Mullica v. Minn. Life Ins. Co., CIVIL ACTION NO. 11-4034

FRANK MULLICA, Plaintiff, v. MINNESOTA LIFE INSURANCE CO. et al. Defendant.

CIVIL ACTION NO. 11-4034

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

September 26, 2013

MEMORANDUM

Jones, II, J.

Plaintiff, in his Second Amended Complaint, brought three Counts against Minnesota Life Insurance Co. ("MLIC"), Arkema Inc. ("Arkema"), Mercer (US) Inc., and Mercer HR Services, LLC. ("Mercer") for a breach of fiduciary duty regarding the denial of life insurance compensation following his wife's death. The Second Amended Complaint asserts claims under the Employee Retirement Income Security Act ("ERISA"), provisions 29 U.S.C. §1132(a)(1)(B) and 40 P.S. §532.6. Following Plaintiff's Second Amended Complaint, on March 16, 2012, all three Defendants filed Motions to Dismiss. Now before this Court, seeking to dismiss all claims pursuant to Fed. R. Civ. P. 12(b)(6), are MLIC's Motion to Dismiss ("MLIC Def. Mot. to Dismiss") (Dkt. No. 44), Arkema's Motion to Dismiss ("Arkema Def. Mot. to Dismiss") (Dkt. No. 47), and Mercer's Motion to Dismiss ("Mercer Def. Mot. to Dismiss") (Dkt. No. 48). The Court heard Oral Argument on the pending motions on June 20, 2012 (Dkt. No. 60). For the reasons that follow, Defendants' Motions will be granted in part and denied in part.

I. FACTUAL BACKGROUND

Frank J. Mullica was an employee at Arkema beginning in November 1999 and his employee insurance began during that time. (Second Amended Complaint (SAC) ¶2). While MLIC provided group life insurance to the employers, Arkema was the "policyholder and Plan Administrator" and Mercer was the "Benefits Administrator." (Id. at ¶¶ 3A-3B; Mullica Ex., ECF No. 31-4, p. 22).

Plaintiff married Lauren Benitez-Mullica in August, 2007 and the couple separated in the fall of 2009. (Id. at ¶ 9). Shortly after they married in 2007, the "spousal life [for $150,000] and accidental death and dismemberment (AD&D) insurance [for $213,000] began," with Plaintiff as the beneficiary. (Id. at ¶¶ 2, 10). Due to the pending divorce process, Plaintiff relied on the language of the Summary Plan Description (SPD) and terminated the coverage of the decedent in November 2009, which Plaintiff believed was required as part of their "legal separation." (Id. at ¶¶ 12A-B).¹ Plaintiff relied on the language of the SPD, but argues that "the term 'legally separated' in MLIC's policies and the SPD had no legal meaning and therefore, was ambiguous and misleading." (Id. at ¶ 13). Plaintiff and the decedent were never informed of the actual termination of the policy. (Id. at ¶ 15).

Following the death of Benitez-Mullica in January 2010, MLIC initiated its claims investigation as to whether Plaintiff and the decedent were "legally separated." (Id. at ¶ 17).Plaintiff also supplied MLIC with the death certificate, stating that the death was caused by a drug overdose in March 2010--an event not covered under the AD&D portion of the policy. (Id. at ¶ 18). Due to some overpayment by Plaintiff, MLIC tried to rectify this separate situation in April, 2010, by offering to reimburse Plaintiff the amount he overpaid in premiums on the decedent's insurance. (Id. at ¶ 19). On May 3, 2010, after investigating the claim, MLIC denied Plaintiff's claim due to his termination of the policy for the decedent and with the belief that only $50,000 of the $150,000 in coverage was ever issued.. (Id. at ¶¶ 20-21).

In the denial letter to Plaintiff, MLIC did not specify that the cause of death was excluded from the AD&D coverage, which prompted Plaintiff to hire counsel and request all documents used in the claims investigation process. (Id. at ¶¶ 22-25).² After further correspondence, Plaintiff initiated an appeal of MLIC's denial of coverage. (SAC at ¶¶ 26-29). Pursuant to the SPD, "the Claims Administrator had 60 days to 'review and answer' the 'appeal;'" however, after three months, Plaintiff received no response and MLIC had not requested an extension. (Id. at ¶ 30-31).

Five months later, counsel for MLIC wrote Plaintiff to inform him of the company's decision to deny the appeal. (Id. at ¶ 32). Plaintiff and his counsel allege that the lapse in time was MLIC performing "essentially a second claims review made under the guise of deciding plaintiff's appeal," using documents that were different from those used in the first claim investigation, which Plaintiff alleges is against Plan procedures. (Id. at ¶¶ 33-34). Furthermore, Plaintiff requested all documents MLIC used in the process, which he was entitled to, and alleges that he did not receive everything. (Id.). Plaintiff alleges that MLIC violated its fiduciary obligationswhen it denied Plaintiff benefits pursuant to ERISA §502(a)(1)(B) and 29 U.S.C. §1132(a)(1)(B). Consequently , Plaintiff brought suit to recover the benefits he alleges are due to him under the Plan. (Id. at ¶¶ 37-38).

Plaintiff also named Mercer and Arkema in the suit based on their possible "[creation] or [participation] in creating or distributing the confusing and/or misleading documents at issue described in paragraphs Nos. 11-15 and 30 and 30." (Id. at ¶¶ 41, 45). Plaintiff further alleges that Mercer "operated and maintained Arkema Benefits Center," while Arkema "administered the Plan" and thus both have a fiduciary duty to the plaintiff. (Id. at ¶¶ 42, 44 respectively).

II. LEGAL STANDARD

In deciding a motion to dismiss pursuant to Fed. R. Civ. P. Rule 12(b)(6), courts must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008). After the Supreme Court's decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), "threadbare recitals of a cause of action's elements, supported by mere conclusory statements" do not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable of the alleged misconduct." Id. (citing Twombly, 550 U.S. at 556). This standard, which applies to all civil cases, "asks for more than a sheer possibility that a defendant has acted unlawfully." Id. at 678; accord Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) ("All civil complaints must contain more than an unadorned the-defendant-unlawfully-harmed-me accusation."). Moreover, "the factual detail in a complaint [must not be] so undeveloped that it does not provide a defendant [with] the type of notice of claim which iscontemplated by Rule 8 [of the Federal Rules of Civil Procedure]." Villegas v. Weinstein & Riley, P.S., 723 F. Supp. 2d 755, 756 (M.D. Pa. 2010) (quoting Phillips, 515 F.3d at 232).³

III. DISCUSSION

A. Claims Against MLIC

MLIC's Motion to Dismiss is denied in part and granted in part. Each of the claims is discussed separately.⁴

1. Preemption⁵

"To assure uniform treatment, Congress provided that where a plan is covered by ERISA, all state laws relating to the [ERISA-qualified] plan are preempted." Tannenbaum v. Unum Life Ins. Co. of America, 2006 WL 2671405, at *2 (E.D.Pa. Sept. 15, 2006) (citations omitted). However, if a state law directly regulates the business of insurance companies within the state, then the state law is "saved" for preemption purposes. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987).The question here is whether the Pennsylvania Insurance Act, under which Plaintiff brings his claims, is pre-empted by ERISA.

As discussed in Metropolitan Life Ins. Co. v. Taylor, if a "suit [is] by a beneficiary to recover benefits from a covered plan, [then] it falls directly under §502(a)(1)(B) of ERISA, which provides an exclusive federal cause of action for resolution of such disputes." 481 U.S. 58, 62-3 (1987). The United States Supreme Court in Pilot Life Ins. Co. v. Dedeux further explained ERISA preemption, noting that state law is generally preempted but "the savings clause excepts from the pre-emption clause laws that 'regulate insurance.'" Pilot Life, 481 U.S. at 45. The plaintiff in Pilot Life sued his life insurance company for claims somewhat similar to Mullica's, such as breach of fiduciary duty, in relation to the processing of a claim for benefits. Despite plaintiff's suit against the life insurance company, the Court explained that "if a state law 'relate[s] to... employee benefit plan[s],' it is pre-empted." Id. As a result, the Court ultimately preempted his claims. Id.; see also Bieber v. Nace, No. 1:1-CV-0718, 2011 WL 6180719 (M.D.Pa. Dec. 13, 2011). The purpose and legislative intent of ERISA must also be considered when interpreting a state law to determine whether it must be pre-empted. Similar to the plaintiff in Pilot Life, Mullica's claims would be pre-empted because of "the conclusion that ERISA's civil enforcement remedies were intended to be exclusive." Pilot Life, 481 U.S. at 54. However, there are still other factors to be considered before preemption is given force. See FMC Corp. v. Holliday, 498 U.S. 52 (1990). (state laws regulating insurance companies are pre-empted if the plan at the center of the claim is self-funded); Hall v. Pennwalt Group Comprehensive Medical Expense Benefits Plan, 746 F.Supp. 507 (E.D.Pa. 1988). (setting forth three-factor test to determine if a state law "falls within the Act's reference to the 'business of insurance.'")

The Pennsylvania statute here regulates insurance companies and policies, but it is unclear how far the statute reaches in terms of its effect on these benefits plans. Furthermore, it is unclear whether MLIC is a self-funded plan; this determination would affect the possible preemption of the plan from state laws. For the present motion, however, this Court must accept Plaintiff's allegations regarding the plans as true. Discovery may yield information regarding the plan's operation that defeats...