Cornish v. US Life Ins. Co.

690 F.Supp.2d 581

Brinon K. CORNISH, Executor of the Estate of Donna Mae Cornish, et al., Plaintiffs v. UNITED STATES LIFE INSURANCE COMPANY in the City of New York, et al., Defendants.

Civil Action No. 3:06-CV344-DW.

United States District Court, W.D. Kentucky, at Louisville.

June 4, 2009.

Douglas H. Morris, Lea A. Player, Morris & Player, PLLC, Adrienne W. Kim Franklin Gray & White, Louisville, KY, for Plaintiffs.

Timothy L. Mauldin, Bell, Orr, Ayers & Moore, PSC, Bowling Green, KY, for Defendants.

ORDER

DAVE WHALIN, United States Magistrate Judge.

The parties in this ERISA action have consented pursuant to 28 U.S.C. § 636(c) to proceed before the undersigned Magistrate Judge for all further proceedings in this case, to include the entry of a final judgment. The case itself arises from the death of Donna May Cornish. The late Ms. Cornish was discovered on Jan. 14, 2004, by her son, Executor Brinon Cornish, drowned in her home bathtub. Police who responded to the scene estimated that Ms. Cornish had been lying submerged in the bathtub for approximately a full day before her body was discovered. The following day on Jan. 15, a medical examiner for the Kentucky Justice Cabinet performed an autopsy on the body of Ms. Cornish, which the examiner's report notes exhibited mild to moderate decomposition and putrification. Test results on her blood at that time revealed a blood alcohol level of .210. Based on the autopsy and test results, the medical examiner concluded that "death in this 55-year-old white female ... is due to drowning during ethanol intoxication." (DN 33, Ex. B, Autopsy Report).

Prior to her death, Cornish had been employed by the National Processing Company (NPC) where she participated in NPC's group plan of basic life and accidental death and dismemberment insurance coverage provided by Defendants, U.S. Life Insurance Company in the city of New York (U.S. Life) and American General Life Companies (AIG). The policy, which took effect on Jan. 1, 2004, included life insurance and accidental death coverage in the amount of $225,000 each and named her two children, Brinon and Heather Cornish, as beneficiaries.

Following his mother's death, Brinon Cornish filed a claim for both life and accidental death benefits under the policy. AIG initially denied coverage for any benefits. The company later approved payment of the life insurance benefit portion of the policy in June of 2004, but denied the claim for accidental death benefits based on the policy's exclusion for intoxication.¹ (DN 36, Ex. 8, denial letter). AIG based its denial on the medical examiner's conclusion that Ms. Cornish died as the result of drowning during ethanol intoxication. Brinon Cornish, as executor, disputes the applicability of this exclusion, which he argues requires proof of causation, and not merely that his mother died "while intoxicated" as her death certificate states (DN 36, Ex. 9, Death Certificate).

This dispute on whether the intoxication exclusion applies led to Cornish filing suit against U.S. Life and AIG in state court for breach of contract and unfair claims settlement practices (DN 1, Ex. 1, Complaint). Defendants removed the lawsuit to federal court (DN 1), where the District Court determined that the policy at issue is an employee benefit plan governed by the provisions of ERISA. See 29 U.S.C. § 1132(e) (DN 16). The parties thereafter consented to proceed before the Magistrate Judge (DN 32). The question now is what standard of review is to be applied when the Court considers the decision of AIG to deny accidental death benefits.

LEGAL ARGUMENT

U.S. Life and AIG argue that the appropriate standard of review in the present case is the arbitrary and capricious standard because the language of the policy at issue clearly provides discretionary authority to determine the eligibility of the claimants for benefits (DN 33). They rely heavily on the requirement of the policy that "due proof of loss must be sent to U.S. Life" (DN 33, Ex. D, Policy G-19001, ADDB-1) and on that portion that specifies that the company has the right to order an autopsy to determine whether the employee's death was the result of a covered accident (DN 33, Ex. E, Policy p. 19001, GP). In the words of U.S. Life and AIG, "As these policy sections make clear, a claimant is required to submit due proof of loss, and based upon the proof submitted, the Company has discretionary authority to determine whether a covered loss has occurred and/or whether a listed exclusion is applicable." (DN 33, p. 5, brief of Defendants).

The primary authority that the two companies cite to support their position is the unpublished Sixth Circuit decision of Leeal v. Continental Casualty Co., 17 Fed.Appx. 341, 343 (6th Cir.2001), which holds that the phrase "due written proof of loss" is sufficiently similar to the term "satisfactory proof," as interpreted in Perez v. Aetna Life Ins. Co., 150 F.3d 550, 557 (6th Cir. 1998), to grant the plan administrator the necessary discretion to justify the use of the less demanding, arbitrary and capricious standard. Leeal, 17 Fed.Appx. at 343.

U.S. Life and AIG point out the Leeal is followed by a number of district courts in the Sixth Circuit. In particular, they cite Carpenter v. CNA Continental Casualty Co., 254 F.Supp.2d 730, 737 (S.D.Ohio 2002), along with Schornhorst v. Ford Motor Co., 606 F.Supp.2d 658, 664-65 (E.D.Mich.2009) (unpublished decision), Haley v. Lowe's Home Centers, Inc., 2007 WL 869613 at *4 (E.D.Tenn.2007) (unpublished decision) and Hall v. Life Ins. Co. of North America, 151 F.Supp.2d 831, 834 (E.D.Mich.2001). These decisions, according to the companies, follow Leeal to hold that the term "due proof" just like the term "satisfactory evidence" constitutes a sufficiently clear grant of discretion to require this Court to review the denial of benefits under the more favorable standard. Consequently, so long as a reasoned explanation can be offered for the decision to deny accidental death benefits, U.S. Life and AIG insist that it must be affirmed by this Court. See Haus v. Bechtel Jacobs Co., 491 F.3d 557, 561-62 (6th Cir.2007).

As further support for their position, U.S. Life and AIG also rely upon a series of Sixth Circuit ERISA decisions that interpret the term "satisfactory proof." See Perez v. Aetna Life Ins. Co., 150 F.3d 550, 557 (6th Cir.1998); Yeager v. Reliance Standard Life Ins. Co., 88 F.3d 376, 380-381 (6th Cir.1996); Miller v. Metropolitan Life Ins. Co., 925 F.2d 979 (6th Cir.1991). These decisions hold that insurance policy provisions that call for "satisfactory proof" of disability clearly vest sufficient discretion with the plan administrator to require use of the arbitrary and capricious standard.

Cornish in his legal memorandum (DN 36) argues that under Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the appropriate ERISA standard to review the denial of benefits in this case is the de novo standard of review because the language of the policy fails to provide the plan administrator with sufficient discretion to construe the provisions of the policy or to determine eligibility for benefits. He insists that any grant of discretion to the administrator must be clear and expressly provided in the employee benefit plan. See Yeager v. Reliance Standard Ins. Co., 88 F.3d at 380 (citing Perry v. Simplicity Engineering, 900 F.2d 963, 965 (6th Cir. 1990)). According to him, the published decision of the Sixth Circuit that is the most persuasive is Hoover v. Provident Life and Accident Ins. Co., 290 F.3d 801, 808 (6th Cir.2002), which holds that the contract language "written proof of loss," and "proper written proof" are not sufficient to create the discretion required for the arbitrary and capricious standard.

Cornish then cites a number of decisions from outside the Sixth Circuit that have considered whether the contract term "due proof" is a sufficiently clear grant of discretion to justify the use of the arbitrary and capricious standard. He specifically cites Wilson v. Life Ins. Co. of North America, 424 F.Supp.2d 1146, 1156 (D.Neb.2006), in which the district court for Nebraska holds that the language "due proof" does not confer discretion on the administrator and therefore the de novo standard of review applies. He also cites Erbe v. Conn. Gen. Life Ins. Co., 2009 WL 605836 (W.D.Pa.2009) as another decision in which the district court for the Western District of Pennsylvania holds that "due proof" language in an employee benefit plan does not delegate discretionary authority, nor does a separate provision of the same policy that grants the insurance company the right to require a medical examination of any claimant under the policy. Finally, Cornish maintains that AIG in its denial letter to the executor specifically disclaimed its fiduciary duties under the policy and therefore justified the application of a de novo standard of review in the present case.

LEGAL ANALYSIS

When an employee, or in this case an estate executor of a deceased employee, elects to challenge the determination of an employee benefit plan administrator concerning benefit eligibility under 29 U.S.C. § 1132(a)(1)(B), the initial question that must be addressed is the standard of review to be applied based on the language of the benefit plan at issue. Gallagher v. Reliance Standard Life Ins. Co., 305 F.3d 264, 268 (4th Cir.2002) ("It is well-established that a court reviewing the denial of disability benefits under ERISA initially must decide whether a benefit plan's language grants the administrator or fiduciary discretion to determine the claimant's eligibility for benefits, and if so, whether the administrator acted within the scope of that discretion.").

The Supreme Court in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. at 115, 109 S.Ct. 948 discussed the standard of review to be applied in such circumstances. Firestone holds that when a denial of...