Fenwick v. Hartford Life & Accident Ins. Co.

RITA K. FENWICK, Plaintiff, v. HARTFORD LIFE & ACCIDENT INSURANCE COMPANY, Defendant.

CIVIL ACTION NO. 3:13-CV-1090-DJH

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY AT LOUISVILLE

August 20, 2015

MEMORANDUM OPINION AND ORDER

Following an administrative review pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), Hartford Life & Accident Insurance Company (Hartford) ceased paying disability benefits to Rita Fenwick. Fenwick now argues, among other claims, that Hartford breached its fiduciary duty to her as a plan beneficiary through lackluster claims processing procedures. Hartford disagrees that she was entitled to any benefits whatsoever, and it contends that Fenwick cannot prove a breach of fiduciary duty. Hartford asserts that Fenwick's fiduciary duty claim fails both legally and factually and has moved for partial summary judgment. (Docket No. 31) Fenwick's fiduciary duty claim is not sustainable as equitable relief under ERISA, and so the Court will grant Hartford's motion.

I. Factual Background

Rita Fenwick, a former employee of Target, became disabled while covered by Target's long-term disability plan. She received monthly income benefits under that plan for five years. In 2010, Hartford purchased Target's plan in a "reserve buy-out." Through this purchase, Hartford assumed all risk for current claims, including Fenwick's. In October 2012, Hartford terminated Fenwick's benefits, deciding that she no longer qualified as "disabled." (D.N. 31,PageID # 473-74) Fenwick appealed this decision; Hartford denied her appeal. Fenwick believes that she was, and is, still entitled to her monthly benefits. As part of this suit, she pursues a traditional ERISA claim to recover her benefits. But that portion of the case is not this opinion's focus.

Central to this opinion is Fenwick's argument that Hartford has an inherent conflict of interest that arose directly from its purchase of Target's long-term disability plan: The more Hartford pays in benefits, the less it profits and serves its own financial interests. But as the plan administrator, Hartford also owed a fiduciary duty to Fenwick, the plan beneficiary. She claims that Hartford breached that duty for a number of reasons. Fenwick's protestations revolve around claims that: (a) Hartford utilized a claims process designed to systematically delay decisions; (b) Hartford's personnel automatically accepted the opinions of Hartford's medical reviewers, discounting the opinions of treating physicians; and (c) Hartford trained its reviewers to seek reasonable not accurate decisions. (D.N. 32, PageID # 487) She wants equitable relief—permissible under ERISA in some form and under certain circumstances—to remedy these alleged breaches of fiduciary duties. After a brief ERISA discussion, the Court will address arguments (a) and (b) together and discuss (c) separately.

II. Standard

To grant a motion for summary judgment, this Court must find that there is no genuine dispute as to any material fact and that the moving party is entitled to summary judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party bears the initial burden of identifying the basis for its motion and the parts of the record that demonstrate an absence of any genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The Court must determine whether "the evidence presents a sufficient disagreement to require submission to ajury or whether it is so one-sided that one party must prevail as a matter of law." Patton v. Bearden, 8 F.3d 343, 346 (6th Cir. 1993) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)). Viewing this case in the light most favorable to Fenwick, the non-movant, and drawing all reasonable inferences in her favor, see Schreiber v. Moe, 596 F.3d 323, 329 (6th Cir. 2010), the Court concludes that genuine issues of material fact do not exist as to her claim for breach of fiduciary duty and grants Hartford's motion for summary judgment.

III. Discussion

ERISA strikes a delicate balance. It constitutes a balancing "between ensuring fair and prompt enforcement of rights under a plan and the encouragement of the creation of such plans." Conkright v. Frommert, 559 U.S. 506, 517 (2010) (citation omitted). "Congress sought 'to create a system that is [not] so complex that administrative costs, or litigation expenses, unduly discourage employers from offering [ERISA] plans in the first place." Id. (citation omitted). The scheme works because it "induc[es] employers to offer benefits by assuring a predictable set of liabilities, under uniform standards of primary conduct and a uniform regime of ultimate remedial orders and awards when a violation has occurred." Id. (citation omitted). Courts give deference to ERISA plan administrators to "promote[] efficiency by encouraging resolution of benefits disputes through internal administrative proceedings rather than costly litigation." Id. (citing Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (1989)).

But plan beneficiaries may bring lawsuits "to recover benefits due to [them] under the terms of [the] plan, to enforce [their] rights under the terms of the plan, or to clarify [their] rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B) (2012 & Supp. 2014). Participants "in a covered plan [may] bring a private right of action 'against a person thatqualifies as a fiduciary' and breaches that duty under the plan's terms." Thies v. Life Ins. Co. of N. Am., 804 F. Supp. 2d 560, 574 (W.D. Ky. 2011) (citations omitted).

What are the fiduciary obligations of plan administrators? In broad terms, their obligations are "to serve the interest of participants and beneficiaries and, specifically, to provide them with the benefits authorized by the plan." Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142 (1985). Their principal duties, though, "relate to the proper management, administration, and investment of fund assets, the maintenance of proper records, the disclosure of specified information, and the avoidance of conflicts of interest." Id. at 142-43. Qualifying as an ERISA fiduciary requires either (1) being explicitly designated by the plan as a fiduciary, or (2) being an implicit fiduciary by exercising discretionary control or authority over a plan's assets, management, or administration. Id. (citations omitted). Hartford does not dispute its fiduciary status.

ERISA also allows for equitable relief in some circumstances. Beneficiaries may bring civil actions to "(A) [] enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provision of this title or the terms of the plan." 29 U.S.C. § 1132(a)(3). Of course, "appropriate" is the key modifier. The Supreme Court has explained "that courts, in fashioning 'appropriate' equitable relief, will keep in mind the 'special nature and purpose of employee benefit plans,' and will respect the 'policy choices reflected in the inclusion of certain remedies and the exclusion of others.'" Varity Corp. v. Howe, 516 U.S. 489, 515 (1996) (citation omitted). When Congress has "elsewhere provided adequate relief for a beneficiary's injury, there will likely be no need for further equitable relief, in which case such relief normally would not be 'appropriate.'" Id. (citation omitted) (emphasis added). The Sixth Circuit ruledcommensurately in Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 615-16 (6th Cir. 1998), noting that ERISA claimants may not simply characterize a denial of benefits claim as a breach of fiduciary duty claim in order to trigger equitable relief. When an ERISA claimant's injury can be remedied under another ERISA enforcement provision—like § 1132(a)(1)(B)—equitable relief will normally not be "appropriate." See Thies, 804 F. Supp. 2d at 574. Recently, the Sixth Circuit buttressed this position, holding that claimants could not pursue a breach of fiduciary duty claim under § 1132(a)(3) "based solely on an arbitrary and capricious denial of benefits" where an § 1132(a)(1)(B) remedy would make the claimant whole. Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364, 371 (6th Cir. 2015).

A. Systematic Delay and the Use of Experts

Hartford argues that Fenwick's breach of fiduciary duty claim is just a repackaged version of her claim for benefits, and as such, her request for equitable relief is inappropriate. Hartford also takes issue with the viability of Fenwick's legal arguments and with the strength of her factual support. As to Fenwick's arguments regarding systematic delay and the preference for the opinions of Hartford's experts over treating physicians, the Court generally agrees.

1.

Fenwick's systematic delay argument has several problems. For one, Fenwick has no proof of systematic delay. What Fenwick does possess is proof that Hartford may have failed to address her appeal of its denial of her benefits claim within the plan's given timeframe. Admittedly, without further discovery, it would be impossible to determine if there was systematic delay. But the Court believes that such discovery—and the further pursuit of a breach of fiduciary duty claim—would be futile for several reasons.

First, this case presents a justiciability problem. Fenwick's primary complaint is that Hartford denied her benefits. If the Court ultimately determines that Hartford wrongly denied her those benefits, it is unforeseeable that she would go through the claims process again. If she is no longer pursuing a claim through processing, she would no longer need to challenge Hartford's supposed systematic delays. That is, once her benefits claim is adjudicated, her fiduciary duty argument is moot. This outcome may have been different if Fenwick were part of a class, see Hill v. Blue Cross & Blue Shield of Mich., 409 F.3d 710, 714 (6th Cir. 2005), but, as she is...