Jill Steigleman v. Symetra Life Insurance Company ( 2022 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAR 29 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JILL M. STEIGLEMAN, No. 21-15613
Plaintiff-Appellant, D.C. No. 3:19-cv-08060-ROS
v.
MEMORANDUM*
SYMETRA LIFE INSURANCE
COMPANY, an Iowa corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Arizona
Roslyn O. Silver, District Judge, Presiding
Argued and Submitted March 11, 2022
Phoenix, Arizona
Before: HAWKINS, PAEZ, and WATFORD, Circuit Judges.
Jill Steigleman appeals from the district court’s order granting summary
judgment to Symetra Life Insurance Company on her claim for bad faith under
Arizona law. We reverse and remand.
1. The district court erred in holding that Steigleman’s long-term disability
policy was part of an “employee welfare benefit plan” under the Employee
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
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Retirement Income Security Act (ERISA). See 29 U.S.C. § 1002(1). Steigleman’s
employees gained access to group-type disability insurance coverage through
Steigleman’s membership in The Agents Association (TAA), and Steigleman’s
insurance agency paid the employees’ premiums. While these factors are evidence
that Steigleman may have “established or maintained” an ERISA plan, they are not
sufficient. This court has noted that the “bare purchase of insurance . . . does not
by itself constitute an ERISA plan.” Kanne v. Conn. Gen. Life Ins. Co., 867 F.2d
489, 492 (9th Cir. 1988). And while an employer can establish an ERISA plan
even if she “does no more than arrange for a group-type insurance program,” Crull
v. GEM Ins. Co., 58 F.3d 1386, 1389 (9th Cir. 1995) (internal quotation marks
omitted), the record does not show that Steigleman’s agency specifically
contracted with TAA to extend disability coverage to her employees or otherwise
“arranged for” that coverage. Unlike the employer in Crull, Steigleman neither
agreed to act as the plan administrator nor undertook the administrative tasks
associated with the maintenance of an ERISA plan. Id. at 1390.
Symetra contends that Steigleman imposed stricter eligibility criteria for her
employees than TAA did, but the record does not support summary judgment on
this issue. Steigleman testified at her deposition that her employees were eligible
for disability coverage if they had been employed for six months and worked at
least 32 hours per week. TAA required that staff be employed for six months and
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work only 20 hours per week. Despite this apparent discrepancy, there is a
genuine issue of material fact as to whether Steigleman imposed her own separate
requirements or merely described TAA’s eligibility rules incorrectly at her
deposition.1
2. Symetra argues alternatively that TAA qualifies as an “employee
organization” capable of establishing or maintaining an ERISA plan. An employee
organization must exist “for the purpose, in whole or in part, of dealing with
employers concerning an employee benefit plan, or other matters incidental to
employment relationships.” 29 U.S.C. § 1002(4). TAA’s bylaws state that one of
its purposes is to advise Farm Bureau Financial Services (FBFS), but only “when
requested” by FBFS management. TAA does not engage with FBFS on typical
issues incidental to employment relationships, such as salary negotiation, labor
conditions, or collective bargaining. See Sarraf v. Standard Ins. Co., 102 F.3d 991,
993 (9th Cir. 1996). The only concrete advocacy issue identified by Symetra is a
Matching Savings Program, yet TAA’s executive director did not know what the
program was, and an FBFS officer testified that the program was “kind of off
limits usually” in TAA’s discussions with FBFS. We cannot conclude from this
record that TAA has any meaningful engagement with FBFS regarding an
1
Because we need not address whether Steigleman and her staff were covered by
different plans, Steigleman’s request for judicial notice (Dkt. 11) is DENIED as
moot.
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employee benefit plan or other matters incidental to employment relationships.
Symetra’s alternative argument for finding that an ERISA plan was established
therefore fails.2
3. The district court erred in concluding that Symetra’s conduct was
reasonable as a matter of law. Although Symetra ultimately paid Steigleman’s
claim in full, it may nonetheless be liable for bad faith if it failed to “immediately
conduct an adequate investigation, act reasonably in evaluating the claim, and act
promptly in paying a legitimate claim.” Zilisch v. State Farm Mut. Auto. Ins. Co.,
995 P.2d 276, 280 (Ariz. 2000) (en banc).
Symetra’s initial denial on October 26, 2017, was consistent with Dr.
Ehteshami’s note indicating that Steigleman could return to work on August 30,
2017. However, Symetra was aware that this note reflected only Dr. Ehteshami’s
June 14 post-operative examination, and Steigleman had informed Symetra of an
October 11 examination at which Dr. Ehteshami recommended that she not return
to work before January 2018. Symetra also informed Steigleman in February 2018
2
At oral argument and in a subsequent Rule 28(j) letter, Symetra suggested that
TAA also qualifies under ERISA’s definition of “employer” because TAA was
acting “indirectly in the interest of an employer,” i.e., Steigleman, when it
purportedly established or maintained an ERISA plan. 29 U.S.C. § 1002(5).
Symetra did not raise this argument in its Answering Brief or in its summary
judgment briefing before the district court. We therefore will not address
Symetra’s new theory, see Hooks v. Kitsap Tenant Support Servs., Inc., 816 F.3d
550, 564 n.14 (9th Cir. 2016), and the district court may decide whether it would
be appropriate to consider the argument on remand.
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that it was limiting her claim to 12 months of benefits even though Symetra’s own
records from October 2017 reflect a radiculopathy diagnosis that made this
limitation inapplicable. Even after Symetra determined that the limitation did not
apply in August 2018, it waited four months before informing Steigleman. When
Symetra finally notified Steigleman that it was withdrawing the limitation, it
suspended further benefits based on information Symetra received from its broker
that Steigleman had returned to work. Internal emails show that Symetra was
aware Steigleman would likely be entitled to benefits even if she did return to work
in some capacity, but it suspended her benefits anyway.
Symetra argues that it had reasonable grounds for each of these actions. But
it is not enough to show that there are innocent explanations for the insurer’s
decisions. Symetra must establish that no reasonable jury could find that it acted
unreasonably and was aware that its conduct was unreasonable. Zilisch, 995 P.2d
at 280. Symetra has not met its burden here.
4. Steigleman has made out a prima facie case for punitive damages. The
record contains extensive evidence of improper financial motivations in Symetra’s
investigation of Steigleman’s claim. Symetra was also aware of Steigleman’s
precarious financial situation when it took many of the allegedly unreasonable
actions. A reasonable jury could therefore conclude that Symetra’s conduct was so
“oppressive, outrageous or intolerable” that punitive damages are warranted in this
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case. See Hawkins v. Allstate Ins. Co., 733 P.2d 1073, 1080 (Ariz. 1987).
REVERSED and REMANDED.