Patricia Ellis v. Reliance Standard Life Ins Co.

Case: 14-50284 Document: 00512861911 Page: 1 Date Filed: 12/08/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-50284 United States Court of Appeals
Fifth Circuit
FILED
PATRICIA ELLIS, December 8, 2014
Lyle W. Cayce
Plaintiff - Appellant Clerk
v.
RELIANCE STANDARD LIFE INSURANCE COMPANY,
Defendant - Appellee
Appeal from the United States District Court
for the Western District of Texas
USDC Civil No. 1-13-CV-399
Before KING, DENNIS, and CLEMENT, Circuit Judges.
PER CURIAM:*
In this life insurance benefit dispute Patricia Ellis appeals the district
court’s grant of summary judgment in favor of her deceased husband’s life
insurance provider, Reliance Standard Life Insurance Company (“RSL”). The
district court held that RSL did not abuse its discretion as a plan administrator
when it calculated the death benefit paid to Mrs. Ellis following her husband’s
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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death using his 2009, as opposed to his 2010, income. For the following reasons,
we AFFIRM.
FACTS AND PROCEEDINGS
The late Randolph Ellis was employed by Taylor Morrison Inc., a
homebuilding company, as a commissioned real estate salesman starting in
2005. Taylor Morrison offered life insurance to its employees. The insurance
was underwritten and administered through RSL. Mr. Ellis began paying
premiums on an RSL life insurance policy (“the policy”) beginning on January
1, 2008. The policy is governed by the Employee Retirement Income Security
Act (“ERISA”), 29 U.S.C. § 1001 et seq.
A. The Policy
The policy pays its beneficiary “[t]wo (2) times earnings, rounded to the
next higher $1,000, subject to a maximum of $700,000.” “Earnings” is defined
under the policy as “the greater of $60,000 or the amount of wages [Taylor
Morrison] paid to the insured as reported on his/her W-2 form for the year just
before the date of loss.” If the W-2 for the year just before the date of loss is for
less than a full year, the amount is annualized.
The policy contains two provisions concerning the effects injury or
disability have on coverage. These two provisions are the “waiver of premium
in event of total disability” provision (“waiver provision”) and the “continuation
of individual insurance” provision (“continuation provision”). The waiver
provision states that RSL will extend insurance in one year increments if the
insured meets six criteria:
1) an Insured becomes totally disabled prior to age 60;
2) the Total Disability begins while he/she is insured;
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3) the Total Disability begins while this [p]olicy is in force;
4) the Total Disability lasts for at least 6 months;
5) the premium continues to be paid; and
6) [RSL receives] proof of Total Disability within one (1) year from the
date it began.
This extended life insurance coverage pays the beneficiary “the amount that
was in force at the time that Total Disability began.” That amount cannot
increase. Additionally, if an individual qualifies for the waiver provision,
neither the employer nor the insured is required to pay premiums and any
premiums paid following the disability are refunded.
The continuation provision allows the insured to extend insurance
coverage for a period of up to twelve months if the insured continues to pay the
premium and the reason for the insured’s ineligibility is illness or injury. The
continuation provision, therefore, is a gap-filling provision allowing coverage
to continue during illness or injury for up to twelve months, so long as
premiums are paid. The waiver provision, in contrast, addresses total (i.e.
permanent) disability, can be extended in one year increments, and does not
require payment of premiums. The policy contains no language suggesting that
either the waiver or continuation provision would take precedence in the event
an insured qualified for both.
The policy also contains a section addressing “Changes in Amount of
Insurance,” which covers what circumstances may change the size of the death
benefit. This provision requires that an individual must be “Actively at Work”
for the amount of the death benefit to change. “Actively at work” is defined as
“actually performing on a Full-time basis each and every duty pertaining to
his/her job in the place where and the manner in which the job is normally
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performed.” “Full-time” is defined as a minimum of 32 hours of work each
week.
B. Mrs. Ellis’s Claim for Death Benefits
Mr. Ellis began his policy with RSL in 2008. He was diagnosed with
carcinoma (a form of cancer) on August 22, 2010. He stopped working on
November 19, 2010. During the 2009 tax year Mr. Ellis earned $144,065.85.
During the 2010 tax year Mr. Ellis earned $334,478.99.
On November 19, 2010, Mr. Ellis filed a claim for disability benefits and
was subsequently paid such benefits under RSL’s short- and long-term
disability insurance coverage. He received disability payments from the date
of his diagnosis until his death on November 10, 2011.
Absent the application of the waiver or continuation provision, the policy
would have been automatically terminated when Mr. Ellis stopped working
full-time for Taylor Morrison on November 19, 2010. Taylor Morrison,
however, began paying Mr. Ellis’s premiums under the continuation provision
following his disability. Subsequently, on August 25, 2011, Mr. Ellis applied
for a waiver of premium in the event of total disability. At that time, he met
the six requirements necessary for the waiver provision to apply. RSL did not
officially confirm Mr. Ellis’s enrollment in waiver provision benefits until
August 2012, many months after his death.
Mr. Ellis died on November 10, 2011. Mrs. Ellis submitted a claim for
death benefits on January 4, 2012. Under the policy, RSL paid plaintiff
$325,600: two times Mr. Ellis’s 2009 income of $147,790.23, rounded up to the
nearest thousand, plus a ten percent supplementary payment. RSL calculated
the death benefit using Mr. Ellis’s 2009 W-2 income because it was the income
“in force” when total disability began (i.e., the income indicated on his W-2
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from the year prior to his 2010 disability). RSL also paid Mrs. Ellis an
additional $29,600 because the waiver provision provides for a supplementary
payment of ten percent of the death benefit if death is due to cancer, as it was
in Mr. Ellis’s case.
C. Mrs. Ellis’s Challenges to the Death Benefit Amount
Mrs. Ellis challenged the amount of the death benefit to RSL on July 24,
2012. She argued that that the “date of loss” for purposes of determining the
death benefit should have been the date of Mr. Ellis’s death, November 10,
2011. Following from this, the death benefit would be calculated using Mr.
Ellis’s 2010 W-2 income because that was the year prior to Mr. Ellis’s death.
This change would have resulted in a benefit of $677,000: an increase of over
$350,000.
On August 7, 2012, RSL declined to adjust the death benefit paid to Mrs.
Ellis. RSL noted that Mr. Ellis began receiving disability payments and
stopped working on November 19, 2010, and was later granted the Waiver of
Premium in Event of Total Disability benefit. Since the waiver provision states
that the amount of insurance will be the amount that was in force at the time
that total disability began, the policy required that November 19, 2010 be used
as the date of loss. Thus, RSL used the prior year’s 2009 W-2 income to
calculate the benefit owed. Also on August 7, 2012, RSL, for the first time,
confirmed in writing that Mr. Ellis “had qualified” for the waiver provision of
the policy starting on November 19, 2010. Mrs. Ellis internally appealed this
determination and RSL’s Quality Review Unit affirmed the determination of
the death benefit on December 19, 2012.
Mrs. Ellis then filed a complaint in the United States District Court for
the Western District of Texas on May 14, 2013 pursuant to 29 U.S.C.
§ 1132(a)(1)(B). Mrs. Ellis again argued that the “date of loss” for the policy
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should be the date of death, not the date of disability, and, therefore, the benefit
should have been calculated using Mr. Ellis’s 2010 W-2 income.
On February 24, 2014, the district court granted defendant’s motion for
summary judgment and denied plaintiff’s cross-motion for summary judgment.
The district court held that plaintiff’s argument that “date of loss” referred to
death and not to the beginning of total disability was inconsistent with the
terms of the policy. It also held that the defendant did not “abuse its discretion
or interpret the contract in an unreasonable fashion” when it concluded that
the waiver of premium application could be considered in force even if it had
not been formally approved before death. Mrs. Ellis appealed the district
court’s grant of summary judgment to this court on March 24, 2014.
Mrs. Ellis’s brief argues that “the Plan abused its discretion in
calculating life benefits based on 2009 W-2 earnings instead of 2010 W-2
earnings.” The brief reaches this conclusion by presenting two alternative
arguments: first, that the policy was continued for twelve months following Mr.
Ellis’s death under the continuation provision, preventing the application of
the waiver provision; and, second, that the waiver provision of the policy must
be explicitly approved by RSL before it can be considered to be in effect.
STANDARD OF REVIEW
“Standard summary judgment rules control in ERISA cases.” Cooper v.
Hewlett–Packard Co., 592 F.3d 645, 651 (5th Cir. 2009) (quoting Vercher v.
Alexander & Alexander Inc., 379 F.3d 222, 225 (5th Cir. 2004)). We review the
grant of summary judgment de novo, applying the same standard as the
district court. Pub. Citizen Inc. v. La. Att’y Disciplinary Bd., 632 F.3d 212, 217
(5th Cir. 2011). Summary judgment is appropriate “if the movant shows that
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there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” FED. R. CIV. P. 56(a).
When the language of a life insurance plan grants the plan administrator
discretionary authority to construe the terms of the plan or determine
eligibility for benefits, a plan’s eligibility determination must be upheld by a
court unless it is found to be an abuse of discretion. Metro. Life Ins. Co. v.
Glenn, 554 U.S. 105, 110–11 (2008) (citing Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101, 115 (1989)). “Regardless of the administrator’s ultimate
authority to determine benefit eligibility, however, factual determinations
made by the administrator during the course of a benefits review will be
rejected only upon the showing of an abuse of discretion.” Meditrust Fin. Servs.
Corp. v. Sterling Chems., Inc., 168 F.3d 211, 213 (5th Cir. 1999).
In the ERISA context, “[a]buse of discretion review is synonymous with
arbitrary and capricious review.” Cooper, 592 F.3d at 652 (5th Cir. 2009). This
standard requires only that “substantial evidence support a plan fiduciary’s
decisions.” Ellis v. Liberty Life Assur. Co. of Bos., 394 F.3d 262, 273 (5th Cir.
2004). Substantial evidence is “more than a scintilla, less than a
preponderance, and is such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.” Id. (quoting Deters v. Sec’y of
Health, Educ. & Welfare, 789 F.2d 1181, 1185 (5th Cir. 1986)). “A decision is
arbitrary only if made without a rational connection between the known facts
and the decision or between the found facts and the evidence.” Holland v. Int’l
Paper Co. Ret. Plan, 576 F.3d 240, 246 (5th Cir. 2009) (quoting Meditrust Fin.
Servs. Corp., 168 F.3d at 215). Moreover, this court’s “review of the
administrator’s decision need not be particularly complex or technical; it need
only assure that the administrator’s decision fall somewhere on a continuum
of reasonableness—even if on the low end.” Corry v. Liberty Life Assur. Co. of
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Bos., 499 F.3d 389, 398 (5th Cir. 2007) (quoting Vega v. Nat’l Life Ins. Servs.,
Inc., 188 F.3d 287, 297 (5th Cir. 1999) (en banc)). In evaluating a plan
administrator’s decision under this standard, we may apply a two-step analysis
to determine whether it abused its discretion, first determining whether the
administrator’s decision was legally sound and, if it is not, determining
whether the decision was an abuse of discretion. Wildbur v. ARCO Chem. Co.,
974 F.2d 631, 637 (5th Cir. 1992).
DISCUSSION
The policy clearly states that RSL “shall serve as the claims review
fiduciary . . . [and] has the discretionary authority to interpret the Plan and
the insurance policy and to determine eligibility for benefits.” As a
consequence, RSL is a plan administrator and the court examines its decision
for an abuse of discretion. High v. E-Systems Inc., 459 F.3d 573, 577 (5th Cir.
2006).
Again, the policy provides that the death benefit will be paid in the
amount of “[t]wo (2) times earnings, rounded to the next higher $1,000, subject
to a maximum of $700,000.” “Earnings” is defined as “the amount of wages
[Taylor Morrison] paid to the insured as reported on his/her W-2 form for the
year just before the date of loss.”
“Date of loss” is not defined in the general definition section of the policy.
Mrs. Ellis argues that the term is ambiguous in the policy and should be held
to mean “date of death.” That argument is unpersuasive. The language in the
waiver provision makes clear that the date when coverage under the waiver
provision begins is the day that the insured became “Total[ly] Disab[led],”
irrespective of the use of the term elsewhere in the contract.
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The waiver provision of the policy states that the “Amount of Insurance
continued will be the amount that was in force at the time that Total Disability
began,” and that this amount will not increase. It follows that the date of loss
must be the date of disability under this provision. If the date of loss could be
defined as the date of death then it would be possible—exactly as happened in
this case—for the amount of insurance to increase if the insured earned more
money in the year before death than in the year before disability, but this
increase is prohibited by the terms of the waiver provision.
Additionally, at various other points in the policy “date of loss” has
different meanings. For example, date of loss as used in the “accidental death
and dismemberment” section would include the date of the loss of a hand, foot,
or eye. Moreover, the interpretation of “date of loss” relative to the waiver
provision to mean “date of disability” is consistent with the “Changes in
Amount of Insurance” provision of the policy that requires an insured to be
“Actively at Work” for an increase in death benefit payments. If an insured
suffers total disability and cannot actively work, then his or her death penalty
premium cannot increase from the date when the total disability began.
It is uncontroverted that Mr. Ellis was not “Actively at Work,” as defined
in the policy, after November 19, 2010. He applied for and received disability
payments, which were initially paid under Mr. Ellis’s short-term disability
coverage and after ninety days (the maximum amount of time covered under
short-term disability) converted to long-term disability coverage. Both short
and long-term coverage is paid to those who cannot work full-time. Nine
months later, in August 2011, he applied under the terms of the waiver
provision that required him to be totally disabled.
Thus, RSL reasonably concluded that Mr. Ellis’s date of loss was
November 19, 2010. This meant that RSL had to look to W-2 income from the
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previous year, 2009, to calculate the death benefit. RSL, therefore, did not
abuse its discretion in determining that the death benefit should be paid based
on Mr. Ellis’s 2009 W-2. Consequently, the district court did not err in granting
RSL’s motion for summary judgment.
The arguments in Mrs. Ellis’s brief that the waiver provision was not in
force at the time of Mr. Ellis’s death because of the applicability of the
continuation provision or because it was posthumously confirmed in writing
are unpersuasive. Though these arguments present alternative
interpretations of the policy’s relevant provisions, they do not lead to the
conclusion that RSL abused its discretion.
Even assuming, arguendo, that Mrs. Ellis presented sufficient evidence
to establish that Mr. Ellis would have been covered by the continuation
provision for twelve months following his disability, nothing in the policy
suggests that he could not have begun coverage under the waiver provision
while he was still eligible for the continuation of coverage. Indeed, Mr. Ellis’s
decision to seek coverage under the waiver provision when he could maintain
coverage under the continuation provision would have been logical for three
reasons. First, the waiver provision, unlike the continuation provision, pays
the policy beneficiary an additional ten percent lump sum benefit if the insured
is diagnosed as totally disabled due to “Life Threatening Cancer,” which Mr.
Ellis was. Second, the continuation provision only extends coverage for a
maximum of twelve months, and at the time Mr. Ellis applied for the waiver
provision he was only three months from the November 2011 expiration of the
continuation provision. Third, even though Taylor Morrison was paying Mr.
Ellis’s premiums, the waiver provision refunds all premiums due or paid after
total disability. It is sensible that Mr. Ellis would seek a ten percent increase
in coverage, assurance that there would be no gap in coverage between the
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continuation provision and the waiver provision, and a refund of premium
payments to his employer—all of which cost him nothing in additional
expense—even if the continuation provision could have been used to maintain
coverage for another three months. Mrs. Ellis also argues that the waiver
provision did not apply to Mr. Ellis because RSL failed to provide explicit notice
that Mr. Ellis was approved for benefits under the waiver provision. Given the
language of the waiver provision, however, RSL did not abuse its discretion in
concluding that the waiver provision applied to Mr. Ellis as of his application
for waiver provision coverage.
The waiver provision sets forth six requirements. Mr. Ellis met all of
them. Notice of approval by RSL is not an enumerated requirement. Moreover,
the policy explicitly states “[w]e will extend the Amount of Insurance” if the six
criteria are met. Approval, therefore, could reasonably be found to follow
automatically if the six conditions are met.
The language cited by Mrs. Ellis, which follows the text setting out the
six requirements, stating “[a]fter proof of Total Disability is approved by us,
neither you or the insured is required to pay premiums” does not render RSL’s
decision an abuse of discretion. This language is best understood to notify the
insured that, after approval by RSL, premiums are not required and will be
refunded. When compared with the definite statement “[w]e will extend
[coverage] if . . .” and six very discrete requirements, the language cited by Mrs.
Ellis does not clearly create a seventh requirement that must be satisfied for
the waiver provision to take effect.
In fact, this language may suggest the opposite conclusion from Mrs.
Ellis’s argument. An employer or insured does not pay premiums once an
insured qualifies for the waiver provision. The policy also provides that it will
return all premiums paid from the start of disability once total disability is
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approved. Thus, an individual is considered covered by the waiver provision
from the date of total disability, not from the date of formal approval. Were
this not the case, an employer or insured would only receive a refund of
premiums from the date of approval of the waiver provision, not the date of
disability. Again, RSL reasonably determined that the waiver provision
applied to Mr. Ellis once the six criteria were satisfied, not upon written
approval.
Lastly, if the continuation provision was in force at the time of Mr. Ellis’s
death instead of the waiver provision (which is not clearly demonstrated by the
record), the policy’s active work requirement would prohibit an increase in the
death benefit. Benefits may only be paid by calculating a beneficiary’s income
from before the last day she/he “actually perform[ed] on a Full-time basis each
and every duty pertaining to his/her job in the place where and the manner in
which the job is normally performed.” Mr. Ellis received disability benefits—
which are paid when one cannot work—between the time his disability began
and his death. The record offers no persuasive evidence that Mr. Ellis worked
“Full-time” after November 19, 2010. 1
If, as discussed above, Mr. Ellis did not actively work “Full-time”
following his disability, then the amount of the death benefit could not have
increased irrespective of whether the continuation or waiver provision applied.
It is true, as RSL states in its August 7, 2012, letter, that RSL could have
calculated the death benefit using Mr. Ellis’s 2010 earnings “if he had ceased
to be Totally Disabled and returned to Active, Full-time work in 2011.” But,
1Mrs. Ellis offers some evidence that Mr. Ellis received income after his disability and
that he sent e-mails regarding work after his disability. This evidence is not sufficient to
create a reasonable inference that Mr. Ellis returned to work “Full-time” as defined by the
policy.
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since the record does not support that Mr. Ellis returned to work, even if we
found that the policy administrator abused its discretion in finding that the
waiver provision applied to Mr. Ellis (which we explicitly do not), Mrs. Ellis’s
appeal would not result in an increase to her death benefit.
RSL did not abuse its discretion by finding that Mr. Ellis was covered by
the waiver provision on the day he applied for it in August 2011. Based on this
finding RSL reasonably concluded that the “date of loss” for the purpose of
calculating the death benefit was the date of Mr. Ellis’s disability, November
19, 2010. Since the policy requires calculation of the death benefit using the
W-2 from the year prior to the date of loss, RSL also did not abuse its discretion
when it calculated Mrs. Ellis’s death benefit using Mr. Ellis’s 2009 W-2 income.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s grant of
summary judgment in favor of RSL.
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