require submission to a jury or whether it is so one-sided
that one party must prevail as a matter of law”).
III.
For the foregoing reasons, we affirm the judgment of the district court.
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