Boyles v. Am. Heritage Life Ins. Co., Case No. 3:15–cv–274

226 F.Supp.3d 497

Ronald P. BOYLES, Jr., Plaintiff,

v.AMERICAN HERITAGE LIFE INSURANCE COMPANY d/b/a Allstate Benefits a/k/a Allstate Life Insurance Company of New York, Jeffrey Azzato, St. Marys Insurance Agency, Inc., and Unum Life Insurance Company of America a/k/a Unum Group, Defendants.

Case No. 3:15–cv–274

United States District Court, W.D. Pennsylvania.

Filed December 28, 2016

Michael B. Cohen, Altoona, PA, for Plaintiff.

Andrew G. Jubinsky, Figari + Davenport, LLP, Dallas, TX, Robert J. Grimm, Swartz Campbell, William James Rogers, Thomson, Rhodes & Cowie, Pittsburgh, PA, Matthew W. McCullough, MacDonald, Illig, Jones & Britton, Erie, PA, for Defendants.

MEMORANDUM OPINION

KIM R. GIBSON, UNITED STATES DISTRICT JUDGE

I. Introduction

This case arises under the Employee Retirement Income Security Act of 1974 (ERISA) from the denial of disability benefits to Plaintiff Robert P. Boyles, Jr. ("Boyles") by American Heritage Life Insurance Co. ("AHL") and Unum Life Insurance Company of America ("Unum"). Pending before the Court are AMERICAN HERITAGE LIFE INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT (ECF No. 60) and UNUM'S MOTION FOR SUMMARY JUDGMENT ON THE ADMINISTRATIVE RECORD (ECF No. 64). The parties have developed their respective positions as to the Concise Statements of Material Facts and submitted numerous exhibits (including the administrative records of AHL and Unum, filed under seal) (ECF Nos. 61, 66–70, 74, 75, 77) and have thoroughly briefed the legal issues (ECF Nos. 62, 65, 71, 72, 73, 76, 80). The motions are now ripe for disposition. For the reasons that follow, the motions are GRANTED .

II. Jurisdiction and Venue

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331, as Plaintiff's claims arise under federal law. Venue is proper in this judicial district pursuant to 29 U.S.C. § 1132(e)(2).

III. Background

A. Procedural Background

Plaintiff initiated the instant action by filing a twenty-count complaint (the Original Complaint) in the Court of Common Pleas of Blair County, Pennsylvania, on September 29, 2015. (See ECF No. 1–2.) Defendants AHL, Unum, Azzato, and St. Marys removed the action to this Court on October 22, 2015. (See ECF No. 1.) Defendants then filed several motions related to Plaintiff's Original Complaint. These motions were denied as moot because on November 24, 2014, Plaintiff filed a twelve-count First Amended Complaint ("FAC"). (See ECF No. 26). Defendants then filed motions to dismiss portions of the FAC. On July 25, 2016, the Court issued a Memorandum Opinion and Order which: (1) granted the partial motions to dismiss filed by AHL and Unum and dismissed counts II, IV, VI and VII of the FAC; and (2) granted in part and denied in part the motions filed by Defendants Azzato and St. Marys, and dismissed counts IX and X of the FAC.

Plaintiff, AHL, and Unum agreed that no discovery was necessary between them and the case should be decided on the respective administrative records.¹ Pursuant to the Court's Initial Scheduling Order (ECF No. 43), AHL and Unum filed summary judgment motions as to the ERISA claims and Plaintiff has filed his responses thereto.

B. Factual Background

At this stage of the case, the Court must view any disputed facts in the light most favorable to Boyles, the non-moving party. However, the facts in this case are largely undisputed. The following recitation is based primarily on Plaintiff's briefs (ECF Nos. 72, 73).

i. Work History

Plaintiff Ronald Boyles was employed by St. Marys as a commercial insurance producer from 2006—when St. Marys acquired Boyles' family-operated insurance company, Boyles Insurance Agency—until his employment was terminated in November 2013. By virtue of that employment, Boyles participated in an employee welfare benefit plan sponsored and administered by St. Marys. From January 1, 2010 through July 31, 2013, the plan was insured by a policy underwritten by AHL. Effective August 1, 2013, St. Marys switched coverage to a policy underwritten by Unum.²

Boyles had a history of back problems, which required multiple surgeries. On September 25, 2012, Boyles had surgery to reposition a medical device that was implanted in his back. In December 2012, Boyles expressed interest in filing a disability claim to Azzato, the President of St. Marys. Azzato informed Boyles that, due to Boyles' long-time commitment to the agency and his work ethic, St. Marys would continue to pay Boyles his full salary while he recovered. Azzato stated that he considered Boyles to be on a type of "full-paid medical leave" from December 2012 through November 22, 2013, when his employment terminated.

From October 2012 through May 2013, Boyles would come into the office or work from home, as his condition allowed. On January 10, 2013, Boyles tripped over an electrical cord in his office and injured his left shoulder and wrist, and sustained a concussion. On May 10, 2013, Boyles had shoulder surgery. After that time, Boyles only worked a few hours per week. St. Marys did not use time clocks. Azzato estimated that Boyles' actual hours worked were approximately 10–20 hours per week from May to November, 2013. Azzato terminated Boyles' employment on November 22, 2013.

ii. Claims History

On December 19, 2013, Boyles submitted a disability claim to AHL. It was denied initially by AHL for the stated reason that his condition resulted from the January 10 workplace accident. Boyles filed three appeals, all of which were rejected by AHL. The overarching basis for the denials was that Boyles continued to receive his full salary, and thus did not satisfy the definition of "disability" under the terms of the AHL policy. AHL's processing of the claim will be discussed in more detail below.

On July 10, 2014, Boyles submitted a disability claim to Unum. On December 26, 2014, Unum denied the claim for the stated reason that Boyles was not in "active employment" on August 1, 2013 (the date the Unum policy became effective), and thus, was not covered under the policy. The denial letter from Unum also referenced the policy's "continuity of coverage" provision and determined that Boyles was not covered under that provision, either. Boyles filed an appeal, which was rejected. This litigation followed.

IV. Applicable Law

A grant of summary judgment is appropriate when the moving party establishes that "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). A genuine dispute of material fact is one that could affect the outcome of the litigation. Mahoney v. McDonnell , 616 Fed.Appx. 500, 504 (3d Cir. 2015) (citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). However, " ‘[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.’ " Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). As noted above, the parties agree that there are no material disputes of fact and the pending motions should be resolved based on the administrative records.

"[A] denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch , 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). In this case, the parties agree that AHL and Unum, as the plan administrators, each possessed the discretion to determine eligibility for benefits. Therefore, Defendants' decisions to deny Boyles disability payments violates ERISA only if the decisions were arbitrary and capricious. Smathers v. Multi–Tool, Inc. , 298 F.3d 191, 194 (3d Cir. 2002). The burden is therefore on Boyles to show that the denials of benefits were " ‘without reason, unsupported by substantial evidence or erroneous as a matter of law.’ " Pinto v. Reliance Std. Life Ins. Co. , 214 F.3d 377, 393 (3d Cir. 2000) (quoting Abnathya v. Hoffmann–LaRoche, Inc. , 2 F.3d 40, 45 (3d Cir. 1993) ). "[T]he court must defer to the administrator of an employee benefit plan unless the administrator's decision is clearly not supported by the evidence in the record or the administrator has failed to comply with the procedures required by the plan." Abnathya , 2 F.3d at 41.

However, when an insurance company both funds a benefits plan and possesses the discretion to determine eligibility under the terms of that plan, as is the case here, courts must take into account the inherent structural conflict of interest. In Metropolitan Life Ins. Co. v. Glenn , 554 U.S. 105, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008), the Supreme Court clarified that the appropriate standard of review remains abuse of discretion, but the district court should weigh the conflict of interest as one factor in determining whether there was an abuse of discretion. Id. at 118–19, 128 S.Ct. 2343. The Court recognizes and weighs that here both AHL and Unum have a conflict of interest.

V. Discussion

Boyles is a sympathetic Plaintiff. He was obviously a valued employee at St. Marys. He had a reputation for long-term commitment to the agency and a strong work ethic. To his credit, he attempted to battle through his medical problems. Azzato, apparently in recognition of Boyles' valuable contributions, attempted to accommodate Boyles by paying him his full salary even though Boyles was unable to work a full-time schedule. The switch in disability-insurance vendors from AHL to Unum appears to have been unrelated to Boyles. Unfortunately, these events combined to create a unique set of circumstances in which Boyles was denied coverage by both insurers, even though he clearly suffered a disability that prevented him from continuing to work.

In McKay v. Reliance Standard Life Ins. Co. , 428 Fed.Appx. 537 (6th Cir. 2011),...