Yale v. Sun Life Assurance Co.

TERRY J. YALE, Plaintiff, v. SUN LIFE ASSURANCE COMPANY OF CANADA, a Michigan corporation, Defendant.

1:12-cv-01429-AWI-SAB

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

Date of Trial: June 17, 2013

Date Submitted: September 24, 2013

Dated: October 30, 2013

JUDGMENT

I. INTRODUCTION

The Court held a bench trial in the above-captioned matter on June 17, 2013, with attorney Russell Gene VanRozeboom appearing for plaintiff Terry J. Yale ("Plaintiff" or "Yale") and attorney Dennis J. Rhodes appearing for defendant Sun Life Assurance Company of Canada ("Defendant" or "Sun Life"). The Court then set a briefing schedule directing the parties to file and serve proposed findings of fact and conclusions of law. After proposed findings of fact and conclusions of law were filed, the Court took the matter under submission. Having consideredthe argument of counsel and all competent and admissible evidence submitted, the Court hereby enters judgment in favor of Sun Life and against Yale for reasons discussed below.

II. FACTS AND PROCEDURAL BACKGROUND

The Court refers the parties to previous orders for a complete chronology of the proceedings. On August 30, 2012, Yale filed her complaint against Sun Life for recovery of plan benefits and attorneys' fees pursuant to 29 U.S.C. § 1132. Yale alleged as follows:

"Plaintiff is the beneficiary under a group life insurance policy issued as part of an employer plan established and maintained by Watts Water Technologies (the 'Plan'). Plaintiff's claims arise under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. section 1001, et seq., and specifically section 1132(a)(1)(B) thereof."

Yale further alleged:

"Sun [Life] was the Plan Administrator for the Plan and issued the group life policy under which [P]laintiff claims benefits. [¶] . . . [¶] At all relevant times mentioned herein, [P]laintiff was an employee of Watts Water Technology and eligible to participate in Plan benefits."

Yale further alleged:

"During an open enrollment period in December 2009, [P]laintiff submitted an application under Sun Life's Group Policy number 27578 for $250,000 of Optional Dependent Life Insurance benefits for [P]laintiff's husband, John H. Yale. As the spouse of [P]laintiff, John H. Yale was eligible for up to $250,000 of coverage."

Yale further alleged:

"In January 2010, Sun Life processed the application submitted by [P]laintiff, calculated the premiums applicable for $250,000 of coverage for John H. Yale, and sent monthly invoices to Watts Water Technologies confirming the $250,000 of coverage andpremium therefor. All monthly invoices sent by Sun Life to [P]laintiff's employer were duly paid."

Yale further alleged:

"John Yale died unexpectedly on October 10, 2010, from septic shock after Sun Life had billed and collected ten consecutive months of premiums for the $250,000 of coverage. During the time it was billing and collecting premiums for the $250,000 of life insurance coverage for John Yale, Sun Life did not notify anyone that additional paperwork was needed for this coverage amount; nor did Sun Life attempt to refund any premium it had collected or otherwise give notice that it was cancelling or limiting coverage."

Yale further alleged:

"On October 18, 2010, [P]laintiff submitted a claim for policy benefits of $250,000 as the beneficiary under the policy. By letter dated December 20, 2010, Sun Life refused to pay any benefits over $100,000. [¶] On June 8, 2011, [P]laintiff appealed Sun Life's denial of $150,000 in death benefits. On November 10, 2011, Sun Life denied [P]laintiff's appeal and refused to pay any portion of the additional $150,000 death benefit. Plaintiff has exhausted her administrative remedies under ERISA and is now entitled to seek recourse with this Court."

Yale further alleged:

"By denying $150,000 of death benefits, Sun Life has wrongfully breached its obligations owing to [P]laintiff as a beneficiary under Group Policy number 27578 and [P]laintiff is entitled to an amount in the sum of $150,000, plus interest. [¶] 29 U.S.C. sec. 1132(g)(1) authorizes this Court to award reasonable attorney fees to a beneficiary who brings an action to recover benefits under the Plan. Plaintiff has retained the services of legal counsel and has necessarily incurred attorney fees and costs in prosecuting this action in a final amount which is currently unknown. Plaintiff therefore requests and [sic] award of reasonable attorney fees according to proof."

On October 5, 2012, Sun Life filed its answer to Yale's complaint, asserting specific denials of certain allegations and fourteen affirmative defenses. By its tenth affirmative defense, Sun Life alleged Yale's claim was barred by her failure to provide evidence of insurability.

On February 12, 2013, Sun Life lodged its administrative record with the Court. On April 24, 2013, the parties filed their respective trial briefs. On May 15, 2013, the parties filed their responding trial briefs. The Court convened for a one-day bench trial on June 17, 2013. Pursuant to trial, Yale filed her proposed findings of fact and conclusions of law on August 29, 2013; Sun Life filed its proposed findings of fact and conclusions of law on August 30, 2013.

III. LEGAL STANDARD

Under 29 U.S.C. § 1132(a)(1)(B), the statute invoked by Yale, "[a] civil action may be brought--[¶] (1) by a participant or beneficiary [of an employee benefit plan]-- [¶] . . . [¶] (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). "[A] denial of benefits challenged under [29 U.S.C.] § 1132(a)(1)(B)," as in this case, "is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) (italics original). "[I]f the plan does confer discretionary authority as a matter of contractual agreement, then the standard of review shifts to abuse of discretion." Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006) (citing Bruch, supra, 489 U.S. at 115) (emphasis original). The plan at issue here provides in pertinent part:

"The Plan Administrator has delegated to Sun Life its entire discretionary authority to make all final determinations regarding claims for benefits under the benefit plan insured by this Policy. This discretionary authority includes, but is not limited to, the determination of eligibility for benefits, based upon enrollmentinformation provided by the Policyholder, and the amount of any benefits due, and to construe the terms of this Policy.

Any decision made by Sun Life in the exercise of this authority, including review of denials of benefits, is conclusive and binding on all parties. Any court reviewing Sun Life's determinations shall uphold such determination unless the claimant proves Sun Life's determinations are arbitrary and capricious."

(Doc. 11-1 at 113.) Because the plan unambiguously vests the administrator with discretion both to determine a participant's eligibility for benefits and to construe the terms of the plan itself, an abuse of discretion review applies. See Abatie, supra, 458 F.3d at 963-65. The Court's task is to determine whether an abuse of discretion occurred. "In an action tried on the facts without a jury," as here, "the court must find the facts specially and state the conclusions of law separately. The findings and conclusions may be stated on the record after the close of the evidence or may appear in an opinion or a memorandum of decision filed by the court." Fed. R. Civ. P. 52(a)(1). In doing so, the court "can evaluate the persuasiveness of conflicting testimony and decide which is more likely true." Kearney v. Standard Ins. Co., 175 F.3d 1084, 1095 (9th Cir. 1999); accord Schultz v. Butcher, 24 F.3d 626, 632 (4th Cir. 1994) ("For a bench trial . . . , the district court can hear relevant evidence, weigh its probative value and reject any improper inferences").

IV. FINDINGS OF FACT AND CONCLUSIONS OF LAW

Yale has been employed by Watts Water Technologies ("Watts") as a sales representative since March 2000. (Doc. 11-1 at 23, 25.) As recently as 2009, Watts offered its employees and their dependents voluntary life insurance through a policy administered by Reliance Standard Life Insurance Company ("Reliance"). Yale and her husband John Yale (not a Watts employee) had life insurance coverage under the Reliance policy in the amount of $100,000 each. (Id. at 11-14.)

Watts transferred its life insurance policy from Reliance to Sun Life effective January 1, 2010. (Doc. 11-1 at 23, 75.) By its terms, the Sun Life policy allowed Watts's employees to elect a maximum dependent spouse optional benefit of $250,000, but with a guaranteed issue amount - defined as "the maximum amount of insurance available under the policy without evidence of insurability" - equal to the amount of dependent spouse optional life insurance the employee had in force on December 31, 2009. (Id. at 82, 86.) The Sun Life policy provided:

"If the Employee's or Dependent's amount of insurance exceeds the Guaranteed Issue Amount available under this Policy, any amount in excess of the Guaranteed Issue Amount is available to the Employee or Dependent only if he has furnished Evidence of Insurability to Sun Life and has been approved for any excess amount above the Guaranteed Issue Amount."

(Id. at 86.) The Sun Life policy further provided:

"Evidence of Insurability means a statement of proof of an Employee's or Dependent's medical history upon which acceptance for insurance will be determined by Sun Life. The Employee or Dependent must agree to submit to a paramedical examination and/or provide copies of medical records, if requested by Sun Life. Sun Life will

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