Summary
construing similar language to mean that the claimant must, because of illness, be unable to perform the substantial and material duties of her regular occupation
Summary of this case from Karvelis v. Reliance Standard Life Insurance Co.Opinion
CIVIL ACTION NO. 02-1342, SECTION "N"
December 3, 2002
ORDER AND REASONS
The matter is before the Court on cross-motions for summary judgment, which have been the subject of extensive briefing. The motions were heard on Wednesday, November 13, 2002. The parties filed post-hearing memoranda. Having considered the summary judgment record, the applicable law, memoranda filed by the parties, and the argument of counsel, the Court GRANTS plaintiff's Motion for Partial Summary Judgment and DENIES defendant's Motion for Summary Judgment.
I. Plaintiff's Motion for Partial Summary Judgment A. Procedural and Factual Background
This is an action on a policy of disability insurance bearing Certificate Number 46178808840 (the "Policy") effective May 1, 2000 to the plaintiff, Walter Richard House, Jr. ("House"), as Insured, by the defendant American United Life Insurance Company ("AUL"). The Policy also bears Participating Unit Number 00603172-0000-000. House, formerly a partner in the law firm of House, Kingsmill Riess, L.L.C., filed this action against AUL claiming "totally disability" as of October 2, 2000, when he could no longer perform the material and substantial duties of his regular occupation as a trial attorney. Alternatively, plaintiff claims he became "partially disabled," and eligible for the maximum monthly benefits under the Policy ( i.e., $10,000 per month). House further claims penalties and attorney's fees are due and owing based upon the defendant's arbitrary and capricious termination of benefits, unlawful delays in payment, and misrepresentation of the terms and conditions of its Policy.
See Plaintiff's Complaint filed May 6, 2002 at para. 5, filed under 28 U.S.C. § 1332 (diversity) [Rec. Doc. No. 1].
Id.
Complaint at para.6.
Id.
Id. at para.9
AUL's defense to the plaintiff's claims for breach, inter alia, are based upon the assumption that the Policy is an employee welfare benefit plan. AUL answered stating that:
[T]he policy referred to in the complaint is an employee welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 ('ERISA') 29 U.S.C. § 1002 (1). Plaintiff's claims therefore relate to an ERISA plan within the meaning of Section 514(a) of ERISA, 29 U.S.C. § 1144 (a) and relief sought is only available through Section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132 (a)(1)(B)."
AUL's Answer at para. XI [Rec. Doc. No. 3].
The uncontroverted facts set forth in the Plaintiff's Statement of Undisputed Facts reiterated below show the following time line of events:
AUL came forward with no countervailing evidence with respect to any of the facts set forth in Plaintiff's Statement of Undisputed Facts as required. Instead, AUL denied statements numbered 1-4, 6 and 7 for lack of sufficient information to justify a belief therein, and denied statements numbered 5 and 8 as written, as though the Plaintiff's Statement was merely a complaint. AUL does not suggest that House's Motion for Partial Summary Judgment is premature. To the contrary, AUL filed a cross-motion for summary judgment seeking dismissal of plaintiff's claims in their entirety.
• House practiced as a trial attorney, spending over 95% of his time on litigation and litigation related matters, from 1975 through September 2000).
• John R. Cook M. D. ("Cook"), a board certified internist and cardiologist, has been House's primary care physician since the early 1980's.
• House suffered a heart attack on October 9, 1999.
• After a short convalescence, Dr. Cook cleared House to return to his trial practice, and, from the date of his return through September 2000, House spent over 2,100 billable hours working on litigation matters for clients.
• American United Life Insurance Company ("AUL") issued a disability policy AUL Certificate No. 4617880840 to House, effective on May 1, 2000.
• Based on abnormalities shown by a treadmill stress test on October 2, 2000, and the results of angiography, House underwent quadruple coronary artery bypass surgery on October 4, 2000.
• It is the uncontroverted opinion of Dr. Cook that, since his bypass surgery, House has been "totally and permanently disabled from practicing law as a trial attorney," and that returning to the stress of trial work, against Dr. Cook's instructions, "could cause severe medical repercussions, including death."
• Despite the fact that Dr. Cook has repeatedly relayed his opinions to AUL, it has failed and refused to pay any disability benefits to House under its policy for any period after September 30, 2001.
See AUL's Statement of Undisputed Facts No. 27 (noting that on his application for disability benefits, House listed his occupation as "attorney-trial practice including pre-trial discovery, depos, motions and trials in federal and state court. . . ."
AUL's Statement of Undisputed Facts No. 5 admitted by House, to wit: "5. On October 11, 1999, House underwent a "[s]uccessful percutaneous transluminal coronary angioplasty and stenting of the distal as well as ostial portion of the right coronary artery" (AUL 900).
AUL Policy attached to the Affidavit of Julian Good as Good #2. In its answer, AUL admitted the existence of the AUL disability insurance policy bearing Certificate Number 46178808840 effective May 1, 2000 issued to House, however, it avers that the policy referred to in plaintiff's complaint is an ERISA plan. See AUL's Answer at para. XI. There is no evidence in the summary judgment record or AUL's file which suggests that the policy referred to in plaintiff's complaint effective May 1, 2000 and attached to the Affidavit of Julian Good as Good #2 was not issued to House.
See AUL's Statement of Undisputed Facts No. 12 (admitting that Dr. Morrison Bethea performed a 4 vessel cardiac bypass grafting the left anterior descending, the second diagonal branch of the left anterior descending, the circumflex, and the right coronary artery (AUL000859)).
Cook Affidavit, at paras. 3.6 and 3.9; see also AUL's Statement of Undisputed Facts Nos. 25, 30, 33, 34 (referring to AUL 172, 790, 793, inter alia); AUL's File Memo at AUL 000288 (noting numerous phone calls, including one with Dr. Cook dated 4/5/01 advising that House was having (1) "residual angina at work," (2) "cannot perform litigation," (3) "has significant coronary disease" and (4) "uses nitroglycerin prn for angina").
House Affidavit, at para. 20 and Dr. Cook Affidavit, at para. 3.7; see also AUL's Statement of Undisputed Facts No. 36, 44, 45 (referencing the denial of benefits and concluding that there was a lack of objective evidence that would prevent House from performing the material and substantial duties of his regular occupation full time).
"Total Disability" means "that because of injury or Sickness the Person cannot perform the material and substantial duties of his regular occupation." House's regular occupation at the time of the onset of disability was "attorney — trial practice including pretrial discovery depos, motions, and trials in federal and state court . . ." The terms "material and substantial duties" and "regular occupation" are not defined in the Policy.
See AUL's Statement of Undisputed Facts, at item 32, stating in pertinent part that "total disability is defined as follows: 'TOTAL DISABILITY and TOTALLY DISABLED mean that because of injury or Sickness the Person cannot perform the material and substantial duties of his regular occupation.'"
See AUL's Statement of Undisputed Facts No. 27 (noting that on his application for benefits House listed his regular occupation as "attorney-trial practice including pre-trial discovery, depos, motions and trials in federal and state court. . . ."); see also Correspondence of Randy Fath dated January 2, 2001 (setting forth Houses "job description" for the period prior to September 30, 2000 in detail and noting that he has since surrendered all litigation matters to other attorneys)[AUL000157].
AUL issued a separate policy for employees of the House firm in May of 2000 with less generous monetary benefits and a less generous definition of "Total Disability" as well. After benefits have been paid for 36 months, the employee can only be "totally disabled" if he or she "cannot perform the material and substantial duties of any gainful occupation for which the person is reasonably fitted by training, education or experience."
See Benefits Desired for LTD Coverage for Class 3 ( i.e., all full-time eligible employees) (noting "3 year own occ[upation]" coverage) [AUL 000379].
During his 25 years of trial practice, over 95% of House's billable hours related to litigation. "House's job description for the period prior to and including September 30, 2000 was the representation of clients in complex litigation of construction, business torts, financing, labor insurance, securities, environmental, constitutional, oil and gas, products liability, and personal injury cases in jury and non-jury trials before State, Federal and Bankruptcy courts and in domestic and international arbitrations."
See Correspondence of the House firm's Business Manager responding to AUL's inquiry (also noting that such trial practice included pre-trial practice such as discovery, depositions, motions, and other matters before courts and appellate practice, including oral argument before State and Federal Appellate Courts) [AUL 000157]; Martindale-Hubbell's Online Lawyer Locator showing that House occupation as a litigator [AUL 000118-119]; Intra-office E-mail of AUL's Steve Torrence dated April 12 2002 (noting documentation in the file from both House and the House firm his regular occupation as "trial attorney")[AUL 000224].
Time records reflecting House's actual work for the one-year period preceding September 30, 2000 were submitted to AUL. The records corroborated the House, Kingsmill firm's representations, indicating as follows: (1) trial in the Twenty-Fourth Judicial District Court for the Parish of Jefferson in the months of May, June and July 2000; (2) trial in the Twenty-First Judicial District Court for the Parish of St. Tammany in August 2000; (3) trial in the United States District Court for the Eastern District of Louisiana in January 2000; and (4) argument before the Louisiana Supreme Court on September 14, 2000, within weeks of the quadruple bypass surgery. In his response to AUL's request for the "unusual mental and/or physical requirements" of his work, House described his regular occupation as "intense and stressful involvement of trial work with clients, courts and opposition."
See Correspondence of Randy Fath dated April 4, 2001 (responding to AUL fax dated April 3, 2001 and explaining that non-billable, used merely to fill in the gaps in billable hours, are entered with the description "administrative," because the time does not relate to actual work) [AUL 000141]; see also AUL Fax dated April 3, 2001 (acknowledging its receipt of the Detailed Fee Transaction List provided by the House Firm's CPA/Manager Randy Fath to AUL's Senior Claims Specialist Linda R. Cross) [AUL 000141].
AUL 000148-149; House Affidavit, at paras. 3-4.
After his four-vessel coronary bypass surgery, House returned to work on November 16, 2000 to surrender all litigation matters and reassign his caseload to other attorneys and counseled clients regarding transactional matters. House then left the litigation firm he founded, and in October 2001 accepted a salaried position in the public sector as Executive Counsel to the Louisiana Department of Economic Development ($100,000 per year), a substantial decrease from his prior salary as a litigator ( i.e., average earnings of $350,000 per year during the 1990's).
See AUL's Claim Summary dated February 23, 2001 (noting that the documentation provided by the House, Kingsmill firm corroborated claimant's representation that he returned to work on November 16, 2000 to reassign his caseload) [AUL 000313]. The Claims Summary provides:
The claimant returned to work on November 16, 2000. He states this was to re-assign his caseload. The billable/non-billable hour entries on the Detail Fee Transaction File Lists for the most part appear to indicate this as well.
For the year prior to his disability in October 2000, the claimant's average monthly billable and non-billable hours were 225.46, including holidays, vacation hours and 80 hours of sick time in October of 1999, per the Detail Fee Transaction File Lists submitted by [the House, Kingsmill firm]. Per the entries, on dates for which the narrative notes "trial" claimant often worked 12-14 hr days.Id.
Although AUL's Assistant Medical Director suggested an independent medical examination (IME) on April 18, 2001, and had previously noted the need to know the left ventricular function fraction before making a determination on House's disability claim, AUL never obtained an (IME) by any physician. Despite the fact that AUL's consultant reviewing House's medicals recognized that the opinion of the attending cardiologist prevails, AUL terminated benefits in September of 2001 without ever obtaining a second opinion.
There is no countervailing medical opinion in the summary judgment record. AUL affirmatively decided not to get an IME. [AUL000224].
See Initial Report dated July 6, 2001, Analysis (noting "that the neuropsychological testing information is usually negated by the opinion of the attending cardiologist") [AUL 000255].
B. Contentions of the Parties
House contends that he is "totally disabled" within the meaning of the policy, because he cannot perform the material and substantial duties of his regular occupation as a trial attorney. Moreover, House submits that his treating cardiologist's opinion is uncontroverted by any competent evidence, and that regardless of the standard employed by the Court, the summary judgment record uniformly and overwhelming supports but one conclusion — i.e., that he is "totally disabled."
See Plaintiff's Supplemental Memorandum at p. 2 (arguing that AUL's conclusion terminating benefits amounts to nothing more than lay speculation).
Although unnecessary to the determination of his motion for partial summary judgment, plaintiff further argues that ERISA is clearly inapplicable to a policy which covers only partners. House urges the Court to find that AUL disingenuously raises the specter of ERISA, hoping to avoid the imposition of penalties and attorney's fees for the arbitrary and capricious termination and denial of disability benefits. Plaintiff highlights AUL's unsupported argument that it has discretionary authority to determine eligibility and to construe plan or policy terms. Finally, House contends that the Fifth Circuit's recent decision in Lain v. UNUM Life Insurance Company of America, 279 F.3d 337, 347 (5th Cir. 2002) supports his position. The thrust of House's position is that here, as in Lain, the insurance company's file contains no "concrete evidence" that after quadruple bypass surgery, House was capable of performing the material and substantial duties of his regular occupation ( i.e., trial attorney).
Plaintiff's Original Memorandum in Support of Summary Judgment, at p. 20.
For its part, AUL contends that evidence of the plaintiff's disability status consists solely of the written recommendation of his longtime personal physician, Dr. John R. Cook, that he can no longer continue as a trial attorney given the stress incumbent with that profession. AUL argues that there is not a single note in any prior medical records that House's work was unusually stressful for him or that he ever suffered any impairment due to his occupation. The defendant further chides that "such is not for this Court to decide, because ERISA governs this case, and restricts the Court to reviewing the administrative record and giving deference to AUL's determination under the deferential arbitrary and capricious standard."
AUL's Memorandum in Support of Cross-Motion for Summary Judgment, at p. 2.
More specifically, AUL contends that House makes an artificial distinction between his current occupation as Executive Counsel to the Louisiana Department of Economic Development and his former occupation as partner/trial attorney with the House, Kingsmill firm. AUL's position is that the policy simply insures against the becoming disabled from the practice of law generally, suggesting that any reference to the substantial and material duties of his pre-disability regular occupation is unnecessary. Absent evidentiary support for its assertion, AUL argues in conclusory fashion that plaintiff's present occupation in the public sector is equally if not more stressful than that of a trial attorney. Claiming a lack of concrete evidence and without a countervailing medical opinion, AUL asserts that the plaintiff's treating cardiologist simply diagnosed a future risk of disability.
Id. at pp. 15-16.
AUL urges the Court to adopt its position that the plaintiff's current public sector job is merely an extension of his former occupation, " presumably rife with much responsibility, many demands . . . and presumably all the more stressful when performed at a level that merits recognition as 'State Executive of the Year' by the New Orleans Chamber of Commerce." Id. at 19 (emphasis added).
AUL contends that "that stress tests demonstrate that House is presently more capable than he was in the past to work as a trial attorney and that House has not demonstrated he is presently disabled only that he may be in jeopardy of becoming disabled in the future due to a stressful occupation — an insufficient showing to qualify as disabled under an ERISA policy." Id. at pp. 20-21.
C. Summary Judgment Standard
A motion for summary judgment will be granted only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Any factual controversies must be resolved in favor of the non-moving party. The role of summary judgment is to pierce the pleadings and to assess the proof to determine whether there is a genuine need for trial. When the parties present cross motions for summary judgment essentially they agree there are no genuine issues as to any material fact, and that the matter is ripe for resolution of their motions.D. Standard of Review
Assuming without deciding that ERISA applies to this case, the Court sets forth the standard applicable to such claims. An administrator's denial of benefits under an ERISA plan is "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 Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) (citation omitted). Because the language of the Policy does not give AUL such discretion, the Court applies the de novo standard of review. However, AUL's factual determinations during the course of House's benefit proceeding are reviewed for abuse of discretion. Lain v. UNUM Life Insurance Company of America, 279 F.3d 337, 342 (5th Cir. 2002). When applying the abuse of discretion standard, the Court analyzes whether the plan administrator acted arbitrarily and capriciously. A decision is arbitrary when made "without a rational connection between known facts and the decision or between the facts found and the evidence." Lain, 279 F.3d at 342 ( citing Bellaire General Hospital v. Blue Cross Blue Shield of Mich., 97 F.3d 822, 828 (5th Cir. 1999)). An administrator's decision to deny benefits must be "based on evidence, even if disputable, that clearly supports the basis for denial." Vega v. National Life Insurance Services, Inc., 188 F.3d 287, 299 (5th Cir. 1999). "Without some concrete evidence in the administrative record that supports the denial of the claim," the Court must find "the administrator abused its discretion." Lain, 279 F.3d at 342 ( citing Vega, 188 F.3d at 302).
A "sliding scale" is applied to the abuse of discretion standard where it is determined that the administrator has acted under a conflict of interest. Vega, 188 F.3d at 296. The greater the evidence of conflict on the part of the administrator, the less deferential a court's abuse of discretional standard should be. Id. at 297. In the case at bar, AUL has an inherent conflict of interest because it is the insurer and has acted as the plan administrator and the claims administrator, determining eligibility for benefits and denying claims made under the Policy. However, Vega's "sliding scale" need not be applied in this case, given the overwhelming evidence of House's disability and the utter absence of any concrete evidence to the contrary.
The Fifth Circuit has made it clear that "the administrative record consists of the relevant information made available to the administrator prior to the complainant's filing of a lawsuit and in a manner that gives the administrator a fair opportunity to consider it." Vega, 188 F.3d at 300. Declining to remand to the administrator to make more complete record, the Vega court explained that since "the claimant only has an opportunity to make his record before he files suit in federal court, it would be unfair to allow the administrator greater opportunity at making a record than the claimant enjoys." Vega, 188 F.3d at 302 n. 13.
E. Discussion 1. Disability
In assessing whether to grant or deny benefits, an administrator must: (1) determine the facts underlying the claim; and then (2) determine whether the facts establish a claim to be honored under the terms of the policy. See Lain, 279 F.3d at 243 ( citing Schadler v. Anthem Life Insurance Co., 147 F.3d 388, 394 (5th Cir. 1998)). AUL argues that, based on established facts,
House is not disabled as defined under the Policy.
The Policy provides:
Disability and Disabled mean both Total Disability and Totally Disabled and Partial Disability and Partially Disabled.
* * *
Total Disability and Totally Disabled mean that because of Injury or Sickness the Person cannot perform the material and substantial duties of his regular occupation.
Partial Disability and Partially Disabled mean that because of Injury or Sickness the Person, while unable to perform every material and substantial duty of his regular occupation on a full-time basis, is:
1. performing at least one of the material and substantial duties of his regular occupation or another occupation on a part-time or full-time basis; and
2. is earning less than 80% of his Indexed Pre-Disability Earnings due to that same Injury or Sickness.
Policy, Section 2 — Definitions [AUL 000395].
AUL asserts that House is not disabled under the first-prong of definition of disability because he has failed to present any evidence that he is unable to perform all of his material duties as an attorney generally. AUL fails to explain why House should not be considered at least partially disabled within the meaning of the Policy. The "administrative record" is devoid of competent factual and medical evidence supporting AUL's argument or determination that House's current occupation in the public sector is equally as stressful, if not more so, than that of a trial attorney. AUL submits that its termination of benefits is justified in light of the improved results on certain stress tests. House's ability to engage in strenuous physical exercise, and his superior performance in the position of Executive Counsel.
House asserts in the alternative that he is disabled under the second-prong of the analysis. AUL does not even attempt to meet the plaintiff's alternative argument that he is and was entitled to partial disability payments during all phases of the benefit determination.
2. The Legally Correct Interpretation
The Fifth Circuit applies a two-prong test when reviewing an administrator's denial of benefits. First, the district court must determine the "legally correct interpretation of the policy." Lain, 279 F.3d at 344 ( citing Tolson v. Avondale Industries, Inc., 141 F.3d 604, 608 (5th Cir. 1998)). In ascertaining the legally correct interpretation, the Court considers (1) whether a uniform interpretation of the policy has been given by the administrator, (2) whether the interpretation is reasonable, and (3) whether the unanticipated costs will result from a different interpretation of the policy. Gosselink v. ATT, Inc., 272 F.3d 722, 726 (5th Cir. 2001) ( citing Wildbur v. ARCO Chem. Co., 974 F.2d 631, 637-38 (5th Cir. 1992)).
There has been no allegation as to whether AUL gave the Policy a uniform interpretation. Nevertheless, AUL's own claims file admits that it was necessary to make the determination of whether or not House was a "trial attorney," in order to determine the propriety of a decision to terminate and/or deny benefits under the Policy. The evidence before the Court indicates AUL invested some time and effort attempting to determine whether House's pre-disability occupation was in fact as a "trial attorney" or as an "attorney." Such a determination would have been wholly unnecessary had the Policy term "regular occupation" been uniformly narrowly construed so as not to provide specialty coverage.
See E-Mail of AUL's Kimberly Campbell dated April 11, 2002 addressed to AUL's Steve Torrence (inquiring as to whether a determination was made as to whether House was or was not a "trial attorney") [AUL 000224]. Ms. Campbell's questions directed to Mr. Torrence reiterated below are telling in regard to AUL's interpretation of the Policy term "regular occupation," to wit:
I did receive the information you provided and have a couple of questions that we are still not clear on. Have you established whether or not Mr. House was a trial attorney? It's one thing to have "billable" hours in the support of a trial but quite another to be the lead trial attorney in court. If it was determined that he was not a trial attorney what information was used to make the determination? If it has not then I would not be able to determine if a denial was appropriate. Our last note to Andrew Eagan at AUL indicated that we needed to determine if the claimant was a trial attorney prior to taking next steps . . . We never got any further information. . . .Id. (emphasis added) [AUL 000224-225]; see also E-Mail Reply of AUL's Steve Torrence dated April 12, 2002, stating that:
We do have documentation in the file from both Mr. House (of course) and the employer that House was a trial attorney. House stated — 'In the one year period prior to my quadruple by pass surgery, I billed 2170 hours, tried three lengthy complicated cases, argued three appeals in four different courts of appeal, including the Louisiana Supreme Court and took or participated in depositions, argued numerous trial court motions, and engaged in court supervised settlement conferences resulting in the settlement of over 20 active cases.' The employer wrote — 'Mr. House's "job description" for the period prior to and including Sept. 30, 2000 was the representation of clients in complex litigation . . .'Id. (emphasis added) [AUL 000224].
The plaintiff's Policy is an "occupational disability policy," as opposed to a "general disability policy." The latter type of disability coverage defines disability in terms of the insured's inability to engage in any gainful occupation. See 10 Couch on Insurance 3d § 146:3. The former ( i.e., an occupational disability policy/own occupation), requires only that the insured be unable to perform the substantial and material duties of his or her particular occupation in order to be considered "totally disabled." See id. House purchased a type of coverage that protected him against the risk that an accident or sickness would prevent him from working in his regular occupation ( i.e., "own occupation" coverage).
Although AUL now attempts to distinguish the scope of disability coverage provided by House's former policy with Provident as providing a more generous form of specialty coverage, AUL's claims examiner discerned no difference in the coverage terms. Pursuant to a comparison of the AUL and Provident terms, Ms. Cross concluded that the Provident in fact appeared to be the lesser plan and reported:
It appears this claim is payable based on the medical received to date. Since it is a pre-existing condition — and no evidence of insurability was required per the sub agreement — a plan comparison was done to determine which is the lesser plan. It appears the prior plan is a lesser plan because it does not include COLAB [Cost of Living Adjustment Benefits] or S[ocial] S[ecurity] Incentive, and the M[aximum] B[enefit] D[uration] is to age 65, whereas AUL's MBD is a [10year] RBD and for this claimant the MBD is to age 66 (SSNRA). The remaining provisions are essentially the same in both policies.
Claim Summary of AUL's Claims Examiner Linda Cross dated February 23, 2001 (bolding in original and italic emphasis supplied) [AUL 000317].
There is no contractual definition of either the terms "the substantial and material duties" or the term "regular occupation." It is well-settled in the Fifth Circuit that, in construing language of ERISA plans, federal law must follow the doctrine of contra proferentem, which directs that when plan terms are ambiguous after applying ordinary principles of contract interpretation, courts construe them strictly in favor the insured. Where the term "regular occupation" is not defined in the Plan, a fiduciary must adopt an appropriate description of the claimant's occupation.
See AUL Policy, Section 2 — Definitions [AUL 000389-396].
See Fallo v. Piccadilly Cafeterias, Inc., 141 F.3d 580, 584 (5th Cir. 1998) (holding ambiguities in ERISA Plan description are construed in favor of the qualified beneficiary); Wegener v. Standard Insurance Company, 129 F.3d 814, 818 (5th Cir. 1997); Todd v. AIG Life Insurance Co., 47 F.3d 1448, 1451-51 (5th Cir. 1995) (noting that other Circuits also apply the rule in ERISA cases where the construction of insurance contracts is involved); Ramsey v. Colonial Life Insurance Co. of America, 12 F.3d 472, 479 (5th Cir. 1994).
See Kinstler v. First Reliance Standard Life Insurance Company, 181 F.3d 243, 252 (2nd Cir. 1999).
Although AUL acquired a thorough description of the House's regular occupation, replete with hourly billings spanning the entire year preceding the onset of his illness, AUL made no effort to adopt an objectively reasonable job description and define House's substantial and material duties based upon the facts provided. Moreover, AUL failed to evaluate House's medical condition against the rigors of the substantial and material duties of his regular occupation. Instead, AUL terminated benefits advising House that he was "capable of performing the sedentary occupation of an Attorney as it is normally performed in the national economy."
In correspondence dated April 2, 2002, House advised AUL that it had never addressed the question of whether he might be at least "Partially Disabled" under the Policy, noting that he was was earning only 45% of his Indexed Pre-Disability Earnings. See Correspondence dated April 2, 2002 [AUL 000005]. AUL's Vice President of Group Claims responded:
It is American United Life's continued position that the medical information contained in the file and Mr. House's own claimed level of activity does not support his inability to perform his occupation.See AUL's Correspondence dated May 7, 2002 [AUL 000001]; see also AUL's Correspondence dated February 13, 2002 (advising the original determination of November 20, 2001 was correct) [AUL 000008]; AUL's Original Correspondence Terminating Benefits dated November 20, 2001 ("The determination on your claim is that you are capable of performing the duties of your regular occupation full time. You appear to be capable of performing the sedentary occupation of an Attorney as it is normally performed in the national economy.") [AUL 000018].
Louisiana cases expressly reject the requirement that AUL seeks to foist upon the policy at issue — i.e., that in the case of "total disability," all duties of an occupation must be affected by the sickness or injury. In Laborde v. Employers Life Insurance Co., 412 So.2d 1301 (La. 1982), the Louisiana Supreme Court found that the plaintiff could no longer work as a journeyman carpenter, and was therefore disabled under the disputed policy, even though plaintiff continued working as a carpenter inspector doing lighter work throughout the two year benefit period provided by the policy. See id. at 1304-05 (holding that the plaintiff was unable to perform the substantial and material part of his job in the customary and usual manner); see also Kottle v. Provident Life and Accident Ins. Co., 775 So.2d 64 (La.App. 2nd Cir. 2000), cert. denied, 790 So.2d 635 (La. 2001).
The definition of "total disability" provided by AUL's policy is in harmony with Louisiana's well-established jurisprudential rule that the insured who is unable to perform the "substantial and material duties of his occupation" is entitled to policy benefits. See Laborde, 412 So.2d at 1304; and Johnson v. State Farm Mutual Automobile Ins. Co., 342 So.2d 664, 667 (La. 1977). The Johnson court noted that the insured's intent to obtain coverage in form of economic protection from loss of employment should not be thwarted by narrow policy definitions for total disability requiring absolute helplessness. Id.
In Stender v. Provident Life and Accident Insurance Company, 2000 WL 875919 (N.D. Ill.), the court considered an occupational disability policy substantially similar to the disability policy's provisions in the case at bar. The plaintiff in Stender performed his occupation as commodities pit scalper up until the time of disability. In 1993, his career in the pit abruptly ended because he could no longer hear well enough to trade in the pits, and his voice had deteriorated to the point that he could no longer be heard on the trading floor. Based upon these disabling conditions, Stender filed a claim of total disability with his insurer. Stender then started to trade commodities from his home, and he retained the right to use the trading pit at the Commodities Exchange ("CMOE"). The court observed that the entire focus of the case law is on how the claimant earned his "primary living" before his injury. Id. at 6. Addressing Provident's specific arguments, the court in Stender concluded that: (1) the fact that Stender had listed his occupation as broker/trader on his 1992 income tax return was irrelevant, considering that such a characterization did not in any way define the substantial and material duties of his occupation at the time he became disabled; (2) Stender's concessions that he subsequently traded his own commodities or had access to the screens and information on the trading floor actually supported the fact that he could no longer work in the pit; and (3) the fact that Stender's limitations did not preclude him from trading off the floor of the CMOE sidestepped the fact that the most substantial and material part of his trading at the time he became disabled was shouting the buy and sell prices until a striking price was reached. Stender, 2000 WL 875919, at 6-7. The district court observed that, without the ability to shout or hear, Stender could not trade in the pit — i.e., the most substantial function of his occupation. Granting summary judgment in favor the plaintiff, the district court noted that the policy in no way restricted Stender from pursuing other career options, including earning a living by means of continuing his computer trading. Id. at p. 7.
In another decision construing similar policy language, the district court considered a practicing dentist's claim for total disability. See Shapiro v. Berkshire Life Insurance Company, 1999 WL 566372 (S.D. N.Y. 1999), aff'd, 212 F.3d 121 (2nd Cir. 2000). The plaintiff Dr. Shapiro used his time primarily to perform the functions of a dentist who treated patients. However, he also had an ownership interest in his and other dental practices, and also performed managerial and administrative duties for those dental practices. The court in Shapiro held that those functions related to his ownership interest in other practices, and his managerial and administrative duties with respect thereto, did not amount to a dual occupation. Id. Affirming the district court's decision, the Second Circuit in Shapiro observed:
It is well-settled in New York that occupational disability policies are designed to indemnify against the loss of capacity to work, not against the loss of income. Recovery will not, therefore, be precluded even if the plaintiff were to earn a larger income from his new occupation.
Although earnings may have some bearing on the question of a policyholder's capacity to work, the appropriate inquiry in this case concerns the net income of the individual, rather than his gross revenue (much less the gross revenue of his business). An individual whose sole occupation had been the practice of chair dentistry could suffer total disability without losing a cent of gross revenue simply by hiring a substitute dentist to treat his patients. Here, the record evidence shows that Shapiro's net income decreased following the onset of his disability. This fact tends to support Shapiro's argument that he was, in fact, a dentist.Shapiro, 212 F.2d at 125 (citations and quotation marks omitted).
3. Abuse of Discretion
The only potential unanticipated cost resulting from a different interpretation of the policy language is that AUL will be required to pay benefits to House, and possibly others, if in fact their particular factual circumstances mirror those presented in this case. The crucial issue in this case is whether AUL's interpretation of the Policy is fair and reasonable. Under the Policy an employee is eligible for long-term disability benefits if that employee meets the definition of "disability," which in this case means that "because of injury or sickness [the insured] cannot perform the material and substantial duties of his regular occupation."
On numerous occasions, House explained, defined and documented the substantial and material duties of his regular occupation as a litigator, which requires intense and stressful involvement in pre-trial discovery depositions with clients, opposing parties, witnesses, and opposing counsel, arbitration proceedings in domestic and international tribunals, and court appearances for the purposes of arguing motions, prosecuting and defending cases in the state and federal courts. Additionally, Dr. Cook made it clear in his original Attending Physician's Statement to AUL that House was "totally" disabled. On January 24, 2001, Dr. Cook advised AUL: "Mr. House is a patient of mine who suffered an acute myocardial infarction and subsequently suffered angina and required an AC bypass. He has been totally and permanently disabled. . . . Because of his coronary disease, his age, myocardial infarction, he will be permanently disabled." Moreover, AUL concluded that based upon the medical documentation received as of February 23, 2001, House's claim should be paid.
See Attending Physician's Statement dated November 29, 2000 (concluding that House cannot practice litigation, is totally disabled, and further noting that House had (1) a Class 3 physical impairment as defined the Federal Dictionary of Occupational Titles; (2) a Class 2 degree of functional capacity as defined by the American Heart Association; and (3) a Class 3 degree of mental/nervous impairment as defined by DSM-III multiaxial classification ("Patient is able to engage in only limited stress situations and engage in only limited interpersonal relationships (moderate limitations)") [AUL 0000181].
Correspondence of Dr. Cook dated January 24, 2001 [AUL 000793]; see also Correspondence dated February 7, 2001 ("Cannot practice litigation; Total and permanent disability as set forth in letter of 1-24-01.") [AUL 000729]; Attending Physician's Statement dated July 31, 2001 (same) [AUL 000250]; Correspondence of November 1, 2001 (same)[AUL 00026].
See Recommendation of Claims Examiner Linda Cross dated February 23, 2001 [AUL 000317].
Notwithstanding the foregoing, almost two months after terminating the plaintiff's benefits, AUL notified House in November of 2001 of its determination, with the following explanation: "[Y]ou are capable of performing the duties of regular occupation full time. You appear to be capable of performing the sedentary occupation of an Attorney as it is normally' performed in the national economy." The language utilized by the defendant in denying plaintiff's benefits bears no relation to the Policy definition of the term "totally disabled." Moreover, AUL's claims analyst admits that the job of a "trial attorney is not a sedentary occupation." Equating these disparate activities reflects a plain lack of objectivity and an abuse of discretion by AUL.
Correspondence dated November 20, 2001 [AUL 00018].
E-Mail Correspondence of AUL's Kimberly Campbell dated 4/16/2002 (noting that trial work is "not a sedentary occupation and cannot standardly ( sic) be done in a 40 hr work week") [AUL 000231].
See Lain, 279 F.3d at 346.
A fair reading of the Policy supports the view that, in order to be considered disabled, House must, because of sickness, be unable to perform "the substantial and material duties" of his regular occupation ( i.e., trial attorney). Assuming the undefined policy term "regular occupation" is ambiguous, under Louisiana law it is well-settled that ambiguities in insurance policies are construed against the insurer. Moreover, under Louisiana law the definition of "total disability" is liberally construed even where the terms of the policy appear more stringent.
See Lain, 279 F.3d at 345 (Assuming the definition of "total disability" is ambiguous, the Fifth Circuit in a ERISA case looked to state law, noting that under Texas law it is well-settled that ambiguities in insurance are construed against the insurer).
See Laborde v. Employers Life Insurance, 412 So.2d 1301, 1304 (La. 1982) (Where "total disability" was defined in the policy as "complete inability to perform every duty pertaining to his occupation," the court construed the provision to mean "the inability to perform substantial and material duties of his occupation in the usual and customary way.").
Plaintiff's medical conditions and "total disability" are sufficiently evidenced in AUL's file. House's treating cardiologist Dr. Cook opined that because of the job-related stress of trial practice he was "totally disabled" from his occupation as a trial attorney. There is no countervailing medical opinion.
The discharge summary of Dr. Bethea, the plaintiff's heart surgeon, does not contradict Dr. Cook. Dr. Bethea released House to be followed up by his treating cardiologist. Nothing in Dr. Bethea's discharge summary addresses House's ability return to the rigors of a trial practice or to perform the material and substantial duties of that occupation. Moreover, the plaintiff's medical history corroborates the Dr. Cook's opinion. After his heart attack in 1999, House returned to his full-time occupation as a trial attorney billing in excess of 2100 hours. Return to his stressful work as a trial attorney billing 12 to 14 hour days presaged his emergency four vessel coronary bypass surgery performed on October 4, 2000. Despite the fact that AUL determined that an IME or second opinion was necessary, the company chose not to schedule a consult.
Dr. Bethea's cryptic note dated 11/21/00 states: "I have told him no heavy lifting or straining until after the first year. Other than that, he can return to full activity and return to see me prn." Office Notes of M. C. Bethea (emphasis added) [AUL 000563].
In the report dated July 6, 2001, AUL's Medical Case Manager noted the goal of establishing a second cardiology evaluation of House. Although calls were placed to two physicians' offices, both declined to accept the assignment to complete a second cardiology evaluation. See Initial Report [AUL 000254]. Notwithstanding the fact that discussions with a neuropsychologist associate revealed that there were testing devices that could measure the effects of the stress on the psychological well-being of a person and the reaction of a person to stress, no such tests were ever ordered by AUL in House's case. Because "neuropsychological testing information is usually negated by the opinion of the attending cardiologist," AUL opted instead to pursue a cardiology IME with a physician in the area. Id. [AUL 000255]. The record is clear AUL never made arrangements for or requested that House submit to a second cardiology evaluation or IME.
Like Mr. House, the plaintiff in Hoover v. Provident Live and Accident Insurance Company, 290 F.3d 801 (6th Cir. 2002) underwent coronary artery bypass surgery. As a result of this medical procedure, she was initially able to return to her job as a psychologist on a part-time basis. Hoover's physician opined that her chest pain was stress-related, most of which was related to her work. The treating physician made the determination that Hoover was disabled and recommended that she retire from the counseling profession. Id. at 804.
Provident's in-house physician reviewed Hoover's medical records and concluded that, because of a normal stress test and ejection fraction, there was no reason why Hoover could not return to her full-time occupation. Id. at 805. Hoover submitted to an IME on Provident's suggestion. Provident's in-house counsel reviewed the IME and concluded that there was no objective evidence to support the work restrictions imposed by Hoover's treating physician. Provident terminated disability benefits for the reason that the work restrictions appeared to be preventive measures. Provident denied Hoover's appeal based on a review by a third in-house physician. Id. at 806.
The district court reversed Provident's decision, and the Sixth Circuit affirmed on appeal, holding that district court should have given no weight at all to Provident's rulings. Absent a grant of discretionary authority in the policy to determine eligibility for benefits or to construe the terms of the plan, determinations regarding Hoover should have been reviewed de novo. The Sixth Circuit held that when only Provident's in-house non-examining physicians disagreed with the treating physicians, the evidence in the administrative record does not support a denial of benefits.
Defendant cites Brown v. Washington National Insurance Company, 942 F. Supp. 1078 (E.D. La. 1996), which is factually inapposite. In Brown, Washington National Insurance accepted in theory the differentiation between "trial attorney" and "attorney." The district court denied summary judgment because (1) the parties failed to document the difference , and (2) the insurer disputed the plaintiff's characterization of his regular employment as a trial attorney. Brown, a lead trial attorney for Stone, Pigman law firm, had not litigated since 1990. Id. at 1080-81.
In the case at bar, there is no dearth of documentation that House was in fact a trial attorney at the time of the onset of disability. AUL's file is replete numerous references to House as a "trial attorney," and discussion of the detailed time records submitted by his firm documenting the long hours spent in the heat of courtroom battle and contentious discovery and motions building up to and including trial on the merits. Whether a courtroom battle, the client's deposition, or an argument defending a position on appeal, House described each and every setting to AUL as stressful and fraught with opposition.
See Facsimile Cover Sheet dated 5/16/01 (recommending that AUL's Andrew Eagan require that Mr. House fill out the trial attorney questionnaire) [AUL 000263]; RN Medical Consultant Referral Response dated April 17, 2001 (noting claimant's occupation as "Trial attorney") [AUL 000283]; E-Mail dated April 12, 2002 (stating AUL's file contains documentation from both Mr. House and the employer that he was a trial attorney) [AUL 000228]; RN Medical Consultant Referral Response dated March 22, 2001 (noting claimant's occupation as "Trial attorney") [AUL 000290].
AUL's citation of Cooper v. Paul Revere Life Insurance Company, 1997 WL 375884 (E.D. La.) also bears no parallel, there being disputed issues of material issue of fact in that case. In Cooper, Judge Duval denied summary judgment because the parties' medical experts differed on whether the risk posed to the plaintiff by job-related stress constitutes a present disability, or, as defendant maintained, a risk of disability in the future which would not entitle the plaintiff to benefits under the policy.
F. Conclusion
Regardless of whether a de novo or arbitrary and capricious standard is used, a record this strong, including the uncontroverted opinion of House's treating cardiologist that he is presently disabled from his regular occupation (trial attorney), mandates a ruling in favor the plaintiff. AUL's failure to obtain an IME, despite the urging of its own Medical Case Manager and awareness that an IME was a necessary predicate to the determination of House's current restrictions and limitations, cannot be ignored by the Court. The failure to get an IME was not an oversight. Neither provisions of ERISA nor the lay opinion of a claims analysts on the import of selective medical test results provide concrete or competent countervailing medical evidence.
See Report of Phone Contact by AUL's Senior Claims Analyst dated June 7, 2001 (noting that (1) "the IME has not been scheduled yet," (2) "we want to add one element to the IME that the consultant be experienced with considering occupational stress", and (3) "we are looking for his physical functional level along with his ability to handle the stress of his regular occupation") [AUL 000262]; E-Mail by AUL's Steve Torrence dated April 12, 2002 ("[W]e decided not to do an IME. We contacted two cards [cardiologists] and both refused to do the examination, (reasons unknown) and by that time the medical indicated he was ok from a cardiac so we didn't think it would be of value.") [AUL 0000224].
In summary, the policy at issue only requires proof that House is unable to perform the substantial and material duties of his regular occupation. The record contains uncontroverted medical evidence supporting his "total disability" claim. Further, there is no evidence in the record that House was capable of resuming his regular occupation as a trial attorney after October 2, 2000, without adverse and objectively demonstrated physical consequences. AUL has not presented any such evidence. Applying the more rigorous de novo standard of review as required, the Court can only find "total disability." Nothing in the claims file justifies AUL's decision that a change in circumstances warranted termination of benefits. The only changes that occurred after his bypass surgery were that House reassigned his caseload, resigned from trial practice, and continued his follow-up treatments with Dr. Cook, along with prescription drug therapy and cardiac rehabilitation therapy. There is no evidence that the plaintiff recovered the ability to perform his pre-disability occupation which consisted almost exclusively of trial practice. Indeed, the record reflects that House continues (1) to take heart medications as prescribed and modified from time to time by Dr. Cook, (2) to strictly adhere to the course of follow-up treatment and care for his heart condition, (3) to follow a regimen for cardiac rehabilitation which includes strenuous physical exercise, and (4) to heed the proscription of his treating cardiologist placing his lucrative but overly stressful (and thus, life threatening) pre-disability occupation as a trial attorney off limits.
Accordingly, partial summary judgment in favor of the plaintiff on the issue of "total disability" is warranted.
II. AUL's Cross-Motion for Summary Judgment A. Undisputed Facts Relative to the Application of ERISA
There were no "employees" of the House firm insured either under the policy which afforded Class 1 LTD coverage to House or the purported "Group" Policy detailing Class 1 LTD coverage. More specifically, the AUL policy issued and delivered to House, as Insured, as well as the Class 1 LTD Group Policy, which AUL argues is included within "the Plan" coverage, by their terms apply only to "Eligible Full-Time Partners." It is further uncontroverted that:
See Good #2.
See AUL's Motion and Order for Leave to File Exhibits and attached Exhibits; and AUL's Class 1 Group Policy [AUL 000384-422].
See Certificate Schedule Benefits [AUL000387].
• House paid 100% of his premiums, and that the "Employer," House, Kingsmill Reiss, LLC, paid 0% his premiums.
• Coverage within the meaning of what is purported to be the House Firm's "ERISA Plan," requires that the "[e]mployer . . . contribute at least 25% of the premium for a covered person's LTD coverage."
• The House firm paid 100% of the premiums for persons covered by Class 2 and Class 3 LTD policies/coverages applicable to all eligible full-time employees and full-time non-Partner attorneys, respectively.
• The Certificate of Insurance issued to House by AUL specifically provides that the calculation of disability benefits would be based upon his Schedule K-1, a schedule for partners.
• Consistent with the fact that the House Firm paid 0% of the plaintiff's premiums for LTD coverage, page one of the policy, which is the Certificate of Insurance issued to House, as Insured states: "Group: Does Not Apply."
See Group Life/Long Term Disability Application (stating the name of the "Employer" as "House, Kingsmill Riess LLC," Federal Tax Identification No. "72-1140481") [AUL000374];
See Description of LTD Coverage under Percentage of Employer Contribution [AUL000379].
See AUL000379 (describing classification descriptions and long term disability coverage and denoting K-1 earnings for Class 1, i.e., full-time eligible partners).
See Certificate of Insurance issued to House effective 5/1/2000 (bolding emphasis in original) [Good #2].
B. Contentions of the Parties
Referring to three separate form policies (AUL 000373-501), AUL's position is that it issued one policy of long term disability benefits for the partners, non-partner attorneys and employees of the House firm in May 2000. AUL contends that House's disability policy is a component of an employee welfare benefit plan under ERISA. Specifically, it argues that where employee benefits are funded by more than one insurance policy, the entire benefit program, including House's disability policy, is governed by ERISA.House's argument is threefold, to wit: (1) the provisions of ERISA do not cover a trust for the "business and professional" industry, because such a trust, by definition, is made up of employers and employees from innumerable disparate and unrelated industries; (2) ERISA regulations 29 C.F.R. § 2510.3-3 state that an "employee benefit plan" does not include a plan where "employees" are not participants; and (3) the case of Steiner v. Fortis Benefits Insurance Company, 2000 WL 877013 (E.D. La) falls far short of supporting AUL's argument, and rather bolsters the plaintiff's contention that Policy falls within the safe harbor provision promulgated by the Department of Labor.
See MD Physicians Associates, Inc. v. State Board of Insurance, 957 F.2d 178 (5th Cir. 1992).
See Plaintiff's Post-Argument Supplemental Brief, at pp. 2-3 ( citing 29 C.F.R. § 2510.3-1(j)(1)-(4)).
C. Application of ERISA 1. Whether an Employee Welfare Benefit Plan Exists
In order for ERISA to govern plaintiff's claims under the Policy, this Court must decide, as a threshold matter, whether the Policy constitutes an "an employee welfare benefit plan" as that term is defined by ERISA. If governed by ERISA, then state law claims relating to that plan are preempted.An employee welfare benefit plan is defined as:
any plan, fund, or program which was . . . established or maintained by an employer . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits in the event of sickness, accident, [or] disability. . . .29 U.S.C. § 1002 (1).
2. The Employee Requirement
A plan must, among other things, satisfy the primary elements of an ERISA plan — i.e., "establishment or maintenance by an employer intending to benefit employees." One of the most important aspects is that an ERISA plan benefit employees. A plan without employees is not regulated by ERISA. Meredith v. Time Insurance Co., 980 F.2d 352, 356-58 (5th Cir. 1993) (holding that 29 C.F.R. § 2510.3-3 (c) prevents application of ERISA to medical insurance policy where plaintiff was sole proprietor and policy covered only the plaintiff and her spouse). The Department of Labor has excluded sole proprietors and spouses, who jointly own corporations, from the definition of ERISA employees; it has also excluded partners in a partnership from being deemed to be employees with respect to the partnership. Accordingly, for the purpose of determining whether a plan is governed by ERISA, business owners are not counted as employees to satisfy the ERISA requirement that the plan benefit employees.
Meredith, 980 F.2d at 355.
29 C.F.R. § 2510.3-3 (b) provides: "(b) Plans without employees. For purposes of Title I of the Act and this chapter, the term 'employee benefit plan' shall not include any plan, fund or program, other than an apprenticeship or other training program, under which no employees are participants covered under the plan, as defined in paragraph (d) of this section. For example, a so-called 'Keogh' or 'H.R. 10' plan under which only partners or only a sole practitioner are participants covered under the plan will not be covered under title I. However, a Keogh plan under which one or more common law employees, in addition to the self-employed individuals, are participants covered under the plan, will be covered under title I. Similarly, partnership buyout agreements described in section 736 of the Internal Revenue Code of 1954 will not be subject to title I."
29 C.F.R. § 2510.3-3 (c) provides: "(c) Employees. For purposes of this section: (1) An individual and his or her spouse shall not be deemed to be employees with respect to a trade or business, whether incorporated or unincorporated, which is wholly owned by the individual or by the individual and his or her spouse, and (2) A partner in a partnership and his or her spouse shall not be deemed to be employees with respect to the partnership."
As the Eleventh Circuit recently explained:
The gist of ERISA's definitions of employer, employee organization, participant, and beneficiary is that a plan, fund or program covers ERISA participants because of their employee status in an employment relationship, and an employer or employee organization is the person that establishes or maintains the plan, fund, or program. Thus, plans, or programs under which no . . . employees or former employees participate are not employee welfare benefit plans under title I of ERISA.Slamen v. Paul Revere Life Insurance Co., 166 F.3d 1102, 1104 (11th Cir. 1999) (footnotes and internal quotations omitted). In Slamen, an individual who wholly-owned a business participated in an insurance plan funded by his business that covered only himself. Id. at 1103-04. The insurance plan was not governed by ERISA. Id. at 1105.
The Slamen court cited the Fifth Circuit case, Robertson v. Alexander Grant Co., 798 F.2d 868 (5th Cir. 1996), cert. denied, 479 U.S. 1089 (1987). In Robertson, the Fifth Circuit held that two plans, one of which covered owners of a business and the other covering employees, were two separate plans for the purposes of ERISA. Id. at 871. The Fifth Circuit rejected the argument that the two plans were nearly identical, and explained:
Robertson's argument, however, misses the point. His argument ignores the fact that the plans are two separate plans. The plan covering the partners does not pay benefits to principals, and the plan covering principals does not pay any benefits to partners. Since the plans are separate, the plan covering the partners covers only partners, and the district court correctly ruled that the plan does not cover employees other than partners.Id. at 871-72 (finding that the Grant plan covered only partners and affirming the district court's ruling holding ERISA inapplicable to plans covering only partners).
The Fifth Circuit has devised a comprehensive test for determining whether a particular plan qualifies as an employee welfare benefit plan. Under this test, a court must ascertain "whether a plan: (1) exists; (2) falls within the safe-harbor provision established by the Department of Labor; and (3) satisfies the primary elements of an ERISA employee benefit plan — establishment or maintenance by an employer intending to benefit employees." At the out set the court must first satisfy itself that there is in fact a plan at all. In determining whether a plan exists, a court must determine from the surrounding circumstances that a reasonable person could ascertain the intended benefits. beneficiaries. source of financing, and procedures for receiving benefits.
Meredith, 980 F.2d at 354.
See Hansen v. Continental Insurance Co., 940 F.2d 971, 976 (5th Cir. 1991) ("Whether a particular set of insurance arrangements constitute[s] an 'employee welfare benefit plan' is a question of fact.").
In this case, House contends that the disability policy he purchased from AUL in May of 2000 is not an ERISA plan because he was a partner and the only named insured under the policy. House points out that the Group LTD Class 1 policy similarly excludes employees from coverage, because only full-time partners are eligible to enroll in the Group LTD Class 1 policy or plan. Moreover, that policy offers materially different benefits than the employees' Group LTD policy or plan.
As to whether at least one employee was a participant, the Policy's eligibility requirements exclude employees from coverage, i.e., only full-time partners are eligible for membership in the Class 1 LTD Group Policy or plan. Although the employer was required to contribute at least 25% of the premium for a covered person under the Group LTD coverage, by design the House, Kingsmill firm paid 0% of the partner's LTD premiums in the event a partner opted to purchase a Class 1 LTD Policy. Moreover, because House paid 100% of his own premiums for the Policy, he was not covered by the Class 1 LTD Group Policy or Plan. Where "all of the benefits" of a given policy/plan "flow to the owner," and in this case all benefits arguably by definition can only flow to owners of the House firm ( i.e., full-time partners), ERISA does not apply. See Slamen, 166 F.3d at 1106; Robertson, 798 F.2d at 871-72.
See Supplemental Exhibits in Support of Application of ERISA, "BENEFITS DESIRED FOR LTD COVERAGE," at para. 2 (requiring that the "[e]mployer ( i.e., the House firm) pay at least 25% of the premium for a covered person's LTD coverage.").
See also 29 C.F.R. § 2510.3-3 (c)(2) (excluding all policies covering only partners, regardless of the numbers, and thus the degree of any given partner's influence over ERISA-related decisions).
In its supplemental memorandum, AUL cites Steiner v. Fortis Benefit Insurance Company, 2000 WL 877013 (E.D. La.) for the propositions that: (1) a formal document designated as the "Plan" is not required in order to establish that an ERISA plan exists; and (2) the purchase of multiple policies covering a class of employees offers substantial evidence that a plan, fund, or program has been established. However, the facts of Steiner are distinguishable from those before the Court. In Steiner, the plaintiff was a shareholder in the law firm of Hoffman, Sutterfield, Ensenat and Bankston. The firm applied to Fortis Benefits Insurance Company for group long-term benefits applicable to all employees, who were to be covered immediately. Initially, the Fortis policy was non-contributory, with the entire premium for the group policy paid by the firm. Thereafter, the Fortis policy was converted to a contributory policy retroactive to the date of inception. Under the policy there were two eligible classes of persons covered. Most notably, plaintiff Steiner was a member of Class I, which included "[e]ach Active, full-time Director, Associate, and Administration employee of the policyholder. In other words, the policy considered by the Steiner court unquestionably covered employees of the Hoffman, Sutterfield law firm. Hence, the court concluded that "the purchase of long term disability insurance through a group policy for its employees is a 'plan,' assuming Hoffman Sutterfield actually purchased the benefits through its own funds for its employees." Id. at 3 (emphasis added). Because there was insufficient information in the record regarding whether Steiner's employer paid any portion of her premium and its role thereafter, the district court denied Fortis' motion for summary judgment. The court explained:
See Defendant's Post-Hearing Brief, at p. 3.
There is simply insufficient information in the record to determine whether the plan in question falls within the safe harbor provision of the Department of Labor and thus is outside of the scope of ERISA. If ERISA does not apply, then Louisiana law is applicable to the provisions of the policy and will determine whether the plaintiff will succeed on her claim. Because there are material issues of fact not established by the mover in determining whether the plan falls within the safe harbor provision, and because the defendant's motion is based upon the application of ERISA . . ., the motion must be denied.Steiner, 2000 WL 877013, *5.
"Merely stating that the policy is established under ERISA does not meet the requirements of the jurisprudence in creating a Plan governed by ERISA or in defeating the Department of Labor safe harbor provisions so as to be exempted from ERISA regulation." Steiner, 2000 WL 877013, *5 n. 1.
House's Policy provides that only full-time partners are eligible for membership, as does the the Class 1 LTD Group Policy. Moreover, partners pay 100% of their premiums for such coverage. House submits that he paid 100% of his premiums and AUL does not argue otherwise. Disability insurance was clearly intended, however, the intended beneficiaries were exclusively full-time partners, with premiums paid 100% by the partner opting for such coverage.
3. Safe Harbor Provision
AUL has failed to meet its burden with respect to the first prong of the inquiry — i.e., whether a plan exists at all. Nevertheless, the Court turns to the second inquiry. If a plan meets all four criteria contained in 29 C.F.R. § 2510.3-1(j)(1)-(4), it falls within the safe-harbor provision promulgated by the Department of Labor and is exempt from ERISA's coverage. A plan falls within the exemption and is not an ERISA plan if it satisfies all four of the following criteria: (1) the employer does not contribute to the plan; (2) participation is voluntary; (3) the employer's role is limited to collecting premiums and remitting them to the insurer; and (4) the employer receives no profit from the plan.
See Meredith, 980 F.2d at 255.
See 29 C.F.R. § 2510.3 (j)(1)-(4).
The relevant policy or plan for purpose of this Court's determination is the policy issued to House or the House firm's Class 1 LTD Group Policy. The House firm paid no premiums and House's participation was voluntary. Each partner was required to pay 100% of their own premiums and there is no countervailing evidence. AUL's argument that the House, Kingsmill firm paid 100% of the premiums for employees' Class 2 and 3 Group LTD policies misses the point. The relevant policy or plan in this case was House's policy or the Class 1 Group LTD policy which covered only full-time partners. Moreover, only full-time employees were eligible for coverage under the Class 3 LTD policy, and only full-time non-partner attorneys were eligible for coverage under the Class 2 LTD policy.
As to whether the firm merely collected premiums and remitted them to the insurer, AUL directs this Court's attention to the Subscription Agreement. However, it is far from clear on this record whether the provisions of the subscription agreement and the employer's actual role in fact coincide. Although AUL argues that the House, Kingsmill firm was required to take an active role in determining eligibility for benefits, the defendant cites no evidence suggesting that the firm took an active role in either determining eligibility or in serving as a plan or claims administrator or conduit with respect to the Policy. The House, Kingsmill firm does not appear to have provided House with a summary plan description. On this record, a trier of fact could conclude that the House, Kingsmill firm did nothing more than ministerial tasks and passed along House's premium payments to AUL, essentially in the form of a payroll deduction. The Court cannot find, as a matter of law, that the House, Kingsmill Law Firm endorsed or chose the Policy at issue, when it contributed no part of the premium and participation in the partner's policy was voluntary in all respects. Finally, there is no evidence in the summary judgment record from which to conclude that the House, Kingsmill firm profited from the issuance of the disability policy to House. The record evidence demonstrates that all premiums were remitted to AUL.
The district court's opinion in Bourg v. NN Investor's Life Insurance Co., 1991 WL 211568 (E.D. La.) is not persuasive, due to salient factual distinctions. In Bourg, the policy application and the premium schedule showed that the insurance policy was obtained by Bourg Realty Partners for two non-partner employees, who were not family members. Bourg Realty Partners also admittedly purchased a medical insurance policy for partners and employees via the Mass. Market Trust. Additionally, it paid 100% of the insurance premiums, and thus was not exempt from the safe harbor provision of 29 C.F.R. § 2510.3-10). Bourg, 1991 WL 211568, *2 (E.D. La.).
The case at bar is more closely analogous to St. Martin v. Provident Life Accident, 1993 WL 262708 (E.D. La.). In the St. Martin case, Guardian asserted that the St. Martin firm established an ERISA plan and that benefits under the plan are funded through the purchase of several insurance policies, including the purchase of a professional disability policy for Michael St. Martin. Id. at *1. Citing Robertson, supra, the court held that St. Martin's professional disability policy was not governed by ERISA. The court rejected Guardian's contention that because St. Martin had indicated on his application for the disability policy that the firm would pay 100% of the policy premiums, the disability policy was a component of the firm's ERISA plan. The court noted that the evidence showed the contrary, i.e., that the premiums were taxed as income to St. Martin in 1990 and 1991. Relying on Robertson, supra, the court concluded that St. Martin's disability policy, which provides benefits solely to a partner, is not part of the firm's ERISA plan. Id. at *2.
AUL suggests that this Court may ignore the fact that only full-time partners were eligible to be covered persons under the Policy and the fact that the House, Kingmill law firm paid 0% of the premiums for House's or any other Class I LTD insurance policy. AUL cites Hollis v. Provident Life and Accident Insurance Company, 259 F.3d 410, 416 (5th Cir. 2001) and McNeil v. Time Insurance Company, 205 F.3d 179, 190 (5th Cir. 2000) as authority for its argument that whether House was an employee, or an owner, or taxed like a partner is wholly irrelevant to the issues before the Court. However, Hollis and McNeil, supra, are factually inapposite.
In the Hollis case, there was no dispute that Hollis, participated in Graduate Supply House, Inc.'s program, which provided life, medical and disability insurance for its employees. By all accounts, Hollis was an independent contractor but was treated as an employee. Indeed, Graduate Supply paid $600.00 per year, or $50.00 per month, of Hollis' disability premiums on his Provident LTD policy in the same fashion and denomination it paid premiums for its bona fide employee salesmen, who purchased disability insurance pursuant to the company's plan or program, albeit from a different company, Lincoln Life. The district court denied Provident's Motion for Summary Judgment, and the case was tried to a jury, which returned a verdict awarding policy benefits and bad faith damages under Mississippi state law to the plaintiff. Id. at 412-14.
On appeal, Provident argued that ERISA governed the plan and that Hollis' state law claims are preempted. Hollis conceded that Graduate Supply established and maintained an ERISA plan. The issue, therefore, was whether Hollis' disability insurance policy with Provident constituted part of Graduate Supply's ERISA plan, which allowed salesmen to choose a disability policy, and Graduate would pay $600 per year in premiums on whatever policy the salesmen chose. At the end of its analysis, the Fifth Circuit concluded that because Hollis was a person designated by the terms of the plan who could become entitled to benefits thereunder, he was an ERISA beneficiary. The most noteworthy distinctions are that: (1) the existence of an ERISA plan was conceded in Hollis; and (2) admittedly Gator Supply paid $600 per year of the Provident policy's annual premium such that the safe harbor provision was inapplicable to the Provident policy. Moreover, because the "employer" paid a portion of Hollis' premium, independent contractor or not, he was unquestionably a person covered by Gator Supply's plan, which also extended benefits to salesmen employees. Hollis, 259 F.3d at 414-15.
The Fifth Circuit's decision in McNeil is also distinguishable in pertinent part. Most notably, a single plan existed that covered both Dr. McNeil (a partner) and the secretary Ms. Jana Jay (an employee). McNeil, 205 F.3d at 189. Moreover, the McNeil court recognized the exception that a plan with no employees does not constitute an ERISA benefit plan, to wit:
It is true that a plan in which the only participants are the owners or partners does not constitute an ERISA benefit plan. Meredith v. Time Ins. Co., 980 F.2d 352, 357-58 (5th Cir. 1993). But that is not the case here, because the plan covered both Dr. McNeil and Ms. Jay. See Yega v. Nat. Life Ins. Services, Inc., 188 F.3d 287, 291 (5th Cir. 1999) ( en banc) (plan covering owners and employees constituted ERISA plan); Peterson v. American Life Health Ins. Co., 48 F.3d 404, 408 (9th Cir. 1995) (the involvement of at least one employee is sufficient to establish the existence of an ERISA plan).Id. at 190 n. 17. Finding that "Time's plan does not fall within the ERISA safe harbor," the Fifth Circuit highlighted the fact that this partnership established a single plan, and that both Dr. McNeil and the firm's secretary Ms. Jay were members of the same plan. Id. at 190. The court explained:
As the district court noted, the evidence clearly establishes that the partnership contributed to the plan. Though the partnership's contributions were for Ms. Jay, not Dr. McNeil, all documents filed with Time indicated that the two were members of the same plan.Id.
D. Conclusion
The summary judgment evidence in the instant case establishes that full-time partners were covered or eligible for coverage solely under the House Policy. The policy issued to House, as insured, on the policy form available only to full-time partners, provides more generous disability benefits than the Class 3 LTD Group Policy, which afforded coverage to full-time eligible employees of the House firm. House paid 100% of his own premiums for his Class 1 LTD policy. Under the Class 2 and 3 LTD policies, the House, Kingsmill firm paid 100% of premiums.
It is axiomatic that in the context of summary judgment, the Court must construe the evidence in favor the plaintiff and not against him. On this record, the Court may not conclude, as a matter of law, that the House, Kingsmill Law Firm "established or maintained" an employee welfare benefit plan with the intent to provide disability benefits to House, or that the Class 1 LTD Policy issued to House was a component of a comprehensive employee benefit plan. Accordingly, and for all of the above and foregoing reasons,
See Slamen v. Paul Revere Life Insurance Co. 166 F.3d 1102, 1106 (11th Cir. 1999); Page v. UNUM Life Ins. Co. of Am., 2000 WL 748 154 (N.D. Tex); Hampton v. Provident Life Accident Ins. Co., 1999 WL 1332189, at *3 (E.D. La.) (relying on Robertson v. Alexander Grant Co., 798 F.2d 868, 870-72 (5th Cir. 1986)); St. Martin v. Provident Life Accident Ins. Co., 1993 WL 262708 (E.D. La).
IT IS ORDERED that the Defendant's Motion for Summary Judgment is DENIED.
IT IS FURTHER ORDERED that the Plaintiff's Motion for Partial Summary Judgment is GRANTED.