Salyers v. Metro. Life Ins. Co.

871 F.3d 934

Susan SALYERS, an individual, Plaintiff-Appellant,

v.METROPOLITAN LIFE INSURANCE COMPANY, Guardian Ad Litem, MetLife, Inc., Defendant-Appellee.

No. 15-56371.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 6, 2017 Pasadena, California

Filed September 20, 2017

Christian J. Garris (argued), Law Offices of Christian J. Garris, Los Angeles, California, for Plaintiff-Appellant.

Ian Seth Linker (argued), Metropolitan Life Insurance Co., New York, New York; Misty A. Murray, Hinshaw & Culbertson LLP, Los Angeles, California; for Defendant-Appellee.

Before: Harry Pregerson, Richard A. Paez, and Marsha S. Berzon, Circuit Judges.

OPINION

PREGERSON, Circuit Judge:

Plaintiff-Appellant Susan Salyers ("Salyers"), a nurse at Providence Health & Services ("Providence"), bought a $250,000 life insurance policy on her husband through an ERISA-governed benefits plan. Salyers paid premiums commensurate with that amount of coverage. When Salyers's husband died shortly thereafter, Defendant-Appellee Metropolitan Life Insurance Company ("MetLife") paid out only $30,000. MetLife refused to pay the full $250,000 because Salyers had not submitted evidence of insurability with her coverage election, as required under the plan. After unsuccessfully appealing the denial of benefits through MetLife's administrative process, Salyers filed suit against MetLife. The district court conducted a bench trial and entered judgment for MetLife. Salyers appealed. We reverse.

FACTUAL AND PROCEDURAL BACKGROUND

Salyers is a nurse at Providence. She was a participant in an ERISA-governed employee welfare benefits plan ("the Plan") that provided, among other benefits, dependent life insurance. MetLife issued the group policy that funded life insurance benefits under the Plan.

At the time Salyers first applied for dependent life insurance in 2013, the Summary Plan Description listed eligibility requirements for Dependent Life Insurance coverage and described "How the Plan Works":

Each fall you elect your Dependent Life benefit options to be effective for the next calendar year. During your first enrollment as newly benefits eligible employee [sic], you may select any amount of spouse/Adult Benefit Recipient domestic partner coverage up to $50,000 without evidence of insurability (statement of health). After the first year, spouse/Adult Benefits Recipient domestic partner coverage amounts may be increased by one level per year for coverage levels up to and including $50,000. No evidence of insurability is required for this increase. Evidence of insurability is required for any coverage amount above $50,000 or for any increase of more than one benefit level.

On August 15, 2013, Salyers submitted her benefits elections to Providence. On the Benefits Enrollment Form, which warns that "MetLife may require evidence of insurability depending on your election," Salyers elected life insurance coverage in the amount of $20,000 for herself and $20,000 for her spouse, Gary Wolk ("Gary"). Because Salyers elected only $20,000 in coverage for Gary, no evidence of insurability was required.

Although Salyers elected only $20,000 in coverage for Gary, Providence mistakenly entered $500,000 in its system. Due to this administrative error, Providence deducted premiums from Salyers's paycheck based on $500,000 in coverage during the last four months of 2013. During that time, neither Providence nor MetLife asked Salyers to submit a statement of health or any other evidence of insurability for Gary's 2013 coverage.¹

During the next open enrollment period, Salyers elected $250,000 in life insurance coverage for Gary, effective January 1, 2014. The 2014 Plan documents reiterated that evidence of insurability was required for elections of coverage of over $50,000. The Plan's 2014 open enrollment guide stated that "any coverage you elect requiring a statement of health will not take effect until approved by MetLife." Salyers did not submit a statement of health or other evidence of insurability with her 2014 election. Nonetheless, Salyers's premium payments were adjusted to reflect her new election of $250,000 in coverage, and, again, neither Providence nor MetLife asked for a statement of health or other evidence of insurability.²

Gary died on January 10, 2014. On January 15, 2014, Providence sent a letter to Salyers offering its condolences and stating that Salyers had $250,000 in coverage for Gary. On January 20, 2014, Salyers submitted a claim for benefits to MetLife. Accompanying the claim was an Employer's Statement from Providence, which said that Salyers had been enrolled in the Plan effective September 1, 2013, and that she had $250,000 in dependent life insurance coverage for Gary.

Upon receiving the claim, MetLife confirmed with Providence that there was no statement of health on file for Gary, which led Providence to discover its keystroke error from the 2013 enrollment. Providence then submitted a revised Employer's Statement to MetLife, which stated that Gary had life insurance coverage in the amount of $30,000. This amount reflected the coverage for which Gary was eligible under the Plan without providing evidence of insurability: the initial election of $20,000 in 2013, plus a "one level" increase of $10,000 for the following year.

MetLife ultimately paid Salyers $30,000, and Providence refunded the premiums that were deducted from Salyers's paychecks based on the unapproved higher coverage amount. Salyers called MetLife to ask why it had not paid the full $250,000. Around that time, a MetLife employee wrote a note in the file explaining that the full amount should be paid:

Providence has asked if we can pay this, since the employee had been enrolled in this amount and was paying premiums. On their enrollment confirmations it was showing this amount, so the employee thought that was their coverage. I do agree with their assessment that this should be paid since the $250,000 is what the employee thought they had.

Despite that recommendation, counsel for Providence explained to Salyers's counsel that Salyers was not entitled to the additional $220,000 because she had failed to submit evidence of insurability as required by the Plan. Salyers appealed to MetLife in a letter dated July 15, 2014.

After reviewing Salyers's appeal and the administrative claim file, MetLife responded that additional benefits were not payable because MetLife had not received and approved evidence of insurability for Gary as required by the Plan. MetLife claimed that its receipt of premiums did not create coverage.

In a letter dated August 12, 2014, Salyers's counsel appealed MetLife's formal denial. After another review of the claim file and Salyers's appeal letter, MetLife upheld its initial denial of benefits on the same grounds as before, and so notified Salyers by letter dated August 22, 2014. In that letter, MetLife explained that it re-examined the entire claim file and that no new information had been presented to change the denial decision.

Salyers then filed suit against MetLife in the U.S. District Court for the Central District of California. She claimed that MetLife should be estopped from contesting coverage or, in the alternative, that MetLife waived its right to enforce the evidence of insurability requirement. The district court conducted a bench trial on July 28, 2015, and concluded that Salyers had not sustained her burden of establishing an entitlement to the unpaid benefits. The district court entered judgment on August 14, 2015. This timely appeal followed.

JURISDICTION AND STANDARD OF REVIEW

This court has jurisdiction under 28 U.S.C. § 1291. We review the district court's findings of fact for clear error and its legal findings de novo. See Pannebecker v. Liberty Life Assur. Co. of Boston , 542 F.3d 1213, 1217 (9th Cir. 2008).

DISCUSSION

Salyers raises three arguments on appeal: (1) MetLife waived the evidence of insurability requirement because it did not ask Salyers for a statement of health, even as it accepted her premiums for $250,000 in coverage; (2) MetLife should be estopped from contesting coverage based on the evidence of insurability requirement; and (3) MetLife did not conduct a full and fair review of Salyers's claim. Because we conclude that MetLife waived the evidence of insurability requirement, we need not reach Salyers's other claims.

A. Salyers's Waiver Claim

A waiver occurs when "a party intentionally relinquishes a right" or "when that party's acts are so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished." See Intel Corp. v. Hartford Accident & Indem. Co. , 952 F.2d 1551, 1559 (9th Cir. 1991). Courts have applied the waiver doctrine in ERISA cases when an insurer accepted premium payments with knowledge that the insured did not meet certain requirements of the insurance policy. See, e.g. , Gaines v. Sargent Fletcher, Inc. Grp. Life Ins. Plan , 329 F.Supp.2d 1198, 1222 (C.D. Cal. 2004) (holding that an insurer waived its right to rely on evidence of insurability requirement as grounds for denial of benefits by receiving payments without "giving any indication" that the insured had failed to submit evidence of insurability); Pitts v. Am. Sec. Life Ins. Co. , 931 F.2d 351, 357 (5th Cir. 1991) (finding waiver in ERISA action where insurer continued accepting payments after learning of plan participant's breach of policy requirements).

This is not, however, a straightforward waiver case, in which the insurer had actual notice of the facts and failed to act. As the district court found, MetLife and Providence created a system in which Providence was responsible for interacting with plan participants and MetLife remained largely ignorant of individual plan participants' coverage elections. Because of this compartmentalized system, until Salyers made her claim for benefits, MetLife did not know that (1) premiums had been deducted from Salyers's paycheck or (2) Salyers...