Castleberry v. Lincoln Nat'l Life Ins. Co.

DANIEL CASTLEBERRY, Plaintiff, v. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, Defendant.

CASE NO. 2:19-CV-1025-WKW [WO]

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF ALABAMA NORTHERN DIVISION

September 30, 2020

MEMORANDUM OPINION AND ORDER

Before the court is Defendant The Lincoln National Life Insurance Company's Motion to Dismiss Plaintiff's Claim for LTD Benefits or, in the alternative, Motion for Summary Judgment. (Doc. # 6.) Plaintiff Daniel Castleberry filed a response in opposition. (Doc. # 11.) After careful consideration of the arguments of counsel, the relevant law, and the record, the court finds that the motion to dismiss is due to be granted in part and denied in part and that the motion for summary judgment is due to be denied as moot.

I. JURISDICTION AND VENUE

Subject matter jurisdiction is proper under 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e)(1) because Mr. Castleberry is seeking to enforce rights and recover benefits allegedly owed to him under a long-term disability policy governed by the Employment Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. § 1132(a)(1)(B). Personal jurisdiction and venue are not contested.

II. STANDARD OF REVIEW

To withstand a motion to dismiss pursuant to Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). To state a claim that is facially plausible, a "plaintiff [must plead] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. A complaint must state "more than a sheer possibility that the defendant acted unlawfully." Id.

Normally, attaching outside materials to a motion to dismiss requires the court to convert the motion into one for summary judgment. See Fed. R. Civ. P. 12(d). That rule, however, has an exception that is relevant here. A court may consider a document that is attached to a Rule 12(b)(6) motion to dismiss without converting it into a summary judgment motion if the document is referenced in the complaint, if it is "central to the plaintiff's claim," and if its authenticity is undisputed. Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir. 2002). "'Undisputed'" in this context means that the authenticity of the document is not challenged." Id.

Attached to Lincoln's motion are: (1) the long-term disability policy; (2) Lincoln's letter, dated May 8, 2018, notifying Mr. Castleberry that it was ceasing his benefits beyond November 4, 2018; (3) Mr. Castleberry's letter, dated October 2, 2018, notifying Lincoln that it was appealing Lincoln's May 8, 2018 denial; and (4) Lincoln's letter, dated March 29, 2019, denying Mr. Castleberry's appeal. (Doc. # 6-1, at 2-68.) These documents are referenced in the complaint and are central to Mr. Castleberry's claims. Additionally, Mr. Castleberry does not dispute the authenticity of the documents, and has included (2) and (3), above, with his response to Lincoln's motion to dismiss. Accordingly, the court will consider these documents in ruling on Lincoln's motion to dismiss without converting the motion into one for summary judgment.¹

III. BACKGROUND

A. The Injury

On or about February 23, 2016, Plaintiff Daniel Castleberry suffered on-the-job injuries while working as a truck driver for Virginia Transportation. These injuries required him to undergo a cervical fusion on August 2, 2016. Mr. Castleberry tried unsuccessfully to return to work in September 2016. Mr. Castleberry underwent a functional capacity evaluation on October 24, 2016, whichindicated that he did not meet the strength or mobility requirements for his position as an automobile hauler.

B. The LTD Policy

The Lincoln National Life Insurance Company ("Lincoln") issued a group long term disability insurance policy—policy number 000010202236 ("LTD Policy")—to Mr. Castleberry's employer, Virginia Transportation, effective February 1, 2015. (Doc. # 6-1, at 5-6.) The LTD Policy required that prior to bringing suit for claims governed by ERISA, the "beneficiary must first seek two administrative reviews of the adverse claim decision." (Doc. # 6-1, at 21.) If the first review is denied, the LTD Policy requires the beneficiary to request a second review, here, within 180 days of receiving a denial letter for the first review. (Doc. # 6-1, at 20; Doc. # 6-1, at 54.)

At the time Mr. Castleberry sustained his injuries, he had both a short-term policy and the LTD Policy through Virginia Transportation. Colonial Life—the insurer for the short-term policy—awarded Mr. Castleberry benefits based on an annual salary of $129,000. (Doc. # 11.) However, Lincoln—the insurer for the LTD Policy—based Mr. Castleberry's LTD Policy benefits on an annual salary of $71,604.80.² (Doc. # 11-4, at 11.) Mr. Castleberry represents in his brief that hedisputed this lower salary amount, and twice (on May 30, 2017, and October 2, 2018) requested information from Lincoln as to how it had determined the LTD Policy benefits. (Doc. # 11, at 2.) Lincoln responded on August 2, 2017, that Virginia Transportation had reported Mr. Castleberry's annual salary as $71,604.80. (Doc. # 11-4, at 11-12.)

Lincoln paid Mr. Castleberry LTD Policy benefits of $3,580.24 per month for twenty-four months (the "Own Occupation Period"). (Doc. # 11-4, at 11.) Mr. Castleberry informed Lincoln that, based on his annual income of $129,000, the monthly benefits should have been $5,000 (the maximum covered by the LTD Policy). (Doc. # 11, at 5.)

On May 8, 2018, Lincoln denied Mr. Castleberry's claim for benefits past the first twenty-four months. (Doc. # 6-1, at 50-55.) Pursuant to the second tier of benefits—the "Any Gainful Occupation Period"—Lincoln again denied benefits on the ground that Mr. Castleberry could work full-time in sedentary work capacities. (Doc. # 6-1, at 53.) Lincoln found that Mr. Castleberry could "perform[] work in other occupations, even if [he] c[ould] no longer perform [his] Own Occupation," and that, therefore, he "no longer [met] the definition of disability in this policy. . . ." (Doc. # 6-1, at 54.) Lincoln denied benefits beyond November 4, 2018. (Doc. # 6-1, at 54.)

Mr. Castleberry, through his current counsel, appealed this decision by letter dated October 2, 2018. (Doc. # 6-1, at 58.) By letter dated March 29, 2019, which was addressed to Mr. Castleberry's counsel, Lincoln denied the appeal. (Doc. # 6-1, at 62-67.) The denial letter set out Mr. Castleberry's appeal rights, explaining that he had exhausted his "first level of appeal" and that he had 180 days to pursue "a final administrative appeal." (Doc. # 6-1, at 66.) Neither the May 8, 2018 denial letter nor the March 29, 2019 denial letter addressed Mr. Castleberry's underpayment claim. Mr. Castleberry did not seek further relief from Lincoln within 180 days. Instead, on December 4, 2019—after the 180 days had expired—Mr. Castleberry filed this lawsuit.

During the pendency of the first administrative review of his claim, Mr. Castleberry applied for Social Security Disability benefits within the timeframe that the LTD Policy required and received a Fully Favorable decision on November 23, 2018. (Doc. # 11-2.) The Social Security Administrative Law Judge found that Mr. Castleberry was disabled, as defined by the Social Security Act, since July 31, 2016. (Doc. # 11-2.) On June 18, 2019, Lincoln claimed that it overpaid Mr. Castleberry's LTD benefits based on Mr. Castleberry's Social Security Disability award. Mr. Castleberry alleges that the "proper amount" of repayment needs to be determined. (Doc. # 1.)

C. Claims in This Lawsuit

Although Mr. Castleberry's complaint is not a model of clarity, construed liberally, it lays out three ERISA claims pursuant to 29 U.S.C. § 1132(a)(1)(B): first, that Lincoln improperly calculated Mr. Castleberry's LTD benefits based on an annual income of $71,604.80, rather than an annual income of $129,000; second, that Lincoln wrongfully terminated his LTD benefits; and third, for clarification of Mr. Castleberry's rights pursuant to the ERISA plan as to Lincoln's claim for recovery of overpayments. (See Doc. # 6-1, at 22 (LTD Policy provision governing Lincoln's right of recovery of overpaid benefits due to "the Insured Employee's receipt of Other Income Benefits").)

IV. DISCUSSION

Lincoln moves to dismiss Mr. Castleberry's action, arguing that Mr. Castleberry failed to exhaust his administrative remedies before filing suit, as the LTD Policy and ERISA require. Mr. Castleberry has responded by urging this court to excuse exhaustion under the "futility doctrine." For the reasons discussed below, Mr. Castleberry has failed to exhaust his administrative remedies, and the court declines to apply the futility doctrine.

A. Scope of Lincoln's Motion

It is important at the outset to point out what Lincoln has not addressed in its motion. As explained, in Part III.C., the complaint contains three claims under §1132(a)(1)(B).³ Lincoln's motion seeking dismissal for failure to exhaust addresses only Mr. Castleberry's claim that Lincoln wrongfully terminated his benefits under the LTD Policy. Lincoln's motion does not address Mr. Castleberry's claim that Lincoln underpaid benefits based on errors in how it calculated the LTD benefits. Nor does the motion address Mr. Castleberry's claim for clarification of the amount of repayment he owes Lincoln based upon his retroactive award of social security disability benefits for the period when he also was paid LTD benefits. Because Lincoln's motion does not address exhaustion as to two of the three claims, this action proceeds as to those claims.

B. Failure to Exhaust

Mr. Castleberry has failed to exhaust his administrative remedies on his claim that Lincoln wrongfully terminated his LTD benefits, as required the LTD Policy and ERISA.

ERISA imposes the following requirements...