Canada Life Assuranc v. Lebowitz

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
CANADA LIFE ASSURANCE COMPANY,
Plaintiff-Appellant,
v.
ESTATE OF HARVEY M. LEBOWITZ;
No. 98-1967
EUNICE LEBOWITZ; MAX E.
BLUMENTHAL, Co-Personal
Representative,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Benson E. Legg, District Judge.
(CA-97-726-L)
Argued: May 5, 1999
Decided: July 20, 1999
Before ERVIN, WILKINS, and KING,
Circuit Judges.
_________________________________________________________________
Affirmed by published opinion. Judge Ervin wrote the opinion, in
which Judge Wilkins and Judge King joined.
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COUNSEL
ARGUED: Michael Sean DeBaugh, LORD & WHIP, P.A., Balti-
more, Maryland, for Appellant. Melvin Julius Sykes, Baltimore,
Maryland, for Appellees. ON BRIEF: J. Paul Mullen, LORD &
WHIP, P.A., Baltimore, Maryland, for Appellant. Sandra A. Strem-
pel, DINSE, KNAPP & MCANDREW, Burlington, Vermont, for
Appellees.
_________________________________________________________________
OPINION
ERVIN, Circuit Judge:
The question before this Court is whether a claimant who never
received written notice of his right of conversion as guaranteed by an
insurance policy governed by the Employee Retirement Income
Security Act (ERISA), 29 U.S.C.A. §§ 1001-1461 (West 1999), is
entitled to benefits. Canada Life Assurance Company ("Canada Life")
issued a group life insurance policy ("Policy") to the law firm of
Whiteford, Taylor, and Preston, L.L.P. ("WTP"). Harvey M.
Lebowitz ("Lebowitz"), a senior partner at WTP, left WTP for
another law firm, Blades and Rosenfeld, P.A. Lebowitz died without
exercising his right to convert the Policy into an individual policy.
Canada Life first filed this action in district court seeking a declara-
tion that at the time of his death Lebowitz was not covered by the Pol-
icy. Lebowitz's wife, Eunice Lebowitz, and his estate (the "Estate")
filed a counterclaim for benefits. Both sides filed motions for sum-
mary judgment. The district court granted summary judgment to the
Estate. Canada Life appealed.
Although Canada Life may not have been required by ERISA to
provide Lebowitz with written notice of his right of conversion, since
Canada Life promised in its Policy documents to provide such notice,
this Court must enforce that promise and ensure that Lebowitz
received adequate written notice. Because Canada Life failed to give
Lebowitz adequate written notice of his right of conversion, we affirm
the grant of summary judgment to the Estate.1
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1 In their submissions to this Court, both parties originally agreed that
the district court had abused its discretion in awarding attorneys' fees to
the Estate without explaining its reasoning as required by Quesinberry v.
Life Insur. Co. of North America, 987 F.2d 1017, 1029 (4th Cir. 1993).
Because the district court subsequently explained and reversed its award
of attorneys' fees in a court document dated February 19, 1999, and
because Canada Life conceded during oral argument that this action
mooted the attorneys' fees issue, we do not address it herein.
2
I.
Canada Life became WTP's group life insurance carrier on June 1,
1995. The life insurance policy was a Policyholder Administered
Group Life Benefit policy. WTP was designated the Policyhold-
er/Plan Sponsor, Plan Administrator, and the Agent for Service of
Legal Process on the Policyholder. As Plan Administrator, WTP had
"the exclusive and absolute discretion to interpret and administer the
[Policy] in accordance with its terms." Canada Life was designated
the Claims Administrator. On June 1, 1995, the Summary Plan
Description document (SPD) of the Policy was distributed to all part-
ners, associates, and employees of WTP.
Lebowitz became a senior partner at WTP on February 25, 1991.
Sometime in September 1995, Lebowitz decided to resign from WTP
at the end of September and take on a new position at another law
firm, Blades and Rosenfeld.
Lebowitz never billed more than 30 hours a week from June 1995,
when the Policy first became active, until his departure at the end of
September. Canada Life's Group Life Plan document (GLP) states
that the Policy insures "full-time employees who work at least 30
hours per week on a regular basis as employees." J.A. at 80.
Despite his billable hours, Lebowitz was still considered a full-time
senior partner by WTP. WTP's Managing Partner Ward B. Coe, III
("Coe") testified that Lebowitz was "treated and recognized as a full-
time partner" during the period of his partnership with WTP.
Although WTP "encouraged all partners to record all time spent on
firm-related matters whether billable or nonbillable," partners were
not required to record nonbillable but beneficial activities such as cli-
ent relations, management, marketing activities, and mentoring. As a
matter of firm practice, all partners worked full time for the firm. Coe
stated that "[a]s one of our most senior partners, Mr. Lebowitz's
recorded time was not necessarily indicative of the time he spent
working for the firm." Additionally, WTP paid Lebowitz's insurance
premiums for the months of June through September. On the basis of
this evidence, the district court concluded that"Lebowitz was a full-
time partner at WTP from February 25, 1991 until September 29,
1995" and "as a full-time partner he was understood to be covered
3
under the Policy." Canada Life Assurance Co. v. Lebowitz, No. CA-
97-726-L, at 2 (D. Md. June 2, 1998) (unpublished memorandum
opinion).
Some time in September 1995, before Lebowitz left WTP, WTP's
Human Resources Manager Catherine Xanthakos ("Xanthakos") con-
ducted an exit interview with him to discuss how his group health and
life insurance coverage would be affected by his departure. Xanthakos
testified she advised Lebowitz that he would not be covered as of
October 1, 1995, and that he had 30 days after that date to convert his
group life insurance into an individual policy. She also testified that
she gave Lebowitz a blank Canada Life "Group Conversion Applica-
tion" and told him that he needed to complete the application and pay
the necessary premium in order to exercise his life insurance right of
conversion. On the top of this Application under the heading "Impor-
tant," in 9-point type, were the following words,"Please remit the
completed form and required premium to the address shown above,
within 31 days from the date your coverage under the group policy
terminated." Xanthakos added that if Lebowitz needed any additional
information, he should call Canada Life's toll-free help number listed
at the top of the form.
Xanthakos does not recall when in September this meeting took
place. She kept no written record of her conversation with Lebowitz.
Although she did provide Lebowitz with a written letter documenting
his health insurance right of conversion as required by the Consoli-
dated Omnibus Budget Recovery Act ("COBRA"), 29 U.S.C.A.
§§ 1161, 1166 (West 1999), she did not provide him with a similar
letter documenting his life insurance right of conversion. Although
Lebowitz wrote Xanthakos a letter stating that he did not intend to
convert his health insurance, he never gave Xanthakos any indication
as to whether he intended to convert his life insurance.
Lebowitz left WTP on September 29, 1995 and shortly thereafter
began working at Blades and Rosenfeld, P.A. On November 4, 1995,
Lebowitz died. Although Blades and Rosenfeld provided Lebowitz
with a new life insurance policy, a "Record and Change Form"
included in the joint appendix indicates that his new life insurance
policy was not effective until December 1, 1995. See J.A. at 101.
4
Canada Life filed suit in district court on March 11, 1997, seeking
a declaration that it was under no obligation to pay the Estate. The
Estate filed a counterclaim on May 19, 1997, seeking payment of the
$500,000 principal, accrued interest, costs, and attorneys' fees. Both
sides filed motions for summary judgment. On March 3, 1998, the
district court granted summary judgment to the Estate. Canada Life
appealed.
II.
We review de novo the district court's decision to grant summary
judgment. In so doing, we must view the evidence in the light most
favorable to Canada Life. See Fed. R. Civ. P. 56; State of Maryland
Dept. of Natural Resources v. Kellum, 51 F.3d 1220, 1223 (4th Cir.
1995). Since this is an appeal of a final decision of a district court,
this Court has jurisdiction pursuant to 28 U.S.C.A.§ 1291 (West
1993).
It is undisputed that ERISA governs Canada Life's Plan. When
determining the award of benefits under any ERISA policy, this Court
must begin by examining the plain language of the policy itself. See
Lockhart v. United Mine Workers Assoc. 1974 Pension Trust, 5 F.3d
74, 78 (4th Cir. 1993). Ambiguous terms of an ERISA policy are con-
strued against the drafter in accordance with the reasonable expecta-
tions of the insured. See Jenkins v. Montgomery Indus., Inc., 77 F.3d
740, 743 (4th Cir. 1996).
This Court will enforce the plain language of an insurance policy
unless it is in violation of ERISA. If a policy fails to incorporate the
minimum protections required by ERISA, then this Court will require
that the policy be rewritten to incorporate such protections. Of course,
a policy may provide procedural protections above what is minimally
required by ERISA. In this case, this Court will still enforce the plain
language of policy provisions even if those provisions are not
required by ERISA.
Although it is unclear whether ERISA requires written notice of the
right of conversion,2 since the plain language of Canada Life's Policy
_________________________________________________________________
2 Although this Court has held that an ERISA policy must offer the
right of conversion, we have not addressed whether ERISA requires writ-
5
documents requires such written notice, Canada Life was required to
give Lebowitz written notice.
III.
It is undisputed that Lebowitz did not exercise his right of conver-
sion before he died. It is also undisputed that if Lebowitz did receive
written notice of his right of conversion as guaranteed by the Policy
then Canada Life is entitled to a declaratory judgment. According to
the plain language of the Policy documents, to recover benefits on
summary judgment the Estate must prove that there is no question of
material fact that Lebowitz (1) was covered by the Policy, (2) never
received adequate written notice, and (3) died within his extended
period of conversion.
A.
To be eligible for conversion, Lebowitz must have been covered by
the Canada Life Policy. WTP and Canada Life disagree on the issue
of coverage. WTP considered Lebowitz to be covered whereas Can-
ada Life did not. Since we conclude that WTP possessed final author-
ity to decide who was covered by the Policy, we accept WTP's
determination as controlling and conclude that there is no question of
material fact that Lebowitz was covered by the Policy.3
WTP considered Lebowitz to be covered under the Policy. Coe tes-
tified that WTP "treated and recognized [Lebowitz] as a full-time
partner."4 WTP also paid Lebowitz's insurance premiums during the
_________________________________________________________________
ten notice of such a right. See White v. Provident Life & Accident Insur.
Co., 114 F.3d 26, 28 (4th Cir. 1997) (the right of conversion of a life
insurance policy is a benefit required by ERISA).
3 Since we conclude that there is no question of material fact that
Lebowitz was covered, we do not address the Estate's argument raised
on cross-appeal that Lebowitz was actually employed by WTP until
October 31, 1995.
4 Since WTP is a limited liability partnership incorporated in Maryland,
it is subject to Maryland law. Search of WESTLAW, Corp-All Library
6
relevant period. As conceded by Canada Life, WTP was solely
responsible for determining each month (1) "which employees quali-
fied for life insurance coverage" and (2) the amount of premium to
be paid to Canada Life "based on this determination." Brief for
Appellant at 9. Thus, when WTP paid Canada Life insurance premi-
ums in Lebowitz's name it must have considered Lebowitz qualified
for life insurance coverage. We find the fact that WTP regularly paid
Lebowitz's insurance premiums as conclusive evidence that WTP
considered Lebowitz covered under the Policy.
Canada Life argued that Lebowitz was not covered because the
Policy required that an employee must regularly work at least 30
hours a week and the Estate failed to prove that Lebowitz had worked
that much. In support, Canada Life cited provisions from both the
SPD and the GLP requiring a full-time employee to work at least 30
hours a week on a regular basis to be eligible for coverage. See J.A.
at 49 (SPD), 80 (GLP).
Since WTP considered Lebowitz covered and Canada Life did not,
we must determine who had the final say concerning coverage. To
make such a determination, we must ascertain who was the ultimate
fiduciary with regard to coverage. Under ERISA, a fiduciary is "any-
one . . . who exercises discretionary control or authority over the poli-
cy's management, administration, or assets." Mertens v. Hewitt
Assoc., 508 U.S. 248, 251 (1993).
_________________________________________________________________
(May 19, 1999); Search of LEXIS, Incorp Library, Allsos File (May 19,
1999). Although WTP is a limited liability partnership, under Maryland
law it is still liable for the representations of its agent partners. See Md.
Code Ann. § 9-307 (Michie 1993 & Supp. 1994) (defining "limited lia-
bility partnership"). Coe was the Managing Partner of WTP. Lebowitz
was a partner at WTP. According to then-current Maryland law, Coe had
a duty to render "true and full information" concerning Lebowitz's part-
nership status to Lebowitz's Estate. See Md. Code Ann. § 9-403 (Michie
1993) (entitled "Duty of partners to render information"). Since Coe had
a duty to render this information, WTP is bound by Coe's admission. See
Md. Code Ann. § 9-303 (Michie 1993) (entitled"Partnership bound by
admission of partner").
7
It is clear from the plain language of the SPD and the surrounding
circumstances that WTP was the ultimate fiduciary with regard to
coverage. The SPD designated WTP as the "Plan Administrator" with
"the exclusive and absolute discretion to interpret and administer the
[Policy] in accordance with its terms." J.A. at 48. By the very nature
of the position, a plan administrator is a fiduciary with respect to her
own policy.5
Although Plan Administrator WTP delegated its "exclusive and
absolute discretion" over the handling and adjudication of claims to
Claims Administrator Canada Life,6 the surrounding circumstances
make clear that WTP retained "exclusive and absolute discretion"
over the determination of employee coverage and premium payments.
Sole responsibility for determining employee coverage and premium
payments under the Policy rested with WTP's Human Resources
Manager Catherine Xanthakos. Under this arrangement, Canada Life
did not independently verify WTP's monthly determinations of
employee eligibility and corresponding premiums. 7 Thus, WTP was
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5 See 29 U.S.C.A. § 1002(16)(A)(i) (West 1999) (defining "administra-
tor" as "the person specifically so designated by the terms of the instru-
ment under which the policy is operated"); Klosterman v. Western
General Management, Inc., 32 F.3d 1119, 1122 (7th Cir. 1994) (defining
"fiduciary"); 29 C.F.R. § 2509.75-8 (D-3) (1998) ("[A] plan administra-
tor . . . must, [by] the very nature of his position, have ``discretionary
responsibility in the administration' of the plan. .. .").
6 The SPD not only states that any administrative appeals will be
directed to Canada Life but also that "Canada Life will make the final
decision on the claim." J.A. at 56.
7 Canada Life conceded this arrangement in its brief:
The Canada Life policy was self-administered . This meant, in
part, that WTP, as the Policyholder, was responsible for deter-
mining each month's premium. [A.98]. Responsibility for this
task belonged to the firm's Human Resources Manager, Cather-
ine Xanthakos. [A.43-45]. Each month, Ms. Xanthakos
independently determined which employees were qualified to
receive Canada Life's insurance coverage, and then calculated
the total premium based on this determination. [A.45]. The pre-
miums were sent to Canada Life on a monthly basis.[A.45].
Brief of Appellant at 6 (emphasis added).
8
the ultimate fiduciary with regard to employee coverage. When WTP
paid Lebowitz's insurance premiums, therefore, it determined that he
was covered under the Policy. Since WTP's decision was controlling,
further proof of Lebowitz's coverage was unnecessary. There is no
question of material fact that Lebowitz was covered under the Policy.
B.
Even though Lebowitz was covered by the Policy, the Estate still
must prove that Lebowitz failed to receive adequate written notice of
his right of conversion. We hold that there is no question of material
fact that Canada Life failed to provide Lebowitz adequate written
notice about his right of conversion as required by the plain language
of the Policy.
Canada Life was required by the plain language of its own Policy
documents to provide Lebowitz with written notice of his right of
conversion. Under "Notice of Conversion Right," the GLP states:
[WTP] will be required to give each person at least 15 days
written notice prior to the date on which his right to convert
would expire. If the person has not received such notice the
person will have an additional 15 days from the date he is
notified in which to convert. The life insurance coverage
will not extend beyond the 31st day after the date the group
insurance terminates, and the right to convert will not extend
more than 60 days beyond the initial 31 day conversion
period.
J.A. at 89.
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The GLP further supports the conclusion that WTP retained final
authority concerning employee coverage and premium payment. The
GLP states under "Self-Administration" that"[a]ll premium payments
that would otherwise be calculated by us at our Head Office in accor-
dance with the terms of this policy will be calculated by you. . . ." J.A.
at 98 (emphasis added).
9
The GLP states that coverage ends "[o]n the last day of the month
in which the person's employment terminates." J.A. at 84. Since
Lebowitz's last day of work was September 29, 1995, his conversion
period began on October 1, 1995. If Lebowitz never received proper
written notice, his conversion period became extended to the maxi-
mum "60 days beyond the initial conversion period," which was
December 30, 1995. See Lebowitz, No. CA-97-726-L, at 6.
The issue is whether Lebowitz received proper written notice under
the Policy. Although the GLP requires written notice, it does not
define "written notice." Canada Life argued that Lebowitz received
proper notice two ways. First, Canada Life argued that since Xan-
thakos conducted an exit interview with Lebowitz, Canada Life com-
plied with the purpose of the notice provision in good faith. Second,
Canada Life argued that the SPD and conversion application consti-
tuted sufficient written notice.
We reject both of these arguments because we construe the plain
meaning of "written notice" to require something in writing above and
beyond what was previously received.
1.
Canada Life argued that it satisfied the purpose and spirit of the
written notice provision because Lebowitz, as an experienced attor-
ney, had enough information from his exit interview and the SPD to
make an informed decision concerning conversion.
The facts of this case do not necessarily support Canada Life's
inference. After Lebowitz received Xanthakos' letter notifying him of
his health insurance right of conversion, he wrote a letter to Xan-
thakos stating that he did not intend to convert his health insurance.
In contrast, Xanthakos never wrote him a letter notifying him of his
life insurance right of conversion and he never wrote anything con-
cerning his life insurance right of conversion.
More importantly, we must assume that without adequate written
notice, Lebowitz was not aware of his life insurance right of conver-
sion. A plan administrator must administer the provisions of a policy
10
"consistently." DeNobel v. Vitro Corp., 885 F.2d 1180, 1188 (4th Cir.
1989) (holding that a plan administrator that does not administer pol-
icy provisions consistently abuses its discretion under ERISA). Even
if Lebowitz indeed possessed enough information to make an
informed decision, notice must be given consistently and uniformly
to all participants regardless of their personal experience or individual
acumen.
2.
Canada Life also argued that the SPD and conversion application
constituted sufficient written notice.
The SPD cannot constitute written notice of the right of conversion
because the SPD is routinely given to every person when her cover-
age begins. Since the GLP already requires that every person receive
a copy of the SPD upon joining the Plan (see J.A. at 94), such a con-
struction would render the additional "written notice" requirement in
the GLP superfluous.
The conversion application cannot constitute written notice
because it does not provide sufficient information. We rule that ade-
quate written notice here must be in writing and explicitly include: (1)
when the group coverage will expire, (2) when the right of conversion
will expire, (3) the procedure to follow in order to convert the group
policy into an individual policy, and (4) the amount of premium
required to complete conversion. Since the conversion application did
not provide this minimal information, it did not constitute "written
notice" as required by the Policy.
Thus, we conclude that there is no question of material fact that
Lebowitz never received proper written notice, as required by the
plain meaning of the GLP, before his death.
C.
Since Lebowitz died during his extended conversion period, he
exercised his right of conversion according to the plain language of
the Policy. Lebowitz died on November 4, 1995. Since he never
11
received proper written notice, his conversion period was extended to
December 29, 1995.
The GLP states that
[i]f [a claimant] should die during the conversion period,
and prior to becoming insured under a policy again, an
amount of insurance equal to the maximum amount for
which [the claimant] was entitled to convert will be paid as
a death benefit.
J.A. at 88. Thus, since Lebowitz died during the conversion period,
and prior to becoming insured under another policy, his Estate is enti-
tled to the maximum amount of insurance for which he was entitled
to convert.
On appeal, Canada Life argued that while Lebowitz's conversion
option may have been extended to December 29, 1995, his coverage
ended on September 30, 1995. In support, Canada Life cited language
from the GLP stating that "[a]ll of a person's insurance under this pol-
icy will terminate . . . [o]n the last day of the month in which the per-
son's employment terminates." J.A. at 84.
We disagree for two reasons. First, such an interpretation would
render the aforementioned language concerning the death of a claim-
ant before the expiration of her conversion period superfluous. See
J.A. at 88. Second, Canada Life waived this argument because it
failed to raise it below. See Sandberg v. Virginia Bankshares, Inc.,
979 F.2d 332, 342 (4th Cir. 1992).
We conclude that since there is no question of material fact, the
Estate is entitled to receive payment of Lebowitz's maximum death
benefit of $500,000 and accrued interest.
IV.
For the reasons set forth above, the district court's grant of sum-
mary judgment in favor of the Estate is affirmed.
AFFIRMED
12