Opinion
Case No. 1:03-CV-817.
June 16, 2004
Randy S. Hyrns, for Plaintiff(s).
Michael R. Shpiece, for Defendant(s).
OPINION
Plaintiffs, Shirley and Michael Benson (the "Bensons"), filed their complaint in this case against Defendant, Assurity Life Insurance Company ("ALIC"), on August 20, 2003, in the 43rd Circuit Court for the State of Michigan, alleging claims based upon a group life insurance policy issued by ALIC covering the Bensons' deceased son, Joshua Benson ("Joshua"). The Bensons alleged that the policy was issued through Joshua's former employer, Shawnee Specialties, Inc. ("Shawnee"). ALIC removed the case to this Court on November 12, 2003, on the basis that the Bensons' claims are subject to and preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 to 1461. Following removal, the Bensons filed an amended complaint alleging claims under ERISA for benefits and for breach of fiduciary duty.
Presently before the Court are the parties' briefs setting forth their arguments with respect to the Court's review of ALIC's denial of benefits. The Court will treat the parties' briefs as cross-motions for judgment on the administrative record, the alternative to summary judgment in ERISA denial of benefits cases. See Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 619 (6th Cir. 1998). The parties agree that the Court must review ALIC's decision under the arbitrary and capricious standard of review. For the reasons set forth below, the Court concludes that based upon its review of the administrative record, ALIC is entitled to judgment because its denial of benefits was not arbitrary and capricious.
Facts
Joshua was pronounced dead on October 22, 2001. At the time of his death, Joshua was employed by Shawnee and was covered by Group Life Insurance Policy No. G-600-200-3082 (the "Policy"), issued by ALIC to Shawnee. The Policy provided death benefits in the amount of $20,000. At the time of Joshua's death, the Policy contained the following exclusion:
No Life Insurance benefits will be paid for a) any loss which results directly or indirectly, wholly or partly, from self-destruction or attempted self-destruction or intentionally self-inflicted injury while sane or insane; . . . c) taking part in the commission of an assault or a crime. . . .
(Administrative R. at AR029, hereafter "A.R. ____".) Joshua's designated beneficiary at the time of his death was Mara Ann Strebs. Mara Ann Strebs subsequently executed an assignment of her rights under the Policy to Groner Funeral Home, and Groner Funeral Home thereafter assigned its rights to the Bensons.
Joshua's death certificate, issued January 17, 2002, lists "Methadone, Methamphetamine, Amphetamine Intoxication" as the immediate cause of death. Item 33a of the death certificate states that the death was an "Accident," and item 33d, which provides for a description of how the death occurred, states: "Injested [sic] Methadone/Amphetamine/Methamphetamine." The Medical Examiner's Report, dated March 12, 2002, states that the type of death was "Natural: Instantaneou [sic] Unexplained Rapid Fatal Illness" and that the manner of death was an "Accident." The Medical Examiner's Report also states that "Drug Intoxication — Methadone" was the cause of Joshua's death. The incident report completed by the Cass County Sheriff's Department indicates that Joshua's death was caused by a drug overdose. (A.R. at AR085-90.) The report states that the forensic pathologist advised the investigating officer that "the cause [was] from a mixture of methadone, amphetamine and methamphetamine intoxication." (A.R. at AR090.)
Mara Strebs and Groner Funeral Home filed claims for benefits under the Policy. ALIC or its designee denied those claims in letters dated January 29, 2002, February 12, 2002, and April 26, 2002. On April 29, 2002, the Bensons, through their counsel, also made a claim for benefits. ALIC denied that claim in a letter dated May 16, 2002. All of ALIC's denials were based upon the exclusion for "loss which results directly or indirectly, wholly or partly, from self-destruction or attempted self-destruction or intentionally self-inflicted injury while sane or insane."
These letters were sent by Group Marketing Services, Inc., which appears to be a third-party administrator for ALIC.
Discussion
I. Standard of Review
The parties, through their previously-filed briefs regarding the standard of review, have agreed that the arbitrary and capricious standard governs the Court's review of ALIC's denial of benefits in this case. The arbitrary and capricious standard "`is the least demanding form of judicial review of administrative action. When it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, that outcome is not arbitrary or capricious.'" Davis v. Kentucky Fin. Cos. Retirement Plan, 887 F.2d 689, 693 (6th Cir. 1989) (citation omitted) (quoting Pokratz v. Jones Dairy Farm, 771 F.2d 206, 209 (7th Cir. 1985)); see also Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 984 (6th Cir. 1991) (noting that administrators' decisions "are not arbitrary and capricious if they are `rational in light of the plan's provisions'") (quoting Daniel v. Eaton Corp., 839 F.2d 263, 267 (6th Cir. 1988)). In applying this standard, the Court must defer to the administrator's interpretation when the plan vests the administrator with discretion to interpret the plan; an administrator's determination will be overturned only upon a showing of internal inconsistency in the plan or bad faith.Davis, 887 F.2d at 695.
II. Review of the Denial of Benefits
This Court, in its recent decision in Landis v. Healthcare Resources Group, LLC, No. 1:02-CV-530, 2003 WL 21684264 (W.D. Mich. July 3, 2003), addressed a plan administrator's denial of life insurance benefits based upon a similar exclusion for "intentionally self-inflicted injury, while sane or insane." In determining whether the plan administrator's decision was arbitrary and capricious, this Court noted that other courts dealing with the "self-inflicted injury" language have applied a four-part test to determine whether the exclusion applied to the facts:
First, was the ingestion of drugs intentional? Second, did the decedent know that the ingestion of drugs would be likely to cause an injury? Third, did the ingestion of drugs cause an injury? Fourth, did the loss result from the injury?Id. at *5 (quoting Holsinger v. New England Mut. Life Ins. Co., 765 F. Supp. 1279, 1282 (E.D. Mich. 1991)). Applying this test, this Court determined that the plan administrator's denial was not arbitrary and capricious because there was evidence in the administrative record that the decedent intentionally ingested drugs for a recreational, rather than a therapeutic, purpose and that based upon his experience, the decent knew or should have known of the risks involved with taking controlled substances for an improper purpose. This Court also noted that "the proper inquiry in determining whether the exclusion . . . applies is not whether the person intended death or the specific injury that resulted, but whether the person was aware that ingestion of drugs or engaging in other risky behavior could produce some injury." Id. at *6 (citing Holsinger, 765 F. Supp. at 1282). Because Landis involved virtually the same legal question and similar facts, that analysis is applicable in this case.
The evidence in the administrative record shows that ALIC's decision to deny the Bensons' claim for benefits was not arbitrary and capricious. Specifically, the information from the Cass County Sheriff's Department incident report indicates that Joshua had used drugs before for recreational purposes and had been attempting to stay off drugs. (A.R. at AR086 ("Rachel related that these individuals were not happy that the victim was clean and with her.").) The record also contains evidence supporting the conclusion that Joshua ingested the drugs that caused his death for recreational purposes. (Id. ("She related that in the last hour, Carl and Nathan both called, trying to get the victim to go out and party with them.").) Moreover, the information from the death certificate shows that Joshua died as a result of the drugs that he ingested. Based upon Joshua's prior experience with drug use, ALIC could reasonably conclude that Joshua intentionally ingested the drugs and that he was aware or should have been aware that the recreational use of drugs, especially a combination of drugs such as methamphetamine, Valium, and methadone could produce some injury. In fact, there is no evidence in the administrative record which suggests that Joshua did not intentionally take the drugs. Thus, ALIC has offered a reasoned explanation for its denial of benefits which is supported by evidence in the administrative record.
The Bensons argue, as did the plaintiff in Landis, that the death certificate and Medical Examiner's Report show that Joshua's death was an accident and that this is the only evidence in the record relating to the nature of his death. However, as this Court noted in Landis, the question is not whether the death was accidental, but instead whether the decedent ingested the drugs with the knowledge that such behavior could produce some injury. Landis, 2003 WL 21684264, at *6. Thus, the statements in the death certificate and the Medical Examiner's Report do not contradict the conclusion that the ingestion of the drugs was not accidental.
The Bensons contend that ALIC's denial is suspect because ALIC made the initial denial in January 2002 without the benefit of the Medical Examiner's Report, the sheriff's department report, and the records from Lee Memorial Hospital. Even so, ALIC had the death certificate, which provided support for ALIC's decision. The information ALIC subsequently received and reviewed, apparently in connection with Mara Strebs' appeal of ALIC's initial denial, provided additional support for ALIC's initial determination.
The Bensons also argue that ALIC's decision to deny benefits is arbitrary and capricious based upon the fact that the Policy does not define certain terms that are referenced in the exclusion, such as "self-destruction" or "attempted self-destruction" or "intentionally self-inflicted injury." However, this argument ignores the scope of the arbitrary and capricious standard of review, which requires the Court to defer to the plan administrator's interpretation where the plan grants authority to interpret the plan, as it does in this case. The Bensons fail to cite any authority for the proposition that an ERISA plan must contain definitions or that a plan administrator may not give a reasonable interpretation to plan provisions. Moreover, the Bensons have failed to show that ALIC's interpretation of the exclusion is irrational or internally inconsistent with other provisions of the Policy.
Having concluded that ALIC's decision was not arbitrary and capricious, the Court finds no need to address ALIC's argument that the Bensons lack standing based upon an anti-assignment provision in the Policy. The Court notes that ERISA contains an anti-assignment clause that applies to pension plans but not to welfare plans, such as the Policy in this case. See 29 U.S.C. § 1056(d)(1); Morlan v. Universal Guar. Life Ins. Co., 298 F.3d 609, 615 (7th Cir. 2002). Michigan law allows for assignment of rights under an insurance policy after a loss has occurred, even where the policy contains an anti-assignment clause as in this case. See Roger Williams Ins. Co. v. Carrington, 43 Mich. 252, 5 N.W.2d 303 (1880). At least one court has held that an anti-assignment clause did not bar an assignment in the ERISA context based upon estoppel principles. Hermann Hosp. v. MEBA Med. Benefits Plan, 959 F.2d 569, 574-75 (5th Cir. 1992). However, it is not clear whether federal common law is consistent with Michigan's rule relating to anti-assignment clauses, and neither party has made any effort to address the issue.
Conclusion
For the foregoing reasons, judgment will be entered in favor of ALIC.An Order and Judgment consistent with this Opinion will be entered.