Opinion
Case No. 97-74854
June 11, 2001
MEMORANDUM AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT A/K/A ENTRY OF JUDGMENT
I. Introduction
This is an ERISA case. Plaintiff Jane Cuellar (Cuellar) is suing defendant CNA Insurance Company (CNA) for disability insurance benefits she claims she is entitled to for injuries she sustained in an automobile collision on December 5, 1993. Following the Court's previous order that CNA accept a letter from Cuellar dated September 18, 1996 as a claim to be administratively processed, CNA denied the claim and the subsequent appeal. Now before the Court is CNA's motion for summary judgment, also referred to as a motion for entry of judgment, on the ground that its denial of benefits was proper. For the reasons which follow, the motion is GRANTED.
This is the second case initiated by Cuellar against CNA under the Plan and for the same injuries. The first case (95-73014) was settled on July 12, 1996, the relevance of which is explained below.
II. Background A.
As of December 1993, Cuellar worked as a full-time receptionist at Harbor Oaks Hospital earning $9.06/hour. On December 5, 1993, Cuellar was involved in an automobile accident in which she suffered numerous physical injuries including a closed head injury. At that time, Cuellar was covered under a disability plan through her employer called the TGIF Income Replacement Plan (Plan), administered by Continental Casualty Company, one of CNA's companies. The Plan provided for both short and long term disability coverage. Under the Short-Term Disability Provision, an insured is eligible for benefits if totally disabled for 60 consecutive days and coverage may continue up to 6 months. After the expiration of 6 months, the Long-Term Disability Provision becomes effective if the insured continues to be disabled. Under the Long-Term Disability Provision, an insured is eligible for benefits if totally or partially disabled, or engaged in rehabilitative employment. If engaged in rehabilitative employment, the insured in entitled to 100% of the Long-Term Disability benefits.
Rehabilitative employment is defined by the Plan as follows: while you are unable to perform the substantial and material duties of your regular employment on a full-time, part-time or partial basis, you are gainfully employed in any occupation, other than your regular occupation, on a full-time or part-time basis.
As a consequence of the injuries suffered in the automobile accident, Cuellar took a leave of absence from her job in May 1994. Cuellar thereafter submitted to CNA a claim for disability benefits under the Plan on August 24, 1994. CNA denied the claim and the subsequent appeal. Cuellar then filed suit against CNA in Macomb County Circuit Court; CNA removed the case to federal court. (Case No. 95-73014) The case was eventually settled by way of a "Release, Indemnity and Dismissal of Lawsuit Agreement" (Release). In exchange for $10,000, Cuellar agreed to the terms of the Release; she however made a handwritten notation on the Release document indicating a date restriction of "through 6/1/96 only." (See Exhibit A attached.)
B.
One month after the Release was executed, on September 18, 1996, Cuellar sent a letter to CNA which stated:
This will follow resolution of the insurance claim through June 1, 1996. Mrs. Cuellar will now expect to receive the proceeds of her insurance policy in accord with the Long Term Disability provision which stipulates eligibility to receive 70% of her salary since she is engaged in "Rehabilitative Employment" only, as is qualified in the NME Income Replacement Plan (page 5). Mrs. Cuellar is entitled to receive 70% of her salary for 12 months ($1,014.72) then, in accord with the provision, she will expect a 50% reduction ($507.36) to continue thereafter as long as her disability continues.
Apparently, Cuellar worked at Presbyterian Village Home as a resident aide from February 12, 1996 through March 1997, earning $6.41/hour. She stopped working pursuant to her doctor's recommendation.
When CNA did not respond to Cuellar's letters, she filed this lawsuit in August 1997.
On May 15, 1998, CNA filed a motion for summary judgment arguing that the Release barred any claims under the Plan through June 1, 1996 and that Cuellar made no claim for benefits after June 1, 1996. CNA additionally argued that even if Cuellar made a claim after June 1, 1996, she would not be entitled to benefits because she was employed, and thus not insured, after June 1, 1996.
Following a hearing, the Court denied CNA's motion without prejudice and directed CNA to consider the September 18, 1996 letter as a claim to be administratively processed. The Court did not address the issue of the Release except to comment that it felt that it was ambiguous. The Court informally stayed further proceedings until the claim was administratively reviewed.
C.
On December 22, 1998, after processing Cuellar's September 18, 1996 letter as claim, CNA denied the letter claim on the grounds that (1) Cuellar was not totally disabled, (2) her coverage under the Plan had ceased on May 9, 1994 since that was her last day of full-time employment, and (3) Cuellar's job at Presbyterian Village Home did not qualify as rehabilitative employment. In response. Cuellar submitted additional medical documents to CNA on January 28, 1999. CNA, in turn, reiterated its denial of Cuellar's claim, but advised her that it would treat the January 28, 1999 letter as an appeal of the denial of benefits. The appeal was similarly denied on July 26, 1999.
This was the basis for the denial of Cuellar's initial claim, made in August 1994.
CNA measured Cuellar's disability as of May 9, 1994.
III. Standard of Review
ERISA cases brought pursuant to section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), which provides that a participant or beneficiary may bring a civil action "to recover benefits due to him under the terms of the plan, or to clarify his right to future benefits under the terms of the plan" are not to be decided under the standard for granting summary judgment pursuant to Fed.R.Civ.P. 56(c). Wilkins v. Baptist Healthcare System. Inc., 150 F.3d 609, 619 (6th Cir. 1998). Accordingly, CNA's motion for summary judgment will be treated as a motion for entry of judgment. The Court must decide whether benefits were properly denied based on a review of the record presented to the administrator under the appropriate standard. Id.
A denial of benefits under an ERISA plan is reviewed de novo unless the plan expressly gives the plan administrator discretionary authority to determine eligibility benefits or to construe the plan. Firestone Tire Rubber v. Bruch, 489 U.S. 101, 115 (1989). Under Firestone, where the plan grants decision-making discretion to the administrator, the Court must apply an "arbitrary and capricious" standard of review. Yeager v. Reliance Standard, 88 F.3d 376, 380 (6th Cir. 1996). CNA argues that under the Plan, it is vested with discretionary authority. Cuellar has not disputed this representation, and the Court's own review of the Plan is not to the contrary. The Plan documents provide:
Administrator Discretion over Eligibility. The Plan Administrator reserves the discretionary authority to make benefit eligibility determinations as to the class of employees eligible for coverage. This provision is applicable to all coverage.
Plan at p. 9.
The Sixth Circuit has defined this standard as follows:
When applying this deferential standard, we must decide whether the plan administrator's decision was "rational in tight of the plan's provisions." Daniel v. Eaton Corp., 839 F.2d 263, 267 (6th Cir. 1988); accord Yeager v. Reliance Standard Life Ins. Co., 88 F.3d 376, 381 (6th Cir. 1996) (quoting same). In other words: "When it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, that outcome is not arbitrary or capricious." Davis v. Kentucky Fin. Cos. Retirement Plan, 887 F.2d 689, 693 (6th Cir. 1989).Smith v. Ameritech, 129 F.3d 857, 860 (6th Cir. 1997). In conducting its review, the Court "consider[s] only the facts known to the plan administrator at the time he made his decision." Yeager, 88 F.3d at 381;accord Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 986 (6th Cir. 1991).
IV. Analysis A.
CNA argues that the denial of Cuellar's September 18, 1996 letter claim was not arbitrary or capricious because as of June 1, 1996, Cuellar was not entitled to coverage under the Plan. The Plan specifically states that it applies to "all active full-time employees . . ." Since Cuellar had not been an employee of Harbor Oaks Hospital since May 1994, CNA did not consider her an insured covered by the Plan as of June 1, 1996.
The June 1, 1996 date is important because of the Release, which bars "any and all, through 6/1/96 only, claims for benefits and further, from any and all claims, demands and obligations and causes of action of any nature whatsoever, whether past or present. . . ." CNA says that "the Court found, at the insistence of Plaintiff's counsel, that her letter of September 18, 1996 constituted a new claim to be processed by CNA. . . ." As such, CNA argues that it was obligated to evaluate Cuellar's "new claim" under the circumstances found as of June 1, 1996 only.
Cuellar, however, responds that she is entitled to coverage under the Plan because "[h]er claim is brought under the [Plan] which was effective while she was a full-time employee on December 5, 1993 and for which she has recovered benefits from that date through June 1, 1996." Under this argument, Cuellar seems to imply that CNA should have evaluated her September 18, 1996 letter claim under circumstances predating June 1, 1996. This approach, however, seem to place Cuellar's purportedly "new" claim squarely within the ambits of the Release since it relates to "old" events and circumstances, i.e., prior to June 1, 1996.
As CNA argues, Cuellar "cannot have it both ways. She cannot state that the September 18, 1996 [letter] claim is not a new claim, but rather an `old claim' and at the same time argue that the `old claim' was not purchased for the Release." Thus, the threshold issue becomes, what does the Release actually cover?
CNA's assertion that the Court's direction to consider the September 18, 1996 letter as a claim to be administratively processed, effectively "made the issue of the Release moot" is a mischaracterization. Rather, it appears from the transcript of the hearing on July 15, 1998 that the Court was mainly concerned with Cuellar exhausting her administrative procedures under the Plan before acting on her lawsuit. The Court did not make a decision on the scope of the Release in 1998 when the issue first came before it.
1.
Upon review of the parties' papers, including their previous summary judgment motion papers, there appears to be a fundamental disagreement between the parties as to what rights of Cuellar's, specifically, were extinguished by the Release.In Cuellar's view, the Release merely encompassed the benefits that she had accrued through June 1, 1996. In other words, Cuellar believes that because the language of the Plan says benefits are to be paid "until recovery or until age 65," and her disability continued beyond June 1, 1996, she can now assert a claim to collect benefits that have come duesince June 1, 1996. As Cuellar's brief states,
On July 12, 1996, the parties settled that civil action, Case no. 95-73014, by way of "Release, Indemnity and Dismissal of Lawsuit Agreement" only as to benefits to which she was entitled through June 1, 1996, and in no way settled contract benefits which were to continue to be forthcoming from June 1, 1996 until she was no longer entitled to the same (Release, Appendix M).
Despite Plaintiff's long term disability of which Defendant was aware, Plaintiff has received no contract benefits since June 1, 1996.
Plaintiff's Brief in Support of Her Response to Defendant's Motion for Summary Judgment at 6 (emphasis added).
CNA, however, believes that the Release bars all claims stemming from circumstances or actions which occurred through June 1, 1996. Since Cuellar's September 18, 1996 letter claim stems from the 1993 automobile accident and her accompanying injuries, CNA says that such a "claim" is barred by the Release and Cuellar is not entitled to anything further under the Plan.
2.
The Court agrees with CNA. The Release specifically stated that Cuellar agreed to "release and discharge [defendant] . . . from any and all through 6-1-96 only claims for benefits." Therefore, the plain language of the Release dictates that Cuellar's claim for benefits, made in August 1994, was discharged. Indeed, the dispute giving rise to the first lawsuit was the denial of Cuellar's August 1994 claim for benefits. The dispute regarding the claim was resolved when, in exchange for $10,000, Cuellar agreed to "release and waive and deem fully satisfied all the claims against [defendant] arising out of . . . the claim for disability referred to above." (Emphasis added). Cuellar did not reserve the right to continue the claim she filed in August 1994. Further, it is worth noting that, presumably, Cuellar would not have agreed to dismiss the lawsuit if there were issues unresolved as to the claim. In other words, gleaning the intent of the parties from the language of the Release, Cuellar agreed to dismiss the lawsuit because the dispute regarding the claim for benefits was resolved.
There is no date restriction on this term of the release.
Given that the Release expressly deemed as "fully satisfied," all claims against CNA arising out of the claim for the disability which occurred in 1993, the only way that Cuellar's claim could be outside the purview of the Release, is if the September 18, 1996 letter claim is completely new, i.e., stemming from circumstances occurring after June 1, 1996. However, Cuellar has suffered no new injuries since 1993, rather Cuellar simply says that she continues to be disabled from her injuries suffered in 1993. Thus, it would appear that CNA acted rationally in denying Cuellar benefits, given that there was a 1994 inactive participation date (departure from job), and a 1996 claim (letter).
B.
Moreover, Cuellar's present position suffers from an additional fatal flaw. The section of the Plan that Cuellar is now asserts she is entitled to benefits under, the Long-Term Disability Benefits section, states: "Monthly Long-Term Disability Benefits are payable after you have beendisabled from an injury or sickness for a total of 180 days." This presupposes that the insured has been found to be disabled. Cuellar, however, has never made such a showing. There has never been a determination made, either by CNA or the Court, that Cuellar is totally disabled based on medical evidence, such that she would be entitled to benefits under the Plan. Cuellar's initial claim was settled without a decision on its merits. CNA paid her $10,000 to release her claims and make her lawsuit go away but CNA never conceded the merits of Cuellar's claim. Rather, Cuellar sold the merits for a lump sum payment.
Thus it is irrelevant whether her subsequent employment was "rehabilitative," since she has never been deemed totally disabled.
V. Conclusion
The Court's role in this matter is limited to reviewing CNA's decision to see that it did not act in an arbitrary and capricious manner. For the reasons stated above, CNA's denial of Cuellar's September 18, 1996 letter claim was not arbitrary or capricious. Therefore, it is entitled to entry of judgment.
SO ORDERED.
EXHIBIT A RELEASE, INDEMNITY AND DISMISSAL OF LAWSUIT AGREEMENT
I, Jane Cuellar, for and in consideration of the sum of Ten Thousand Dollars ($10,000.00) to be paid by Continental Casualty Company upon its receipt of this Release, Indemnity and Dismissal of Lawsuit Agreement, properly executed, do, agree as follows:
1. I, Jane Cuellar, release and forever discharge Continental Casualty Company and each of its past, present and future officers, directors, attorneys, agents and representatives, employees, subsidiaries, affiliates and assigns (all referred to herein as the "company") from any and all claims for benefits and further, from any and all claims, demands and obligations and causes of action of any nature whatsoever, whether past, or present, whether foreseen or unforeseen, whether based on tort, contract, statutory or other legal theory of recovery and whether for compensatory, punitive, exemplary, statutory, or any other form of damage or legal relief which are or in any way connected with, or arise out of the following:
"Continental Casualty Company policy No. SR.A083085648 issued to National Medical Enterprises and any claim for disability benefits arising under that policy or arising under the United States District Court for the Eastern District of Michigan, civil action No. 95 73014."
2. I further release and waive and deem fully satisfied all the claims against the Company arising out of a lawsuit referred to above and the claim for disability referred to above.
3. I represent that I am the sole beneficiary under the above referenced policy and that I, solely, am entitled to any and all proceeds payable under that policy. I also represent that I have not assigned any interest I have in that policy to any other person or party.
4. I agree to indemnify the company and hold it harmless against any claim, loss or liability asserted against the company for any matter regarding my claimed disability, initiated by me, or by any other person on my behalf.
5. I also agree and acknowledge that payment of $10,000 is a full and complete compromise and, settlement of all of my rights and claims under policy No. SR-A083085648fn_ and that neither payment of this sum by the Company nor negotiations for this Release shall be considered as constituting any admissions by the Company of any facts or an admission by the Company that it engaged in any wrong doing.
6. I further agree to take all necessary steps to obtain a dismissal with prejudice of the complaint filed against the Company in United States District Court civil action No. 95 63014; I agree and acknowledge that the Company has satisfied all past claims and allegations in that lawsuit through 6-1-96.
Through 6-1-96 only.
I UNDERSTAND THAT ALL OF THE REPRESENTATIONS MADE ABOVE ARE MATERIAL TO THE COMPANY AND I WARRANT THEIR TRUTHFULNESS. I HAVE READ THE TERMS OF THIS AGREEMENT BEFORE SIGNING IT, AND I HAVE BEEN ADVISED BY COUNSEL BEFORE SIGNING THIS AGREEMENT, AND I UNDERSTAND THE TERMS AND EFFECT OF THIS AGREEMENT AND I HAVE SIGNED BELOW VOLUNTARILY.
DATED: 7/12/96 _________________________ Jane Cuellar
____________________________ WITNESS