Thomas v. Reliance Standard ( 1998 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 97-30368
_______________________
ALFRED THOMAS,
Plaintiff-Appellant,
versus
RELIANCE STANDARD LIFE INSURANCE CO.,
Defendant-Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Western District of Louisiana
(95-CV-2142-L)
_________________________________________________________________
January 15, 1998
Before JONES and SMITH, Circuit Judges, and FITZWATER, District
Judge.*
PER CURIAM:**
Alfred Thomas appeals from the district court’s grant of
summary judgment to Reliance Standard Life Insurance Co.
(“Reliance”). The district court held that the policy issued by
*
District Judge of the Northern District of Texas, sitting
by designation.
**
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
Reliance to Thomas’s employer did not provide coverage to Thomas
for his alleged permanent and total disability. We affirm.
I. Background
Thomas began his employment with Cabot Corporation (“Cabot”)
in 1968. He participated in Cabot’s company benefit plan, which
included group accident insurance. The group accident insurance
was provided to Cabot by Reliance under policy VAR50230, and it
included benefits for employees who became permanently and totally
disabled. The parties agree that the group accident policy is an
“employee welfare benefit plan” as defined by the Employee
Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et. seq.
(“ERISA”).
In 1992, Cabot and Reliance renegotiated their group
accident insurance policy. Under policy VAR50230A, which became
effective August 1, 1992, permanent and total disability benefits
were terminated, but otherwise the policy remained virtually
identical to its predecessor, policy VAR50230. Cabot notified its
employees by letter and a revised Employee Benefits Handbook of the
modification to the policy.
On September 22, 1994, Thomas allegedly became
permanently and totally disabled, and he filed a claim under
Reliance’s group accident policy. Reliance refused payment on the
ground that VAR50230A did not provide coverage for permanent and
total disability. Thomas then filed suit against Reliance in
2
Louisiana state court, and Reliance removed the case to federal
district court. The district court granted summary judgment to
Reliance, finding (1) that VAR50230A did not provide coverage for
permanent and total disability, (2) that Louisiana law was
inapplicable to the issue of the adequacy of notice provided by
Reliance to Thomas in switching from VAR50230 to VAR50230A, and (3)
that proper notice was given by Reliance pursuant to ERISA.
II. Analysis
This court reviews de novo a district court’s grant of
summary judgment. See Burditt v. West American Ins. Co., 86 F.3d
475, 476 (5th Cir. 1996). The party moving for summary judgment
must demonstrate an absence of any genuine issue of material fact.
See FED. R. CIV. P. 56(c). While the nonmovant must provide more
than mere conclusory allegations to defeat summary judgment, the
court should decide every reasonable inference in favor of the
party opposing the motion. See Burditt, 86 F.3d at 476.
A. Coverage Claims
Thomas argues that the district court incorrectly applied
an “abuse of discretion” standard to determine whether Reliance
improperly denied coverage for his permanent and total disability
claim under ERISA. Thomas argues that a less deferential standard
of review should apply because Reliance has an inherent conflict of
interest as both the claims administrator and the payor of
disability benefits.
3
A denial of ERISA benefits by a claims administrator is
reviewed under an abuse of discretion standard if the plan gives
the claims administrator discretionary authority to determine
eligibility for benefits or to construe the terms of the plan. See
Duhon v. Texaco, Inc., 15 F.3d 1302, 1305 (5th Cir. 1994) (citing
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)).
If a plan gives discretion to a claims administrator who is
operating under a conflict of interest, “that conflict must be
weighed as a factor in determining whether there is an abuse of
discretion.” Id. at 1306 (quoting Bruch, 489 U.S. at 115). There
is no intermediate or heightened standard of review for examining
a decision of a claims administrator who is operating under a
potential conflict of interest. Rather, the potential conflict of
interest must be given due consideration in applying the abuse of
discretion standard. See Sweatman v. Commercial Union Ins. Co., 39
F.3d 594, 599 (5th Cir. 1994); Duhon, 15 F.3d at 1306.
The parties do not contest that Reliance and Cabot had
total discretion to grant or deny benefits. Therefore, the abuse
of discretion standard applies. See Duhon, 15 F.3d at 1306.
Having heard oral argument and carefully reviewed the briefs and
pertinent portions of the record, we are persuaded that the
district court correctly found that Reliance did not abuse its
discretion in denying permanent and total disability benefits to
Thomas, even recognizing Reliance’s dual role as claims
4
administrator and insurer. VAR50230A unambiguously does not
provide coverage for permanent and total disability.
B. Notice Claims
Thomas argues that Reliance provided improper notice to
him of the change in coverage from VAR50230 to VAR50230A under La.
R.S. 22:213(B)(7) and La. R.S. 22:636(F). Because we agree with
the district court that neither statute applies to the issue of the
adequacy of notice provided by Reliance to Thomas, we need not
reach Reliance’s argument regarding preemption by ERISA.
(1). La. R.S. 22:213(B)(7).
Thomas argues that Reliance violated § 22:213(B)(7) by
failing to give proper notice of the change in coverage from
VAR50230 to VAR50230A. Section 22:213(B)(7) states:
B. Other provisions (optional). No such policy
shall be delivered or issued for delivery containing
provisions respecting the matters set forth below unless
such provisions are, in substance, in the following
forms, or, at the option of the insurer, in forms which
in the written opinion of the commissioner of insurance
are not less favorable to the policyholder.
. . . .
(7) Cancellation: The insurer may cancel this
policy at any time subject to the provisions of R.S.
22:228. Such cancellation shall be by written notice,
delivered to the insured, or mailed to his last address
as shown by the records of the insurer, shall refund the
prorata unearned portion of any premium paid, and shall
comply with the provisions of R.S. 22:636(F).
LA. REV. STAT. ANN. § 22:213(B) (West 1995) (emphasis added). The
district court found that both VAR50230 and VAR50230A were issued
5
and delivered in Massachusetts, not Louisiana. Therefore, §
22:213(B)(7) was inapplicable.
VAR50230A states expressly that “[t]his policy is
delivered in Massachusetts and is governed by its laws.” VAR50230
does not contain such language, but the affidavit of Wayne
Steigerwalt, an assistant vice president of Reliance, states that
both VAR50230 and VAR50230A were issued and delivered in
Massachusetts. Appellant’s response to the language in VAR50230A
is that it is voided by La. R.S. 22:629. Section 22:629 states:
A. No insurance contract delivered or issued for
delivery in this state and covering subjects located,
resident, or to be performed in this state or any group
health and accident policy insuring a resident of this
state, regardless of where made or delivered shall
contain any condition, stipulation, or agreement:
(1) Requiring it to be construed according to
the laws of any other state or country . . . ;
(2) Depriving the courts of this state of
jurisdiction of action against the insurer . . . .
. . . .
B. Any such condition, stipulation, or agreement in
violation of the Section shall be void, but such voiding
shall not affect the validity of the other provisions of
the contract.
LA. REV. STAT. ANN. § 22:629 (West 1995). Assuming, without deciding,
that § 22:629 voids the express language in VAR50230A, Thomas
presents no evidence which questions the veracity of Mr.
Steigerwalt’s affidavit. Because appellant offers no evidence that
the policy was issued and delivered in Louisiana,10. VAR50230 states:
1
Appellant’s only response to Mr. Steigerwalt’s affidavit is
that VAR50230 and VAR50230A require that certificates of insurance
be delivered to the policies’ insureds, who reside in Louisiana.
6
“CERTIFICATE OF INSURANCE: The Company [Reliance] will issue to the Policyholder for delivery to each Insured
Person an individual certificate setting forth a statement as to the insurance protection to which the Insured Person is
entitled and to whom indemnities provided by this Policy are payable.”
VAR50230A states: “CERTIFICATE OF INSURANCE: We will provide a certificate of insurance for each
Insured Person. The certificate will set forth the terms of coverage and to whom benefits are payable.”20. La. R.S.
22:655 permits a third-party to bring a direct action against an insurer under very limited circumstances. See LA. REV.
STAT. § 22:655 (West 1997). 3 he has failed to raise an issue of material fact regarding Reliance’s evidence that the
policy was issued and delivered in Massachusetts. For this reason, § 22:213(B)(7) is inapplicable to this case.
(2). La. R.S. 22:636(F)
Appellant also argues that Reliance provided improper notice of the change in coverage from
VAR50230 to VAR50230A under La. R.S. 22:636(F). Section 22:636(F) states:
F. No insurer shall cancel or refuse to renew any policy of group or family group health and
accident insurance except for nonpayment of premium or failure to meet the requirements for being
a group or family group insurance policy until sixty days after the insurer has mailed written notice
of such cancellation or nonrenewal by certified mail to the policyholder.
LA. REV. STAT. ANN. § 22:636(F) (West 1995) (emphasis added). The district court found that § 22:636(F) did not
apply to Thomas because he was not the “policyholder.” Cabot is specifically named as the “policyholder” in both
VAR50230 and VAR50230A. Certain subsections of § 22:636 specifically refer to providing notice to “insureds,” but
not subsection F. The clear and unambiguous meaning of subsection F is that notice of cancellation of group accident
This, so his argument goes, means that “delivery” takes place in
Louisiana. In Landry v. Travelers Indemnity Co., 890 F.2d 770, 772
(5th Cir. 1989), this court interpreted the definition of
“delivered in Louisiana” under La. R.S. 22:655.
The court held that mailing certificates of insurance to a
Louisiana subsidiary of a Houston corporation, when the policy
itself was delivered to the corporation’s Houston headquarters, did
not constitute “delivery” under Louisiana law. See id. at 772-73.
By analogy, sending certificates of insurance to Reliance’s
insureds does not constitute “delivery” under Louisiana law when
the appellant presents no evidence to contradict either the express
language of VAR50230A or Mr. Steigerwalt’s affidavit that VAR50230
and VAR50230A were issued and delivered in Massachusetts.
7
policies is only required to be made to the “policyholder,” (i.e., Cabot). Therefore, § 22:636(F) is inapplicable to this
case.
(3). ERISA
Under ERISA, the “plan administrator” must furnish each
plan participant with notice of a modification to an employee
benefit plan no later than 210 days after the end of the plan year
in which the modification is adopted. See 29 U.S.C. §§ 1022(a)(1),
1024(b)(1). Cabot is the “plan administrator” because neither
VAR50230 nor VAR50230A designates a plan administrator. See 29
U.S.C. § 1002(16).4 Therefore, Reliance cannot be held liable for
any alleged failure of Cabot to properly notify its employees of
the change from VAR50230 to VAR50230A. See Klosterman v. Western
Gen. Management, Inc., 32 F.3d 1119, 1122 (7th Cir. 1994); Kerns v.
Benefit Trust Life Ins. Co., 992 F.2d 214, 217 (8th Cir. 1993)
(both holding, regarding substantially similar provisions of ERISA,
that only the plan administrator is liable for inadequate notice or
disclosure).
4
29 U.S.C. § 1002(16) defines “administrator” as follows:
(A) The term “administrator” means—
(i) the person specifically so designated by
the terms of the instrument under which the plan is
operated;
(ii) if an administrator is not so designated,
the plan sponsor; . . .
(B) The term “plan sponsor” means (i) the employer
in the case of an employee benefit plan established or
maintained by a single employer . . . .
8
III. Conclusion
For the foregoing reasons, we affirm the judgment of the
district court.
AFFIRMED.
9