Sheila Hamilton v. Standard Insurance Company

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 07-1168
___________
Sheila Hamilton, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Western District of Missouri.
Standard Insurance Company, *
*
Appellee. *
___________
Submitted: October 19, 2007
Filed: November 15, 2007
___________
Before BYE, BOWMAN, and SMITH, Circuit Judges.
___________
BYE, Circuit Judge.
Based upon and relying on a suicide exclusion clause, Standard Insurance
Company reduced the amount of death benefits paid to Sheila Hamilton under a group
insurance policy providing coverage for her deceased husband. Hamilton sued
Standard in federal district court contending a Missouri statute barring suicide
defenses for insurance policies issued to citizens of the state of Missouri should
apply. The district court1 concluded the Missouri statute did not apply because the
policy was issued to a non-Missouri citizen in Idaho, and granted summary judgment
1
The Honorable Dean Whipple, United States District Judge for the Western
District of Missouri.
in favor of Standard. Hamilton v. Standard Ins. Co., 462 F. Supp. 2d 1033, 1036-38
(W.D. Mo. 2006). We affirm.
I
At all relevant times herein, Albertsons, Inc., provided its eligible employees
with life insurance benefits pursuant to an employee benefit plan governed by the
Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-
1461. As to benefits under the plan, Albertsons purchased a group life insurance
policy from Standard. The front page of the policy indicates it was issued in Idaho
(Albertsons is headquartered in Boise, Idaho) and lists "Albertsons Employees' Health
and Welfare Trust" as the policyholder.
Robert Hamilton, Sheila's husband, was an Albertsons employee covered by the
plan at the time of his death on August 1, 2004. Sheila was named as the beneficiary
of Robert's benefits. Robert had basic "Plan 1" life insurance benefits in an amount
equal to twice his annual earnings, or $77,000. Beginning June 1, 2003, Robert
elected additional "Plan 2" life insurance benefits in the amount of $20,000.
Albertsons paid the premiums for the basic life insurance benefits, while Robert paid
for the optional coverage by having the premiums deducted from his paycheck.
Robert's certificate of death indicates he died as the result of a self-inflicted
gunshot wound to the chest. The Standard policy contains a suicide exclusion clause
which provides:
If your death results from suicide or other intentionally self-inflicted
injury, while sane or insane, 1 and 2 below apply.
1. The Plan 1 Life Insurance Benefit payable will be limited to 50%
of the amount of your Plan 1 Life Insurance.
-2-
2. The Plan 2 Life Insurance Benefit payable will exclude the
amount of your Plan 2 Life Insurance which has not been
continuously in effect for at least 2 years on the date of your
death. In computing the 2-year period, we will include time you
were insured under the Prior Plan.2
Jt. App. 12-13.
After Robert's death, Sheila filed a claim with Standard for $77,000 in basic
Plan 1 benefits, and $20,000 in Plan 2 benefits. Pursuant to the policy's suicide
exclusion clause, Standard paid only $39,000 in basic benefits (half of $77,000
rounded to the next higher multiple of $1,000) and denied the claim for $20,000 in
Plan 2 benefits because Robert did not elect that coverage until June 1, 2003, less than
two years before his death on August 1, 2004. Standard also refunded the premiums
Robert had paid for the Plan 2 benefits between June 2003 and July 2004 (a total of
$27.30).
Sheila filed suit against Standard in federal district court. Standard moved for
summary judgment. Sheila opposed the motion arguing Mo. Rev. Stat. § 376.620should be incorporated into the terms of Standard's policy and should bar Standard
from reducing her benefits under the policy's suicide exclusion clause. At the relevant
time, § 376.620 provided:
In all suits upon policies of insurance on life hereafter issued by any
company doing business in this state, to a citizen of this state, it shall be
no defense that the insured committed suicide, unless it shall be shown
to the satisfaction of the court or jury trying the cause, that the insured
2
The policy's reference to "Prior Plan" referred to the fact that Albertsons had
used a different insurance company to provide life insurance benefits under its
employee benefit plan prior to June 1, 2003. Under the Prior Plan, Robert had
coverage for Plan 1 benefits, but did not have any coverage for Plan 2 benefits.
-3-
contemplated suicide at the time he made his application for the policy,
and any stipulation in the policy to the contrary shall be void.
Mo. Rev. Stat. § 376.620 (2002).3
Although § 376.620 by its terms only applies to "policies of insurance . . .
issued . . . to a citizen of this state" and the Standard group policy was issued to a non-
Missouri citizen in Idaho, Sheila argued the statute should still apply because Robert,
a Missouri citizen, was issued an individual certificate of insurance. In addition, with
respect to the optional Plan 2 benefits, Sheila argued the period of time Robert had
Plan 1 benefits under the Prior Plan should be counted towards, and satisfied, the two-
year vesting period. Finally, Sheila belatedly4 argued § 376.620 should apply to the
Plan 2 benefits, even if it did not apply to the Plan 1 benefits, because Robert paid the
premiums for the optional coverage himself, and therefore such coverage should be
construed as a separate policy of insurance affected by § 376.620.
3
Section 376.620 was amended effective August 28, 2007. The statute now
provides:
1. Any life insurance or certificate issued or delivered in this state, may
exclude or restrict liability of death as the result of suicide in the event
the insured, while sane or insane, dies as a result of suicide within one
year from the date of the issue of the policy or certificate. Any such
exclusion or restriction shall be clearly stated in the policy or certificate.
2. Any life insurance policy or certificate which contains any exclusion
or restriction under subsection 1 of this section shall also provide that in
the event the insured dies as a result of suicide within one year from the
date of issue of the policy that the insurer shall promptly refund all
premiums paid for coverage on such insured.
4
This argument was first raised in a motion for reconsideration Sheila filed after
the district court had already granted Standard's summary judgment motion.
-4-
The district court granted Standard's motion for summary judgment, concluding
§ 376.620 did not apply because the policy was a group policy issued to a non-
Missouri citizen. The district court further concluded Sheila's claim the statute should
apply because Robert Hamilton was a Missouri citizen, and the holder of a certificate
of insurance under the group policy, was foreclosed by our decision in Perkins v.
Philadelphia Life Insurance Co., 755 F.2d 632 (8th Cir. 1985). Finally, the district
court held Standard did not abuse the discretion it was afforded under ERISA when
it determined the two-year vesting period had not been satisfied for the Plan 2
benefits, and rejected Sheila's belated claim the Plan 2 benefits should be construed
as a separate policy of insurance to which § 376.620 applied. Sheila filed a timely
appeal.
II
We review the district court's grant of summary judgment de novo, applying the
same standards as the district court. Craig v. Pillsbury Non-Qualified Pension Plan,
458 F.3d 748, 752 (8th Cir. 2006). This case involves the interpretation of a Missouri
statute, an issue we review de novo. McIntyre v. Caspari, 35 F.3d 338, 343 (8th Cir.
1994). This case also involves the interpretation of an insurance policy governed by
ERISA. In such a case, the district court applies an abuse of discretion standard to the
plan's decision if the plan administrator has discretion to interpret the terms of the
plan, Barham v. Reliance Standard Life Ins. Co., 441 F.3d 581, 584 (8th Cir. 2006),
a de novo standard when the plan does not grant its administrator that discretion, id.,and a sliding scale approach somewhere between abuse of discretion and de novo
when the claimant demonstrates a serious procedural irregularity caused a serious
breach of the administrator's fiduciary duty. Tillery v. Hoffman Enclosures, Inc., 280
F.3d 1192, 1197 (8th Cir. 2002). "We have plenary review over the district court's
determination of the appropriate standard of review to apply to an ERISA plan's denial
of benefits." Barham, 441 F.3d at 584 (citing Tillery, 280 F.3d at 1196).
-5-
On appeal, Sheila contends the district court erred when it determined most of
her arguments regarding the proper interpretation and application of Mo. Rev. Stat.
§ 376.620 are foreclosed by our decision in Perkins. We disagree. The policy
involved here is a group insurance policy issued to a non-Missouri citizen in Idaho,
not an individual policy issued to a Missouri citizen. In Perkins, as in this case, a
certificate holder's residency differed from that of the group policy holder; we held it
was the group policyholder's residence which determined whether Mo. Rev. Stat. §
376.620 applied, not the residence of the individual certificate holder. See Perkins,
755 F.2d at 634-35 (indicating § 376.620's "issued . . . to" language refers to the
person to whom the policy is sold, which in the case of a group policy is the group
policyholder, not the holder of an individual certificate of insurance); see also Miller
v. Home Ins. Co., 605 S.W.2d 778, 780 (Mo. 1980) (applying choice-of-law
principles by looking to the state where a group policy was issued to the group
policyholder, not the state where the holder of an individual certificate of insurance
resided, in order to determine whether § 376.620 applied).
In support of her position, Hamilton relies upon two district court decisions,
Nelson v. Aetna Life Insurance Co., 359 F.Supp. 271 (W.D. Mo. 1973), and Moss v.
National Life and Accident Co., 385 F. Supp. 1291 (W.D. Mo. 1974). Those cases
involve the issue whether Missouri follows the lex loci delicti rule rather than the
most-significant-contacts test for choice-of-law purposes. This case does not turn
upon choice-of-law principles, however, but rather upon an issue of statutory
interpretation, i.e., determining what § 376.620 means when it says it only applies to
policies "issued . . . to a citizen of this state." That issue of statutory construction was
addressed in Perkins, which controls this case.
Furthermore, with respect to the argument that § 376.620 should apply not only
to policies of insurance issued to Missouri citizens, but also to certificates of insurance
issued to Missouri citizens under a group policy issued to a non-Missouri citizen, we
note the amended statute now specifically refers to both "life insurance polic[ies]" and
-6-
"certificate[s] issued or delivered in this state." See Mo. Rev. Stat. § 376.620 (1) &
(2) (effective August 28, 2007). Any reference to "certificates" is, however, notably
absent from the version of the statute before us, and we are not at liberty to disturb the
holding in Perkins. See United States v. Reynolds, 116 F.3d 328, 329 (8th Cir. 1997)
("One panel may not overrule another.").
With respect to Standard's denial of $20,000 in Plan 2 benefits, Sheila argues
in the alternative that Standard abused its discretion when it determined the suicide
exclusion clause's two-year vesting period had not been satisfied. Sheila focuses on
the clause's inclusion of "time . . . insured under the Prior Plan" in computing the two-
year period, and argues her husband's coverage for Plan 1 benefits under the Prior
Plan satisfied the two-year period, even though he did not elect any amount of Plan
2 benefits until June 1, 2003, less than two years before his death on August 1, 2004.
Another provision in the clause clearly provides, however, the Plan 2 benefits payable
"will exclude the amount of your Plan 2 Life Insurance which has not been
continuously in effect for at least 2 years on the date of your death." Jt. App. 12-13
(emphasis added).
Assuming arguendo Robert satisfied the two-year vesting period due to the time
he had Plan 1 benefits under the Prior Plan, the ensuing calculation of the amount of
Plan 2 benefits payable would still result in no benefits being payable, because any
amount of Plan 2 benefits not in effect for at least two years are excluded. The
amount of $20,000 would be excluded because it was not an amount in effect at least
two years prior to Robert's death.5
5
Because we would find this to be a correct interpretation of the suicide
exclusion clause even under a de novo standard of review, we decline to address any
of Sheila's arguments relating to her claim the district court erred in applying an
abuse-of-discretion standard, or her claim she should have been entitled to discovery
to uncover procedural irregularities or conflicts of interest.
-7-
Finally, we reject Sheila's contention that, because Robert himself paid the
premiums for the Plan 2 benefits, such coverage should be construed as an entirely
separate contract of insurance between Robert and Standard, rather than a part of the
group policy issued to Albertsons Employees' Health and Welfare Trust (with the
result being that § 376.620 would apply because this separate "policy" was issued to
a Missouri citizen). As the district court noted, Robert's Plan 2 coverage was not a
separately issued policy, but "merely a subset of coverage under the larger plan issued
to Albertsons in Idaho." Addendum at 66. As the group policyholder, Albertsons
could have unilaterally terminated the insuring agreement even if Robert had wished
to continue coverage for Plan 2 benefits. Thus, there is no support for Sheila's claim
regarding a separate contract of insurance flowing directly between Robert and
Standard. See White v. Prudential Ins. Co. of Am., 127 S.W.2d 98, 102 (Mo. Ct. App.
1939) ("It is held that a contract of group insurance is one between the insurer and the
employer for the benefit of the latter's employees, and that the certificate of insurance
which is issued to the individual employee is merely a statement to him that he is
insured under the group policy. It follows, therefore, that the rights of an employee or
his beneficiary are to be determined under the provisions of the contract between the
insurer and the employer.") (internal citations omitted).
III
We affirm the district court.
______________________________
-8-