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Suter v. Unum Life Insurance Company of America

United States District Court, E.D. Virginia, Alexandria Division

February 12, 2017

Kenette Suter, Plaintiff,
UNUM Life Insurance Company of America, Defendant.


          Liam O'Grady United Stales District Judge.

         This matter comes before the court on Plaintiff Kenette Suter's plea for declaratory judgment against UNUM Life Insurance Company of America ("UNUM") under the Employee Retirement Income Security Act of 1974 ("ERISA") seeking life insurance benefits due to her, as beneficiary under the terms of her husband Michael Suter's employee benefit plan. Plaintiff alleges that Defendant failed to provide benefits under ERISA, failed to conduct a full and fair review under ERISA, and breached its fiduciary duty. The parties cross-moved for summary judgment. For the reasons discussed below, Defendant's Motion for Summary Judgment, Dkt. No. 17, is DENIED and Plaintiffs cross-Motion for Summary Judgment, Dkt. No. 20, is GRANTED. The matter is remanded to the Plan Administrator for a review consistent with this memorandum opinion.

         I. Background

         The following factual background, policy information, and procedural history are taken from the claim folder associated with the ERISA review process. As discussed in Part II, Plaintiff disputes some of these factual representations but the claim folder remains the bedrock of the Court's analysis in this case. See Williams v. Metro Life Ins. Co., 609 F.3d 622, 631 (4th Cir. 2010).

         A. Factual Background

         Michael Suter was the majority shareholder, president, and CEO of International Preparedness Associates, Inc. ("IPA"). Mr. Suter formed IPA with Scott Freeman in June 2007. Plaintiff also worked at IPA, where she was responsible for payroll. IPA sponsored a group employee benefit plan that included the life insurance policy at issue in this case, with an effective date of coverage of October 1, 2009. As of October 1, 2013, Mr. Suter had $250, 000 of life insurance coverage. Sometime after obtaining coverage, Mr. Suter contracted laryngeal cancer. By April 2014, Mr. Suter's illness prevented him from coming into the office. Mr. Suter attempted, and did continue, to work from home via email until May 2014. On May 6, 2014, Mr. Suter and Mr. Freeman emailed one another about a potential sale of IPA. There is no record of any work-related emails from Mr. Suter after that date. Pursuant to an agreement with Mr. Freeman, Mr. Suter continued to collect his normal paycheck until June 1, 2014. Plaintiff also issued a paycheck to Mr. Suter for June 1-15, 2014.

         Around the same time that Mr. Suter received his final paycheck from IPA, Plaintiff inquired with the IPA insurance broker about accelerating death benefits under Mr. Suter's life insurance policy. The broker contacted Defendant on June 11, 2014, and Defendant sent the documents required to accelerate benefits to the broker and to Plaintiff that day. In the same correspondence, Defendant also advised that Mr. Suter had not yet filed for short or long-term disability benefits. Defendant provided the application paperwork for these benefits along with the accelerated benefit paperwork. Defendant has no record of a request by Plaintiff or Mr. Suter to accelerate benefits or apply for short or long term disability.

         Mr. Suter passed away on July 18, 2014. Plaintiff filed a claim for benefits with Defendant sometime shortly thereafter.

         A. The Policy

         IPA maintains an employee benefit plan through Defendant that sponsors a life insurance policy, policy number R0140020 ("the Policy"), for its employees. In general, the Policy provides for life insurance benefits in the event that an employee passes away while covered by the Policy.

         The Policy defines the terms necessary for its life insurance benefits determinations. The Policy states that coverage "ends on the earliest of: ... [t]he date you no longer are in an eligible group;... [t]he last day you are in active employment unless continued due to a covered layoff or leave of absence or due to an injury or sickness, as described in this certificate of coverage.[1] The Policy defined "eligible group" as "[o]wners in active employment in the United States with the Employer" subject to a minimum hours requirement of 40 hours a week to maintain coverage. The policy also provides an exception to active employment for employees who are "not working due to sickness or injury" whereby an employee can maintain coverage until their retirement date so long as premiums are paid for the duration.

         The Policy also allows an employee to carry on their benefits by converting them to an individual life insurance policy after employment terminated. To do so, the employee is required to apply for the coverage and pay the first premium within 31 days of termination. The Policy also allowed for coverage to continue in the event of disability claims by policy holders less than 60 years of age. Finally, the Policy allowed for the acceleration of death benefits for terminally ill patients where: (a) an election for such benefit was made "in writing, on a form acceptable to UNUM, " (b) the participant was terminally ill; (c) a physician certification of life expectancy less than twelve months; and (d) UNUM approved the certification. The employee and the employer are each required to complete separate sections of the accelerated benefit claim form in order for UNUM to process the claim. The policy defines terminal illness as one which reduces life expectancy to less than 12 months.

         Defendant is responsible for administering the plan and making any benefits determinations under the plan. The Policy explicitly disclaims an agency relationship between the participant and the Defendant, by and through the employer.

         B. Administrative History

         After receiving notice of Mr. Suter's passing, Defendant submitted a claim to IP A seeking information necessary to assess the benefits claim. IPA's finance director, Brittany Berry, completed the claim form on August 26, 2014. Ms. Berry stated on the form that Mr. Suter's employment had "terminated" on June 15, 2014 and that Mr. Suter's last day physically present in the office was April 28, 2014. In response to the question: "was this employee terminated", Ms. Berry responded "Yes."

         Defendant also called Ms. Berry on September 3, 2014 to confirm the information provided on the claim form. Ms. Berry directed Defendant to speak with Mr. Freeman who confirmed that Mr. Suter was terminated on June 1, 2014 but paid until June 15, 2014. Mr. Freeman also emailed Defendant two days later to explain that he and Mr. Suter were co-owners of IP A and recounted that Mr. Suter had become too ill to work in the office in April 2014, continued to correspond via email until sometime in May 2014, and that it was agreed that he would receive a salary until June 1, 2014; though Mr. Freeman acknowledged that a final paycheck was actually issued on June 15, 2014. This email exchange with Defendant led to a second phone call the same day whereupon Mr. Freeman clarified that Mr. Suter was not fired, and therefore he did not prefer to describe him as "terminated" but that he had ceased to be an employee as of June 1, 2014.

         As part of the diligence process, Defendant also reviewed its own records to confirm that Mr. Suter had not sought short or long term disability benefits and had not attempted to convert his group policy to individual coverage. There is no evidence in the record that Defendant followed up with Plaintiff or IP A regarding the acceleration of benefits claim form which was sent to Plaintiff, upon her request, on June 11, 2014. Defendant also discovered that premiums on the policy had been paid through August 1, 2014. Upon discovering this, Defendant credited IPA's bill for all premiums paid on Mr. Suter's behalf after June 1, 2014.

         On the basis of the foregoing diligence, Defendant determined that Mr. Suter was no longer an employee of IP A at the time of his death and was therefore not covered by the Policy. Defendant issued a denial of benefits letter and summary of findings to Plaintiff on September 11, 2014.

         Plaintiff, through counsel, appealed Defendant's decision on December 9, 2014. Plaintiff argued on appeal that Mr. Suter's employment had not ended on June 1, 2014 because Mr. Freeman did not tell Defendant that Mr. Suter's employment had ended. Plaintiff offered as evidence a May 6, 2014 email exchange between Mr. Freeman and Mr. Suter regarding the sale of IPA. Plaintiff also contended that Mr. Suter was still the owner of IP A at the time of his death. Defendant upheld its denial on January 30, 2015. In the ...

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