Hotop v. Prudential Ins. Co. of Am.

ROBERT JOHN HOTOP, Plaintiff, v. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant.

Civil Action No. 18-15312

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

July 30, 2020

OPINION

ARLEO, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court by way of Defendant Prudential Insurance Company of America's ("Prudential" or "Defendant") Motion for Summary Judgment against Plaintiff Robert John Hotop ("Plaintiff" or "Hotop") under Federal Rule of Civil Procedure 56(c). ECF No. 59. Plaintiff opposes the Motion. ECF No. 64. For the reasons set forth herein, Defendant's Motion is GRANTED.

I. BACKGROUND¹

This action arises from a dispute over whether Plaintiff is entitled to $100,000 or $1,000,000 from Prudential due under a life insurance policy.

A. Plaintiff's Life Insurance Policy During His Employment

Plaintiff is a former employee of United Parcel Service ("UPS"). Def. SOMF ¶ 23. During his tenure at UPS, Plaintiff received welfare benefits and coverage for his spouse, Patricia Hotop ("Patricia"), through "The UPS Flexible Benefits Plan" (the "Plan"). Id. ¶¶ 1, 24. The Planprovided life insurance benefits to employees through a group insurance contract between UPS and Prudential, which designated Prudential as the Plan's claims administrator (the "Group Contract").² Id. ¶ 8. The Plan permitted employees to obtain up to $500,000 in supplemental dependents term life insurance ("SDTLI Coverage") for their spouses. Id. ¶¶ 11-12. While employed at UPS, Plaintiff received $360,000 in supplemental term life insurance coverage for himself and $100,000 in SDTLI Coverage for Patricia. Id. ¶ 25.

B. Plaintiff's Election to Port His Life Insurance Policy After Retirement

On October 1, 2017, Plaintiff retired from UPS. Id. ¶ 26. Upon his retirement, Plaintiff received a notice from UPS that he could continue the insurance coverage he had during his employment by electing one of two options. See id. ¶ 27. The first option—conversion—would allow Plaintiff to convert his supplemental coverage to an individual whole life policy. Id. ¶ 15. The second option—portability—would allow him to continue his coverage at group rates. See id.³ Plaintiff called Prudential on October 30, 2017 to inquire about the difference between [deleted word] porting and converting his coverage and spoke with a Prudential representative. Id. ¶¶ 29-30. During that call, Plaintiff expressed that he wished to "stick with the portability" option. Id. ¶ 31.

On November 13, 2017, Prudential sent Plaintiff a letter, notifying him that he could continue "the same amount of coverage that was in force on the last day of [his] active service" under the portability provision, and that he would move to a Prudential standard portability rate after the first full year of ported coverage. See id. ¶¶ 34-35; see also Declaration of Angle ("AngleDecl.") Ex. B at Pru1000, 59.11. The letter also directed Plaintiff to sign and return a "Portability Election form" to Prudential if he wished to continue his coverage "on a portable basis." Angle Decl. Ex. B at Pru1000.

On November 20, 2017, Plaintiff called Prudential again, and he told a Prudential representative, among other things, that he wished to "continue [Patricia's coverage] which was roughly $100,000." Def. SOMF ¶¶ 36, 39. Plaintiff executed the Portability Election form, electing to continue his supplemental term life insurance and Patricia's SDTLI coverage "as a portable participant," and faxed it to Prudential on December 11, 2017. Id. ¶ 43-47.

On December 19, 2017, Prudential sent Plaintiff an automatically generated billing notice for $2,359.80 in premiums for the period of October 1, 2017 to March 31, 2018. Id. ¶ 73; see also Angle Decl. Ex. D (the "Billing Notice"). The Billing Notice also reflected a summary of Plaintiff's coverage as follows:

The Below Plan Description Reflects Your Coverage(s) as of: January 1, 2018

Plan Description

Insurance Amount

Optional Life (11)

$368,000

ODL-Spouse (10)

$1,000,000

On January 2, 2018, after receiving the Billing Notice, which indicated $1,000,000—rather than $100,000—in SDTLI Coverage for Patricia, Plaintiff called Prudential to "make sure what [his] coverage is and what [his] costs are." See Def. SOMF ¶ 80. Plaintiff asked the responding Prudential representative, Kyle, to "break down what [his] insurance is and what [his] wife's insurance is and the costs for the two[.]" Id. When Plaintiff asked specifically about his wife's coverage, Kyle stated, "it does look like that is set [at] a million dollars. That is $345.00 monthly." Id. ¶ 81. After that phone call, Plaintiff paid the premium amount listed on the Billing Notice. Id. ¶ 86; see also Pl. Supp. SOMF ¶ 39. On January 30, 2018, Plaintiff called Prudential and again spoke with Kyle, who confirmed that Plaintiff's coverage "was approved" and was "effective asof 11/1/2017." Id. ¶ 88. Prudential later electronically drafted a premium payment from Plaintiff's bank account for the period of January 2018 to March 2018. Pl. Supp. SOMF ¶ 40.

One day before Plaintiff first called Prudential to discuss the rates reflected on the Billing Notice, on January 1, 2018, the Group Contract terminated for active UPS employees. Id. ¶ 20. The parties dispute the effect of this termination on Plaintiff as a UPS retiree.⁴ See Def. SOMF ¶¶ 21-22; Pl. Response to Def. SOMF ¶¶ 21-22. Prudential claims that despite the Group Contract's termination, certain retirees like Plaintiff continued coverage under the Plan. See id. Prudential calls these individuals "UPS Continuees." Id. Plaintiff, however, claims that he and other retirees with ported coverage under the Plain were "transferred to the Prudential Standard Port Plan and separated entirely from the UPS ERISA Plan." Pl. Response to Def. SOMF ¶¶ 21-22; see also Pl. Supp. SOMF ¶¶ 7-9. According to Plaintiff, after his policy was transferred to the Prudential Standard Port Plan, "UPS had no involvement, or administrative or financial obligation or burden relating to life insurance Prudential provided to Hotop" and it "made no contributions" to Plaintiff's policy. Pl. Supp. SOMF ¶¶ 10-12.

C. Plaintiff's Claim for SDTLI Benefits

Patricia Hotop passed away on February 4, 2018. Def. SOMF ¶ 92. On March 6, 2018, Plaintiff called Prudential to make a claim for SDTLI benefits. Id. ¶ 93. During the call, Plaintiff requested to verify the amount of Patricia's SDTLI coverage, but the Prudential representative to whom he spoke told Plaintiff he could not provide that information. Id. ¶ 95. Plaintiff called Prudential again the next day and made the same request. See id. ¶ 96. Prudential advised himthat it could provide "the value amount of the policy" upon its receipt of Plaintiff's claim form. Id. Plaintiff then faxed a claim form to Prudential on May 10, 2018. Id. ¶ 97.

On May 7, 2018, Prudential sent Plaintiff a letter, explaining that it had separately mailed Plaintiff a "refund" check in the amount of $1,380.00. See id. ¶ 100; see also Angle Decl. Ex. C. Prudential claimed this amount represented Plaintiff's "overpayment of premiums for Patricia['s] . . . life insurance coverage" under the Plan. Id. On May 16, 2018, Prudential sent Plaintiff a second check in the amount of $101,640.53, which Prudential claims represented Patricia's SDTLI benefits of $100,000, plus interest of $1,640.53. Id. ¶ 99.

Plaintiff submitted a written claim for $1,000,000 in SDTLI benefits on August 16, 2018, which Prudential denied on September 27, 2018. Id. ¶¶ 101-02; see also Angle Decl. Ex. A at Pru359-62, 375-78 (the "Claim Denial Letter"). In rejecting Plaintiff's new claim, Prudential explained that only Plaintiff's pre-retirement "existing coverage c[ould] be ported" under the "Group Policy," and "the Group Policy limits [SDTLI] to $500,000, does not permit increases above $25,000 without . . . evidence of insurability, and does not permit dependent coverage at a level higher than the employee's own coverage." Claim Denial Letter at Pru 376. Prudential also indicated that it "mistakenly billed" Plaintiff "for premiums on $1,000,000.00 of [SDTLI] instead of the $100,000 he ported" due to an "administrative error." Id. It advised Plaintiff that it refunded the incorrect premium amounts he paid, and because "the plan documents have been clear in stating that only $100,000 in coverage could have been in force," denied Plaintiff's claim for an additional $900,000. Id.

On January 4, 2019, Plaintiff appealed Prudential's claims decision, which Prudential denied on April 2, 2019. Def. SOMF ¶¶ 105-06; see also Angle Decl. Ex. A at Pru386-89 (the "Appeal Denial Letter"). Prudential again reiterated the administrative error that caused Plaintiff'sBilling Notice to mistakenly reflect $1,000,000 in SDTLI coverage and the Plan's terms limiting his SDTLI coverage. Appeal Denial Letter at Pru387-88. Prudential further indicated that Plaintiff should have contacted it "immediately" after receiving the Billing Notice to notify it of the error, but he did not, and thus Prudential did not discover the error until Patricia passed away. Id. at Pru388.

D. Procedural History

On September 28, 2018, Plaintiff filed the instant action in the Superior Court of New Jersey, Essex County. ECF No. 1.1 (the "Original Complaint"). Through the Original Complaint, Plaintiff alleged a series of common law claims against Prudential related to Prudential's failure to pay his life insurance claim upon his wife's death. On October 25, 2018, Prudential removed the matter to this Court, asserting that the Court has jurisdiction over Plaintiff's claims under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. ECF No. 1. Plaintiff did not file a motion to remand. Instead, he twice amended the Original Complaint to include claims under ERISA. See ECF Nos. 8, 38 (the "Second Amended Complaint" or "SAC"). The Second Amended Complaint alleges three common law claims and three "alternative" ERISA claims...