Skelton v. Bloomington

33 F.4th 968

Corey SKELTON, individually and as Trustee for the next of kin of Decedent Beth Michelle Skelton, Plaintiff - Appellee

v.RADISSON HOTEL BLOOMINGTON; Water Park of America, Defendants

Reliance Standard Life Insurance Company, a Member of the Tokio Marine Group, Defendant - Appellant

Marc L. Messina, Defendant

Department of Labor, Amicus on Behalf of Appellee(s)

No. 21-2641

United States Court of Appeals, Eighth Circuit.

Submitted: March 16, 2022

Filed: May 6, 2022

Jodell M. Galman, Galman Law Offices, Mahtomedi, MN, for Plaintiff-Appellee.

Joshua Bachrach, Wilson & Elser, Philadelphia, PA, William Daniel Hittler, I, Nilan & Johnson, Minneapolis, MN, for Defendant-Appellant.

Sarah Denise Holz, U.S. Department of Labor, Office of the Solicitor, Washington, DC, for Amicus on Behalf of Appellee(s).

Before GRUENDER, BENTON, and ERICKSON, Circuit Judges.

BENTON, Circuit Judge.

Corey Skelton sued Reliance Standard Life Insurance Company for mishandling his wife's enrollment for supplemental life insurance and then declaring her ineligible for it after she died. The district court¹ granted him summary judgment, finding the company violated the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. Having jurisdiction under 28 U.S.C. § 1291, this Court affirms.

I.

Corey Skelton was married to Beth M. Skelton ("Skelton"), a corporate group sales manager at Davidson Hotels LLC.

Davidson operated a welfare benefits plan ("Plan") that provided dental, health, life and long-term disability benefits for employees. Davidson's documents identified it as the "Plan Administrator" with general "discretionary authority to interpret the Plan," and determine eligibility for coverage and eligibility for claims.

Davidson entered a policy contract ("Policy") with Reliance Standard Life Insurance Company to provide life insurance for the Plan. Reliance "serve[d] as the claims review fiduciary with respect to the [life] insurance policy and the Plan." The Policy granted it "final and binding" "discretionary authority to interpret the Plan ... and to determine eligibility for benefits."

Reliance also had sole discretion to determine eligibility for supplemental life insurance under various circumstances, including when an employee sought it more than 31 days after starting employment. In this circumstance, the employee was required to submit an Evidence of Insurability ("EOI"), demonstrating "proof of good health." Insurance would not become effective until Reliance "approve[d] [that] required proof of good health."

However, if an applicant for supplemental life insurance was changing coverage amounts within 31 days of "a life event change (such as marriage, birth, or specific changes in employment status)," then the applicant was not required to submit an EOI and receive Reliance's approval.

Davidson collected premiums from employees and remitted them to Reliance in one monthly check for all the premiums due, along with a worksheet listing only the total number of employees insured. This is called "bulk billing." Reliance's system did not collect information that would allow it to assess whether Davidson sent mistakenly billed premiums to Reliance.

When Skelton began work at Davidson in April 2013, she was automatically enrolled in a $100,000 basic life insurance policy under the Plan, but she did not select supplemental insurance. When Skelton's husband regained custody of his son—her stepson—in November 2013, she asked Davidson's Human Resources Director if changing custody of her stepson qualified as a life event that allowed her to elect supplemental life insurance. The Director told her it did (although Reliance now avers that it does not unless the employee adopts the child). On November 22, 2013, Skelton applied for the maximum supplemental life insurance available, $238,000, for herself.

In response, Reliance sent Skelton a document, titled "Important Team Member Instructions," stating that Skelton "enrolled in coverage ... that requires proof of good health," requiring Skelton "prove Evidence of Insurability." Instructions , DCD 168-1 at 55. The document's letterhead had both Reliance's and Davidson's logos. It said, "The completed EOI should be returned directly to Reliance" at its mailing address. It stated, "If there is required information missing from the form, Reliance ... will return it to you for completion." The document explained:

Until your application ... is approved by the Medical Underwriting Department, the amount of your ... Supplemental Life Insurance coverage that is subject to evidence of insurability will not go into effect. You will not be charged premiums for amounts subject to evidence of insurability until the approval is granted .... If you have any questions regarding the EOI form ... please contact Reliance[’s] Customer Care Team.

Id. (emphasis added). The parties dispute whether Skelton submitted the EOI to Reliance. But she never received any notice that the form had or had not been received during her time at Davidson.

Instead, Skelton received a "Benefit Verification / Deduction Authorization" document listing her as having "Supplemental Term Life" insurance under the "Reliance Voluntary Life" option, effective January 1, 2014. "Regain[ing] custody of dependent child" was listed as the "Reason for Completing Form."

In February 2014, Skelton went on medical leave and began receiving disability benefits. Davidson notified her that she was required to pay premiums to maintain her benefits while on disability. Skelton paid premiums from February through May 2014. In July 2014, Davidson informed Skelton she was past due on her premiums for May 24, 2014, through July 20, 2014.

In March 2015, Reliance sent Skelton a notice that she might be eligible to have the premiums waived based on her disability. Skelton applied for and received a waiver of her premiums, retroactive to March 1, 2014.

On December 6, 2015, Skelton died. Her husband, Plaintiff-Appellee Corey Skelton, contacted both Davidson and Reliance about her supplemental life insurance. On March 28, 2016, Davidson replied that Skelton's supplemental life insurance had been "in a pending status" ever since she applied because, "per Reliance Standard, there are no records that the completed EOI form was ever received." Davidson acknowledged it sent letters "incorrectly" listing "pending premiums" that "should not have been requested until coverage was actually approved by Reliance Standard's Medical Underwriting Department." Davidson enclosed a check for $133.12, the "maximum amount" of premiums that could have been incorrectly charged to Skelton between February and August 2014.

Corey Skelton sued Davidson, Reliance, and other parties. Count II of his Second Amended Complaint alleged that Davidson and Reliance violated ERISA by mishandling his wife's supplemental life insurance enrollment. Davidson settled with him, paying $250,000, with $175,000 for the ERISA claim. He and Reliance then filed cross-motions for summary judgment. The district court denied Reliance's motion and granted his, finding Reliance breached its fiduciary "duty to ensure its system of administration did not allow it to collect premiums until coverage was actually" effective. The district court subtracted the amount Davidson paid for the supplemental life insurance claim, and ordered Reliance to pay damages of $63,000, plus pre- and post-judgment interest. Reliance appeals.

This Court reviews de novo a grant of summary judgment, including whether a breach of ERISA fiduciary duty occurred. See Torgerson v. City of Rochester , 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc); Herman v. Mercantile Bank, N.A. , 137 F.3d 584, 586 (8th Cir. 1998).

II.

Reliance had a fiduciary role in Skelton's attempt to seek supplemental life insurance.

Corey Skelton sued under 29 U.S.C. § 1132(a)(1)(B), which allows an ERISA-plan participant or beneficiary to recover benefits due under the plan, and under § 1132(a)(3), which allows a participant to obtain "appropriate equitable relief" to redress ERISA fiduciary violations. See id. § 1132(a). The parties agree that ERISA applies to the Plan. However, Reliance argues that it did not have a fiduciary duty relevant to this dispute because Davidson collected the premiums before forwarding them. Reliance is wrong.

Under ERISA, an entity "is a fiduciary with respect to a plan" if it "has any discretionary authority or discretionary responsibility in the administration of such plan." 29 U.S.C. § 1002(21)(A) ; see Maniace v. Com. Bank of Kansas City , 40 F.3d 264, 267 (8th Cir. 1994) ("[D]iscretion is the benchmark for fiduciary status.").

However, " ‘[f]iduciary status ... is not an all or nothing concept. A court must ask whether a[n] [entity] is a fiduciary with respect to the particular activity in question.’ " Maniace , 40 F.3d at 267 (cleaned up), quoting Kerns v. Benefit Tr. Life Ins. Co. , 992 F.2d 214, 217 (8th Cir. 1993). "[A]n insurer who is not the plan administrator has no ERISA fiduciary duty" for a particular activity "unless the policy documents or the insurer's past practices have created [such] an obligation." Kerns , 992 F.2d at 217.

The Policy makes Reliance a fiduciary for Skelton's eligibility and enrollment in supplemental life insurance.

The Policy designated Reliance as the "claims review fiduciary," with "final and binding" "discretionary authority to interpret the Plan and the insurance policy and to determine eligibility for benefits." Policy at 11.0, DCD 168-1 at 25; see Prudential Ins. Co. of Am. v. Doe , 140 F.3d 785, 789-90 (8th Cir. 1998) (holding insurer was fiduciary where it "interpreted the language of the plan and reviewed and decided" the claim at issue); Kerns , 992 F.2d at 216-17 (recognizing an insurance company is a fiduciary where it performs a claims "review function"); Silva v. Metro. Life Ins. Co. , 762 F.3d 711, 716-17 & n.5, 720-24 (8th Cir. 2014) (holding insurer, with "discretionary authority to...