Burclaw v. Standard Ins. Co., 18-cv-855-wmc

SARAMARIE LATONA BURCLAW, Plaintiff, v. STANDARD INSURANCE COMPANY, Defendant.

18-cv-855-wmc

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN

January 24, 2020

OPINION AND ORDER

At bottom, this lawsuit concerns plaintiff Saramarie Latona Burclaw's claim that defendant Standard Insurance Company ("Standard") wrongfully denied her an additional life insurance benefit of $100,000 following the death of her husband, but largely turns on whether the insurance policy at issue is exclusively governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq. Plaintiff initially brought claims for common law breach of contract and bad faith in Wisconsin state court. Defendant subsequently removed the lawsuit to federal court, asserting ERISA preemption as an affirmative defense. Plaintiff responded by filing a combined motion for declaratory relief establishing her right to proceed on her state law claims or, alternatively, to amend her complaint to seek relief under ERISA. (Dkt. #7.) Defendant then filed a motion for summary judgment. (Dkt. #12.) For the reasons discussed below, the court will deny plaintiff's motion for declaratory relief, grant in part and deny in part defendant's motion for summary judgment, and grant in part and deny in part plaintiff's motion to amend her complaint.

UNDISPUTED FACTS¹

Plaintiff Saramarie Latona Burclaw is the widow of David Burclaw, who had been an employee of West Bend Mutual Insurance. West Bend contracted with defendant Standard to provide certain insurance benefits for its employees. On February 21, 2013, Mr. Burclaw enrolled in Standard's group life insurance policy through West Bend's employee plan, including both Basic Term Life, paid with premiums by West Bend, and Additional Term Life, with premiums paid by Burclaw.

Due to health issues, Mr. Burclaw became disabled in April of 2015, and Standard sent a letter on October 19, 2015, advising that he had been approved for a waiver of life insurance premium payments due to his disability. The letter also included the following statement regarding Mr. Burclaw's benefits:

How much Life Insurance do I have?

The following amount of Group Life Insurance was in force on the date you became Disabled:

$204,000.00 Basic Term Life Insurance

$250,000.00 Additional Term Life Insurance

$10,000.00 Dependent Child Life Insurance

(Blocher Decl., Ex. B (dkt. #11-2) 1.) Standard sent a similar letter to West Bend, in which it also stated that Mr. Burclaw's additional life insurance coverage amount was $250,000. (Blocher Decl., Ex. A (dkt. #11-1) 1.)

On April 9, 2017, Mr. Burclaw passed away, and plaintiff subsequently contacted West Bend to claim the life insurance benefits as his widow. West Bend in turn submitteda claim form to Standard, indicating that Mr. Burclaw had $204,000 in basic life benefits, but only $150,000 in additional life benefits. On May 1, 2017, Chandra Topp, Senior HR Generalist at West Bend, contacted Standard asking: "Any further information on the coverage amount? I would like to get back to Dave's wife today. I believe it should be $204 basic life and $150K VLI [voluntary life insurance]. Please confirm." (Jones Decl., Ex. A (dkt. #22-1) 132.) A representative from Standard responded that, according to the ReportsOnline system, Mr. Burclaw was approved for $250,000 in additional life insurance. Topp responded, asking "Are you sure about the 250K? I looked back and I only ever see $150K for him in VLI." (Id.)

On June 12, 2017, Standard paid out the undisputed portions of the benefits to Ms. Burclaw: the $204,000 in basic life and $150,000 in additional life insurance benefits. On June 13, 2017, Topp emailed to Standard copies of Mr. Burclaw's payroll records for the September 6, 2014, through October 17, 2015, pay periods. In her email, Topp wrote: "Attached are the pay statements for Dave Burclaw which align with the $150k for VLI." (Id. at 80.)

On July 21, 2017, Standard notified Ms. Burclaw that it had completed its review of Mr. Burclaw's life insurance benefits and that:

Based on our review, we have determined that Mr. Burclaw was enrolled for $204,000, of Basic Life and $150,000, of Additional Life Insurance benefits. . . .

Our review has determined that on February 21, 2013, Mr. Burclaw enrolled for $250,000 worth of Additional Life Insurance with an effective date of March 20, 2013. However, on February 22, 2013, Mr. Burclaw voluntarily reduced the amount of his Additional Life Insurance to $150,000, also to become effective on March 20, 2013. The $250,000 ofAdditional Life Insurance never became effective and Mr. Burclaw was charged [a] premium based on $150,000, worth of Additional Life Insurance coverage. . . .

Our Waiver of Premium approval letter dated October 19, 2015, indicating the higher amount was an inadvertent error. We sincerely apologize for the benefit misstatement.

(Id. at 75.)

After Standard notified Ms. Burclaw of its decision to pay out $150,000, as opposed to $250,000, in additional life insurance coverage, she retained counsel and requested that Standard reconsider its decision. When it did not, she then filed suit in state court, alleging breach of contract and bad faith under Wisconsin common law. After removing the case to this court, Standard asserted that plaintiff's state law claims are preempted by federal law because the plan at issue is governed by ERISA.² Plaintiff then filed a motion asking the court to determine whether ERISA preempts her state law claims and, if so, declare that de novo review of Standard's coverage decision is appropriate under the plan. Plaintiff also seeks leave to amend her complaint to add state law claims for equitable relief -- namely, estoppel and reformation -- and also to include claims under ERISA, should it apply. In its own motion for summary judgment, defendant maintains that (1) ERISA preempts plaintiff's state law claims, (2) the appropriate level of review is an "arbitrary and capricious" standard, and (3) plaintiff's request to amend her complaint would be futile and, therefore, should be denied.

OPINION

Although plaintiff styled her filing as a "motion for declaratory relief," that motion is more properly construed as one for summary judgment. See Boehm v. Scheels All Sports, Inc., 202 F. Supp. 3d 1030, 1033 (W.D. Wis. 2016) (construing a motion for declaratory judgment as one for summary judgment); Kam-Ko Bio-Pharm Trading Co. Ltd-Australasia v. Mayne Pharma (USA) Inc., 560 F.3d 935, 943 (9th Cir. 2009) ("[A] party may not make a motion for declaratory relief, but rather, the party must bring an action for a declaratory judgment . . . . The only way plaintiffs' motion can be construed as being consistent with the Federal Rules is to construe it as a motion for summary judgment on an action for a declaratory judgment.") (quoting Int'l Bhd. of Teamsters v. E. Conference of Teamsters, 160 F.R.D. 452, 456 (S.D.N.Y. 1995)). Indeed, plaintiff herself requested that the court consider at least part of her motion as seeking partial summary judgment. (See Pl.'s Br. (dkt. #9) 10-11 ("In conjunction with the request to declare that ERISA does not preempt Wisconsin law in this case, Ms. Burclaw requests partial summary judgment as to the Standard's affirmative defense pursuant to Federal Rule 56.").) The court will, therefore, treat plaintiff's filing as a cross-motion for partial summary judgment.

Summary judgment is appropriate if the moving party "shows 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). The court must view all facts and draw all inferences in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

I. ERISA Preemption

As noted at the outset, the threshold and potentially dispositive question in this case is whether plaintiff's claims are exclusively governed by federal law, which requires the court to determine whether Mr. Burclaw's additional life insurance plan was governed by ERISA. Plaintiff argues that they are not because: "(1) at the time that Mr. Burclaw obtained the insurance, it was not a part of West Bend's employee benefit plan; and (2) even if it was part of the plan, it [] falls within the 'safe harbor' provision where preemption does not apply." (Pl.'s Br. (dkt. #9) 11.) Defendant contests both arguments, and maintains that plaintiff's claims are, therefore, preempted. Defendant bears the burden as to this issue. Fifth Third Bank ex rel. Tr. Officer v. CSX Corp., 415 F.3d 741, 745 (7th Cir. 2005) ("Federal preemption is an affirmative defense upon which the defendants bear the burden of proof."); Kanne v. Connecticut Gen. Life Ins. Co., 867 F.2d 489, 492 (9th Cir. 1988) ("Because Connecticut General's claim of ERISA preemption is a federal defense in this lawsuit . . . the burden is on the defendant to prove the facts necessary to establish it.").

Where, as here, both parties have moved for summary judgment on the same claim, the court must adopt a "'Janus-like' perspective, examining each party's motion in turn and construing all inferences in favor of the party against whom the motion under consideration is made." Hopkins v. Prudential Ins. Co. of Am., 432 F. Supp. 2d 745, 758 (N.D. Ill. 2006). The court will take up defendant's motion first, viewing all facts and drawing all inferences in the light most favorable to plaintiff. See Anderson, 477 U.S. at 255. Plus, because the burden of proof rests with defendant, it must "lay out the elements of the claim, cite the facts which it believes satisfies these elements, and demonstrate why the record is so one-sided as to rule out the prospect of a finding in favor of the non-movant on the claim." Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund, 778 F.3d 593, 601 (7th Cir. 2015). Before addressing whether defendant has met this burden, however, a more detailed discussion of the record with regard to the...