Estate of Kirk Anthony Foster v. American Marine Svs Gbp ( 2021 )

UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT MAR 11 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
ESTATE OF KIRK ANTHONY FOSTER, No. 20-35023
through Kelly M. Foster, Personal
Representative for the Estate of Kirk D.C. No. 9:17-cv-00165-DLC
Anthony Foster; KELLY M. FOSTER, as an District of Montana,
individual, Missoula
Plaintiffs-Appellants, ORDER
v.
AMERICAN MARINE SVS GROUP
BENEFIT PLAN; UNITED OF OMAHA
LIFE INSURANCE COMPANY;
AMERICAN MARINE CORP.; JOHN
DOES, 1-3,
Defendants-Appellees,
and
MUTUAL OF OMAHA MARKETING
CORPORATION,
Defendant.
Before: GOULD and FRIEDLAND, Circuit Judges, and OTAKE,* District Judge.
The Memorandum Disposition filed on February 9, 2021, is withdrawn and
replaced with a new Memorandum Disposition filed concurrently with this order.
*
The Honorable Jill Otake, United States District Judge for the District
of Hawaii, sitting by designation.
With this order, the panel unanimously votes to deny the petition for panel
rehearing. The petition for rehearing is DENIED.
Future petitions for rehearing will be permitted under the usual deadlines
outlined in Federal Rules of Appellate Procedure 35(c) and 40(a)(1).
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NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAR 11 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
ESTATE OF KIRK ANTHONY FOSTER, No. 20-35023
through Kelly M. Foster, Personal
Representative for the Estate of Kirk D.C. No. 9:17-cv-00165-DLC
Anthony Foster; KELLY M. FOSTER, as an
individual,
MEMORANDUM*
Plaintiffs-Appellants,
v.
AMERICAN MARINE SVS GROUP
BENEFIT PLAN; UNITED OF OMAHA
LIFE INSURANCE COMPANY;
AMERICAN MARINE CORP.; JOHN
DOES, 1-3,
Defendants-Appellees,
and
MUTUAL OF OMAHA MARKETING
CORPORATION,
Defendant.
Appeal from the United States District Court
for the District of Montana
Dana L. Christensen, District Judge, Presiding
Argued and Submitted November 20, 2020
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Submission Withdrawn December 1, 2020
Resubmitted January 22, 2021
Seattle, Washington
Before: GOULD and FRIEDLAND, Circuit Judges, and OTAKE,** District Judge.
Kelly M. Foster, individually and as personal representative of the Estate of
her husband Kirk A. Foster, brought this action pursuant to the Employee
Retirement Income Security Act’s (“ERISA”) civil enforcement provision, 29
U.S.C. §1132(a), against Defendant-Appellees American Marine SVS Group
Benefit Plan and American Marine Corporation (collectively “American Marine”)
and United of Omaha Life Insurance Company (“United”). As Kirk’s named
beneficiary, Foster alleges that Defendants wrongfully denied her claim for life
insurance benefits after Kirk died of esophageal cancer on June 24, 2016. Foster
filed an unsuccessful administrative appeal, followed by a complaint in the U.S.
District Court for the District of Montana, in which she asserted five claims for
relief against American Marine and United. The district court dismissed two
counts and granted summary judgment to Defendants on the remaining three. We
affirm as to United, and we affirm in part and reverse and remand in part as to
American Marine.
Kirk worked for American Marine as a Health, Safety, Environmental &
**
The Honorable Jill Otake, United States District Judge for the District
of Hawaii, sitting by designation.
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Security Manager. In March 2015, Kirk became terminally ill with esophageal
cancer. On February 1, 2016, American Marine laid Kirk off. According to text
message logs, the news left Kirk “in shock” and “despondent . . . [in] the most
vulnerable period of [his] life.”
Despite being laid off, Kirk’s relationship with American Marine continued.
American Marine worked with Kirk to file a claim with United for Kirk to receive
long-term disability (LTD) benefits, which was approved on February 15.
American Marine also permitted Kirk to exhaust twenty accrued vacation days and
thirty-five accrued sick days before he would stop receiving a salary. This allowed
Kirk to stay on the company’s payroll until April 15. American Marine closed
Kirk’s email account one week later, on April 21, only to turn it back on after Kirk
volunteered to keep training his replacement. Due to his declining health, Kirk
ceased providing volunteer services to American Marine on April 26. He
continued to receive LTD benefits, however, until he died on June 24.
On July 7, 2016, Foster filed a claim with United for Kirk’s life insurance
benefits. United denied the claim, stating that Kirk was ineligible for benefits
because American Marine had stopped paying life insurance policy premiums on
his behalf as of April 30. This appeal concerns, among other issues, whether Kirk
received sufficient notice that his life insurance coverage would end on that date
unless he converted the policy to an individual policy and started paying the
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premiums himself.
As an American Marine employee, Kirk was entitled to group life insurance
benefits under a policy issued by United and administered by American Marine.
The substantive terms of the policy are contained in the Life Insurance Certificate
and Summary Plan Description (the “Life Certificate/SPD”). It is undisputed that
Kirk had a copy of the Life Certificate/SPD.
According to the Life Certificate/SPD, a covered employee’s insurance ends
on the earliest of:
(a) the day this Policy terminates;
(b) the day any premium contribution for Your insurance is due and
unpaid;
(c) the day before You enter the Armed Forces on active duty…; or
(d) the last day of the Policy month in which the day You are no
longer eligible. You will no longer be eligible when the earliest of the
following occurs:
(1) You are not in an eligible classification described in the
Schedule;
(2) Your employment with the Policyholder ends;
(3) You are not Actively Employed; or
(4) You do not satisfy any other eligibility condition described
in this Policy.
Elsewhere, the Life Certificate/SPD indicates that insurance will end for
employees who have been laid off on “the last day of the month in which [an
employee] ha[s] been laid off or go[es] on a leave of absence approved by the
Policyholder.” If an employee’s life insurance ends because his employment ends,
he is entitled to a “conversion privilege,” meaning that he can apply for an
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individual policy within thirty-one days. If an employee dies during the
conversion period, United will pay “the amount of group life insurance [the
employee was] entitled to convert.”
The Life Certificate/SPD contains an exception to the end of insurance
coverage for “totally disabled” employees. A “totally disabled” employee may
qualify for continued life insurance benefits “without payment of premium” if,
among other things, he has completed a nine-month “disability elimination period”
during which he remained totally disabled and premium payments continued. If
the employee dies during the disability elimination period, benefits will be paid to
his beneficiary.
United concluded that Kirk was ineligible for life insurance benefits when he
died on June 24, 2016, because (1) his life insurance coverage ended when
American Marine stopped paying premiums on April 30; (2) he failed to exercise
his conversion privilege within thirty-one days, or by May 31; and (3) his death in
June did not occur during the conversion period. United also determined that,
although Kirk was totally disabled as of February 1, 2016, he did not qualify for a
waiver of the life insurance premium because he had not completed the disability
elimination period, which required nine consecutive months of total disability
coupled with premium payments. Relatedly, according to United, Kirk did not
qualify for life insurance benefits under the provision that grants benefits to
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employees who die during the disability elimination period, because the period
ended for Kirk in April when American Marine stopped paying premiums.
Following an unsuccessful administrative appeal, Foster brought this action
in federal court. The first two counts in Foster’s complaint were dismissed and are
not relevant to this appeal. The remaining counts alleged that Defendants failed to
provide notice that Kirk’s life insurance benefits were ending, thereby denying him
his conversion privilege (Count III); that Defendants failed to provide notice of the
conversion right as required under Hawaii state law (Count V);1 and that American
Marine breached a fiduciary duty to Kirk (Count VI). The district court granted
summary judgment to Defendants on these remaining counts, and this appeal
followed.
The district court erred when it granted summary judgment to American
Marine on Counts III and VI.2 ERISA “requires fiduciaries to deal fairly and
1
The complaint does not include a “Count IV.”
2
American Marine argues that Foster waived any challenge to the district
court’s rulings on Counts III and VI by failing to raise them in her opening brief.
We disagree. Although we “‘will not ordinarily consider matters on appeal that are
not specifically and distinctly argued in appellant’s opening brief,’ [w]e have
discretion to review an issue not raised by appellant . . . when it is raised in the
appellee’s brief.” In re Riverside-Linden Inv. Co., 945 F.2d 320, 324 (9th Cir.
1991) (citations omitted) (quoting Miller v. Fairchild Indus, Inc., 797 F.2d 727,
738 (9th Cir. 1986); cf. Singh v. Ashcroft, 361 F.3d 1152, 1157 n.3 (9th Cir. 2004)
(explaining that the respondent “suffers no prejudice from [a petitioner’s] failure to
properly raise [an] issue” when the respondent briefed it in its answer). Because
American Marine briefed the issue of whether it satisfied its ERISA obligations,
we may properly exercise our discretion to reach the issue.
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honestly with beneficiaries.” Farr v. U.S. W. Commc’ns, Inc., 151 F.3d 908, 915
(9th Cir. 1998). As relevant here, a fiduciary “has an obligation to convey
complete and accurate information material to the beneficiary’s circumstance, even
when a beneficiary has not specifically asked for the information.” Id. at 914(quoting Barker v. Am. Mobil Power Corp., 64 F.3d 1397, 1403 (9th Cir. 1995)).
American Marine argues that it clearly satisfied its ERISA fiduciary
obligations by providing Kirk with the Life Certificate/SPD, which apprised him of
his conversion rights. In support of this contention, American Marine relies on
Stahl v. Tony’s Bldg. Materials, Inc., 875 F.2d 1404 (9th Cir. 1989), where we held
that a plan administrator did not have a duty to notify a participant—beyond
publishing a summary plan description—that his pension benefits could be
significantly reduced if the collective bargaining agreement between his union and
his employer expired. Id. at 1409-10. But Stahl does not stand for the broad
proposition that an employer-fiduciary can automatically avoid liability by
publishing a summary plan description. See Bins v. Exxon Co. U.S.A., 220 F.3d
1042, 1053 n.10 (9th Cir. 2000) (en banc). The question here is whether, under the
particular circumstances of Kirk’s employment termination, American Marine’s
duty to provide complete and accurate information required more than sending
Kirk the Life Certificate/SPD. See Washington v. Bert Bell/Pete Rozelle NFL Ret.
Plan, 504 F.3d 818, 823 (9th Cir. 2007).
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We hold that American Marine was required to provide further explanation
under the circumstances. Although Kirk had notice of the existence of the
conversion policy, the Life Certificate/SPD is ambiguous as to the exact date that
the thirty-one-day conversion clock started for Kirk. It could have been February
29, or “the last day of the month in which he was laid off.” It could have been
April 30, the last day of the month when Kirk stopped being paid. Or, it could
have been an even later date, so long as American Marine continued paying
premiums and Kirk remained totally disabled. This ambiguity was magnified
when American Marine continued paying Kirk’s life insurance premiums and his
LTD insurance premiums after February—the month when Kirk was laid off—
which may otherwise have been the most likely understanding of his month of
termination. The Life Certificate/SPD thus provided incomplete information to
Kirk as to when his life insurance benefits would end and the conversion clock
would start. Meanwhile, American Marine knew exactly when Kirk’s benefits
would expire because it controlled when it stopped making premium payments.
Under the circumstances, American Marine had an obligation to paint a more
complete picture for Kirk.3
3
The record contains a memo dated April 19, 2016, that American Marine
apparently sent to Kirk and that included a partially completed portability coverage
application, but Foster says Kirk never received it. Even if American Marine is
correct that the mailbox rule would apply to the memo, that rule creates a
8
We find further support for this conclusion in the evidence of Kirk’s
relationship with American Marine after he was laid off, and especially in
American Marine’s understanding that Kirk was severely ill. American Marine’s
contact with Kirk lasted until within a week of Kirk’s physical condition
deteriorating to the point that he could no longer provide volunteer services to the
company, or April 26, 2016. Given American Marine’s awareness of his
circumstances, the company should have realized that Kirk would be interested in
maintaining his life insurance coverage and would need information about
precisely when he would need to act to do so.
We therefore reverse insofar as the district court held that American Marine
had no duty to notify Kirk that his life insurance coverage would end on April 30,
2016, beyond sending him the Life Certificate/SPD. Although Kirk knew about
the conversion period because he had the Life Certificate/SPD—and the evidence
strongly suggests that Kirk knew he would stop receiving salary payments on April
15—these facts alone do not compel the conclusion that Kirk knew American
Marine would stop paying his life insurance premiums in April. A genuine issue
of material fact thus exists as to whether Kirk knew when his coverage would
rebuttable presumption that Foster could potentially overcome on remand. See
Schikore v. BankAmerica Supplemental Ret. Plan, 269 F.3d 956, 961, 965 (9th Cir.
2001). This issue is one that would need to be litigated in the first instance in the
district court.
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expire.
We affirm the district court’s grant of summary judgment on Count III as to
United (and on Count VI, to the extent it was asserted against United). Unlike
American Marine, United’s fiduciary responsibilities were limited to claim
administration and policy interpretation. As the district court correctly held, the
Life Certificate/SPD adequately described the terms of the life insurance policy,
including the conversion privilege. The issue here is not whether United correctly
interpreted the policy when it denied Foster’s claim in July 2016, but whether Kirk
was properly notified of his rights by American Marine before they expired.
Relatedly, we reject Foster’s argument that United improperly refunded a
premium payment that American Marine made for May 2016. The record shows
that in April 2016, American Marine paid Group Life Policy premiums for its
employees, including for Kirk, for the month of May. On April 26, American
Marine sent United (apparently without copying Kirk) an “employee termination
report” stating that Kirk’s employment had ended on April 15 and requesting that
Kirk be removed from the group policy as of May 1. Pursuant to its billing
policies, United complied with American Marine’s request and refunded American
Marine for Kirk’s May premium in the billing statement for June. Contrary to
Foster’s assertions, it was not improper for United to refund the May premium
payment or to determine that Kirk was no longer covered as of May 1, 2016.
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We also affirm the district court’s judgment on Count V as to both
Defendants. Hawaii law requires that eligible individuals be given notice of “the
existence of” a conversion right at least fifteen days prior to its expiration. Haw.
Rev. Stat. § 431:10D–214. Kirk received notice of the existence of his conversion
right when American Marine sent him the Life Certificate/SPD on February 1,
2016. Foster has not contested on appeal the district court’s interpretation that the
Life Certificate/SPD satisfied the notice requirement under Hawaii law, and no
party has pointed us to any Hawaii case interpreting this provision. We therefore
decline in this action to consider whether the Hawaii statute requires a more
specific kind of notice.
AFFIRMED in part; REVERSED and REMANDED in part. Each
party shall bear their own costs.
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