Opinion
No. 2:06-cv-02721-MCE-GGH.
June 11, 2008
MEMORANDUM AND ORDER
Lansing Stenson, M.D. ("Plaintiff") initiated the current action against Jefferson Pilot Financial Insurance Company ("Defendant") to recover, inter alia, Long Term Disability ("LTD") benefits. Presently before the Court is Defendant's Motion for Summary Adjudication as to the interpretation of the calculation of benefits under the Jefferson Pilot LTD Policy ("Policy"). Defendant also seeks Summary Judgment as to Plaintiff's Sixth Claim for Relief, which asks this Court to issue a declaratory judgment as to Plaintiff's right to future LTD benefits.
BACKGROUND
The background facts, which are not germane to the Court's current decision and serve merely to clarify the events leading up to this litigation, are taken from Plaintiff's First Amended Complaint ("FAC"). Defendant does not dispute these facts in its current Motion.
The parties currently dispute the manner in which Plaintiff's monthly benefits should be calculated and the extent of Plaintiff's future benefits. The following Policy terms are relevant to Defendant's Motion:
BASIC MONTHLY EARNINGS or PREDISABILITY INCOME means 1/12th of the Insured Employee's annual gross earnings from the Employer during the calendar year just prior to the determination date.
LONG-TERM DISABILITY BENEFITS
Benefit Percentage: 60%
Maximum Monthly Benefit: $10,000
Minimum Monthly Benefit: $50
BENEFIT. The Company will pay a Total Disability Monthly Benefit to an Insured Employee, after the completion of the Elimination Period, if he or she:
1. is Totally Disabled;
2. is under the regular care of a Physician; and
3. at his or her own expense, submits proof of continued Total Disability and Physician's care to the Company upon request.
The Total Disability Monthly Benefit will cease on the earliest of:
1. the date the Insured Employee ceases to be Totally Disabled or dies;
. . .
3. the date the Insured Employee is able, but chooses not to engage in Partial Disability Employment . . .
AMOUNT. The amount of the Total Disability Monthly Benefit equals:
1. The Insured Employee's Basic Monthly Earnings multiplied by the Benefit Percentage (limited to the Maximum Monthly Benefit); minus
2. Other Income Benefits
OTHER INCOME BENEFITS means those benefits shown below:
5. Benefits under the United States Social Security Act . . . as follows:
(a) disability or unreduced retirement benefits for which the Insured Employee and any spouse or child receives, because of the Insured Employee's Disability; or
(b) reduced retirement benefits received by the Insured Employee and any spouse or child because of the Insured Employee's receipt of reduced retirement benefits.
Declaration of Heidi E. Dross ("Dross Decl."), Exh. A, JP3 0035, JP3 0036, JP3 0052, JP3 0055.
Additionally, SWMG provided its employees with a Summary Plan Description ("SPD") regarding the Policy. Dross Decl., ¶ 4. The SPD stated, in part:
MONTHLY BENEFIT. If you are Totally Disabled beyond the Elimination Period due to a covered injury or sickness, you will be eligible to receive a monthly benefit equal to 60% of your basic monthly income, up to a maximum benefit of $10,000. This benefit may be reduced by income benefits from certain other sources as listed in your certificate.
Dross Decl., Exh. B, JP2-0767.
Based on the above Policy language, Defendant's Motion for Summary Adjudication as to the calculation of the benefits Plaintiff receives each month is granted.
Additionally, Defendant's Motion for Summary Judgment as to Plaintiff's Sixth Claim for Relief, which seeks a declaratory judgment that Plaintiff is entitled to lifetime LTD benefits, is also granted.
STANDARD
The Federal Rules of Civil Procedure provide for summary judgment when "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 a judgment as a matter of law." Fed.R.Civ.P. 56(c). One of the principal purposes of Rule 56 is to dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
Rule 56 also allows a court to grant summary adjudication on part of a claim or defense. See Fed.R.Civ.P. 56(a) ("A party claiming relief may move . . . for summary judgment on all or part of the claim."); see also Allstate Ins. Co. v. Madan, 889 F. Supp. 374, 378-79 (C.D. Cal. 1995); France Stone Co., Inc. v. Charter Twp. of Monroe, 790 F. Supp. 707, 710 (E.D. Mich. 1992).
The standard that applies to a motion for summary adjudication is the same as that which applies to a motion for summary judgment. See Fed.R.Civ.P. 56(a), 56(c); Mora v. ChemTronics, 16 F. Supp. 2d 1192, 1200 (S.D. Cal. 1998).
Under summary judgment practice, the moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact.
Celotex at 323 (quoting Rule 56(c)).
If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986); First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968).
In attempting to establish the existence of this factual dispute, the opposing party must tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Fed.R.Civ.P. 56(e). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, and that the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 251-52 (1986); Owens v. Local No. 169, Assoc. of W. Pulp and Paper Workers, 971 F.2d 347, 355 (9th Cir. 1987).
Stated another way, "before the evidence is left to the jury, there is a preliminary question for the judge, not whether there is literally no evidence, but whether there is any upon which a jury could properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed." Anderson, 477 U.S. at 251 (quoting Improvement Co. v. Munson, 81 U.S. (14 Wall.) 442, 448 (1872)). As the Supreme Court explained, "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'" Matsushita, 475 U.S. at 586-87.
In resolving a summary judgment motion, the evidence of the opposing party is to be believed, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party. Anderson, 477 U.S. at 255. Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898 (9th Cir. 1987).
ANALYSIS
A. The Policy Unambiguously Mandates the Manner in Which the Total Monthly Disability Benefit is to Be Calculated.Plaintiff alleges in his Complaint that Defendant breached the terms of the LTD Plan by reducing his monthly disability benefits by the amount of Social Security benefits that Defendant claims he and his dependent receive. FAC, ¶ 1(g). Plaintiff further alleges that the Policy entitles him to receive the maximum benefit of $10,000 per month. Id. Defendant concedes that its interpretation of the LTD Policy and subsequent calculation of Plaintiff's LTD benefits is subject to de novo review by this Court.
In Evans v. Safeco Life Ins. Co., the Ninth Circuit stated that "the interpretation of an ERISA insurance policy is `governed by a uniform body of federal law.'" 916 F.2d 1437, 1441 (9th Cir. 1990) (quoting Sampson v. Mutual Benefit Life Ins. Co., 863 F.2d 108, 109-110 (1st Cir. 1988)).
We interpret terms in ERISA insurance policies "in an ordinary and popular sense as would a [person] of average intelligence and experience." We will "not artificially create ambiguity where none exists. . . . If a reasonable interpretation favors the insurer and any other interpretation would be strained, no compulsion exists to torture or twist the language of the policy."
Id. (quoting Allstate Ins. Co. v. Ellison, 757 F.2d 1042, 1044 (9th Cir. 1985)) (internal citations omitted)).
Notably, the parties do not dispute that Plaintiff is totally disabled and is entitled to LTD benefits under the Policy, nor do they dispute the meaning of the terms material to the interpretation of the Policy. Rather, the parties dispute only the calculation of the amount to which Plaintiff is entitled. Plaintiff argues that the order of operations of the calculation of the Total Disability Monthly Benefit is ambiguous and subject to his interpretation. Defendant argues that the provided method of calculating the Total Disability Monthly Benefit is unambiguous and results in an outcome that differs from that reached under Plaintiff's theory. The relevant Policy language states:
AMOUNT. The amount of the Total Disability Monthly Benefit equals:
1. The Insured Employee's Basic Monthly Earnings multiplied by the Benefit Percentage (limited to the Maximum Monthly Benefit); minus
2. Other Income Benefits
According to Defendant, Total Disability Monthly Benefits are calculated by first multiplying the Insured Employee's Basic Monthly Earnings by the Benefit Percentage. This amount is then limited by the $10,000 Maximum Monthly Benefit. Next, Other Income Benefits are subtracted from that reduced amount to determine the Amount owed.
Applied to the current facts, Plaintiff's monthly income of $37,000 is multiplied by the Benefit Percentage, which is 60%. That percentage reduces his income to $22,200.00. Since Plaintiff's reduced income exceeds the Maximum Monthly Benefit, his benefits are limited to $10,000.
Thereafter, the $10,000 Maximum Monthly Benefit is reduced by any Other Income Benefits that Plaintiff receives, in this case allegedly $2,827, which is the combined total of both Plaintiff's and his dependant's Social Security Benefits. Dross Decl., 3:13-17. Hence, Plaintiff receives $7,173 each month.
Plaintiff disagrees with this interpretation. He argues Defendant breached the terms of the LTD plan by "[r]educing the monthly benefit amounts paid to plaintiff . . . by the amount of Social Security benefits Jefferson Pilot claimed plaintiff received notwithstanding such deductions were contrary to the terms of the contract and plaintiff was entitled to the maximum benefit of $10,000 per month." FAC, ¶ 100(g). Plaintiff argues that, based on the language in the SPD, his Other Income Benefits should first be deducted from his Basic Monthly Earnings prior to applying the Benefit Percentage. Plaintiff's interpretation changes the above calculations as follows:
Basic Monthly Earnings of $37,000 less Other Income of $2,827 equals $34,173. 00, which is then reduced to the Maximum Monthly Benefit of $10,000.
Plaintiff's interpretation is contrary to the plain and unambiguous language of the Policy as well as the SPD. The Policy clearly establishes the order of operations to be followed in making the disputed calculation. The semicolon in the applicable language makes it evident that the subtraction of Other Income Benefits occurs only after all other calculations have been made. Therefore, not only must the Basic Monthly Earnings be reduced by the Benefit Percentage, but that result must then be limited by the parenthetical also preceding the semicolon.
That parenthetical mandates that any calculation in excess of the Monthly Maximum Benefit be reduced to $10,000. It is only after the reduction to the Monthly Maximum Benefit amount that one reading the clause would reach the semicolon to take the further step of subtracting Other Income Benefits.
That interpretation is entirely consistent with SWMG's SPD which provides:
MONTHLY BENEFIT. If you are Totally Disabled beyond the Elimination Period due to a covered injury or sickness, you will be eligible to receive a monthly benefit equal to 60% of your basic monthly income, up to a maximum benefit of $10,000. This benefit may be reduced by income benefits from certain other sources as listed in your certificate.
Dross Decl., Exh. B (emphasis added). Again, under this language, it is only after the Monthly Benefit is reduced to $10,000 that the reduction for Other Income Benefits occurs. Plaintiff's argument that the phrases "monthly benefit" and "maximum benefit" create ambiguity and conflict with the language of the Policy is entirely unreasonable.
Therefore, the Court finds that the Policy requires the monthly benefit to be calculated as follows:
Step 1: Plaintiff's Basic Monthly Earnings are multiplied by the Benefit Percentage. Step 2: If the result from Step 1 exceeds the Maximum Monthly Benefit, that result is reduced to the Maximum Monthly Benefit, in this case $10,000. Step 3: Other Income Benefits are subtracted from the result in Step 2 to reach the final Total Disability Monthly Benefit Amount.Hence, Defendant's Motion for Summary Adjudication as to the manner in which benefits are calculated is granted.
There are not enough facts before the Court on this Motion to determine whether Defendant actually processed these calculations correctly. The Court limits its holding to the manner in which the monthly benefits are to be calculated and withholds judgment as to the actual calculations themselves.
B. There is no Sufficient Controversy Between the Parties to Justify Declaratory Judgment as to Future Benefits.
Plaintiffs have styled their Sixth Claim as one for declaratory relief. The operation of the Declaratory Judgment Act is procedural only. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671, 94 L. Ed. 1194, 70 S. Ct. 876 (1950) (citations and quotations omitted). Generally, declaratory judgment actions are justiciable if "under all the circumstances, . . . there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Cas. Co. v. Pacific Coal Oil Co., 312 U.S. 270, 273, 85 L. Ed. 826, 61 S. Ct. 510 (1941). "[D]eclaratory relief is appropriate (1) when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." Eureka Fed. Sav. Loan Ass'n v. Am. Cas. Co., 873 F.2d 229, 231 (9th Cir. 1989) (citations omitted).
Plaintiff specifically seeks a declaration that "for the rest of his life he is entitled to receive the maximum benefit of $10,000 per month under the LTD contract he purchased from Jefferson Pilot." Compl., ¶ 104. Defendant seeks summary judgment on the Plaintiff's claim, or, alternatively, summary adjudication of the "fact that the plan does not authorize benefits for any future period of disability." Motion, 10:11-14. The relevant Policy language states:
BENEFIT. The Company will pay a Total Disability Monthly Benefit to an Insured Employee, after the completion of the Elimination Period, if he or she:
1. is Totally Disabled;
2. is under the regular care of a Physician; and
3. at his or her own expense, submits proof of continued Total Disability and Physician's care to the Company upon request.
The Total Disability Monthly Benefit will cease on the earliest of:
1. the date the Insured Employee ceases to be Totally Disabled or dies;
. . .
3. the date the Insured Employee is able, but chooses not to engage in Partial Disability Employment . . .
As in the prior discussion, this Policy language is also unambiguous. According to the Policy, there are several conditions that must be met in order for the insured to be entitled to the Total Disability Monthly Benefit. Additionally, in order to continue to receive the Total Disability Monthly Benefit, the insured, must, inter alia, be living, remain Totally Disabled, and be unable to work, even part-time.
Ultimately, the issue before the Court is decidedly narrow. Plaintiff asks for a specific declaration as to the amount of benefits he is entitled to receive and the duration over which he should receive such payments.
First, as already discussed, supra, this Court has determined that Plaintiff is not entitled to receive $10,000 per month if he is receiving any Other Income Benefits which would offset that amount. Therefore, while Plaintiff is limited to the Maximum Benefit Amount under the terms of the Policy, Plaintiff is not necessarily entitled, now or in the future, to receive that $10,000 amount each month.
Moreover, it would be entirely speculative for this court to presume that all relevant circumstances will remain static for the remainder of Plaintiff's life. Plaintiff asks the Court to assume, inter alia, not only that he will remain Totally Disabled, but also that he will never be able to engage in Partial Disability Employment, or, if he was so able, that he would not refuse the opportunity. Based on the current record, the Court cannot make such a declaration.
Finally, it would be inappropriate for this Court to grant Plaintiff's Sixth Claim for Relief because there is not a sufficient controversy between the parties to warrant a declaratory judgment. "A `controversy' in this sense must be one that is appropriate for judicial determination. A justiciable controversy is thus distinguished from a difference or dispute of a hypothetical or abstract character; from one that is academic or moot. The controversy must be definite and concrete, touching the legal relations of parties having adverse legal interests. It must be a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 240-241 (1937) (internal citations omitted). "The difference between an abstract question and a `controversy' contemplated by the Declaratory Judgment Act is necessarily one of degree, and it would be difficult, if it would be possible, to fashion a precise test for determining in every case whether there is such a controversy. Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Cas. Co. 312 U.S. at 273 (citing Aetna Life Ins. Co. 300 U.S. at 239-242).
Notably, Defendant does not dispute that, if Plaintiff continues to meet the conditions required by the contract, he will continue to receive LTD benefits under the Policy. Defendant has not refused, nor threatened to refuse, to pay Plaintiff's claims. The only dispute between the parties is as to the amount of the LTD benefit, not as to whether or not that benefit should be paid. The latter dispute is purely hypothetical. Therefore, there is no current controversy between the parties sufficient to warrant declaratory relief. Such a judgment would require the Court to issue an advisory opinion and that it cannot do. Defendant's Motion for Summary Judgment on Plaintiff's Sixth Claim for Relief is granted.
CONCLUSION
Since the Policy language is unambiguous, as is the order of operations required to calculate the LTD benefits due Plaintiff under the Policy, Defendant's Motion for Summary Adjudication as to the manner of that calculation is GRANTED. Defendant's Motion for Summary Judgment as to Plaintiff's Sixth Claim for Relief is GRANTED as well because there is no controversy between the parties sufficient to warrant declaratory relief.IT IS SO ORDERED.