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Lanpher v. Metropolitan Life Ins. Co.

United States District Court, D. Minnesota

September 29, 2014

RICHARD K. LANPHER, Plaintiff,
v.
METROPOLITAN LIFE INSURANCE COMPANY and BANK OF AMERICA, successor to Merrill Lynch & Co., Inc., as employer and plan administrator of the Merrill Lynch & Co., Inc., Supplemental Long Term Disability Plan, Defendants

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[Copyrighted Material Omitted]

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For plaintiff: Katherine L. MacKinnon, KATHERINE L. MACKINNON, ATTORNEY AT LAW, St. Louis Park, MN.

For Metropolitan Life Insurance Company, defendant: William D. Hittler, NILAN JOHNSON LEWIS, PA, Minneapolis, MN.

For Bank of America, defendant: Wood W. Lay, WINSTON & STRAWN, LLP, Charlotte, NC; BLAKE J. LINDEVIG, Faegre Baker Daniels LLP, Minneapolis, MN.

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MEMORANDUM OPINION AND ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

JOHN R. TUNHEIM, United States District Judge.

This case involves a dispute over a former employee's access to benefits under a supplemental long-term disability insurance plan. Plaintiff Richard Lanpher was an employee at Merrill Lynch (succeeded by Defendant Bank of America, referred to as " Merrill Lynch" throughout), through which he was automatically enrolled in Basic Long Term Disability Benefits plan (the " Basic" plan). Once his salary exceeded $60,000, he became eligible for enhanced benefits under the " Supplemental" long-term disability benefits plan. He did not seek to enroll in the Supplemental plan right away, but did several years later. To enroll in the Supplemental plan, he was required to fill out a Statement of Health and obtain prior approval, based on his submission, from the plan's insurer, Defendant Metropolitan Life Insurance Company (" MetLife" ). Upon his application with Merrill Lynch, he received preliminary approval pending MetLife's approval based on his Statement of Health. He then submitted the Statement of Health and subsequently received a letter from MetLife stating that he had been approved and that Merrill Lynch would make the appropriate changes to his coverage.

Six years later, he ended his employment with Merrill Lynch on account of depression and sought disability benefits under both the Basic and Supplemental plans. After several denials and appeals, he ultimately received notice from MetLife that he would receive benefits under the Basic plan. That notice did not indicate that he had been either approved or denied for Supplemental benefits. His attorney inquired further specifically about the Supplemental, and ten months later received from MetLife a denial notice for the Supplemental benefit, citing as grounds for denial the fact that he did not have coverage under the Supplemental plan at the time his employment ended. On appeal to Merrill Lynch, his claim was also denied for lack of coverage.

Discovery has since revealed that, although MetLife has in its records that it approved Lanpher for the Supplemental benefits on the basis of his Statement of Health, there is no evidence that it communicated this to Merrill Lynch (which would have triggered the deduction of premiums from his paychecks). The parties reference three methods by which MetLife would have communicated this to Merrill Lynch at the time: (a) sending a monthly spreadsheet with the list of employees approved and for which insurance plan, (b) carbon copying Merrill Lynch on approval letters to participants after reviewing their Statement of Health, and (c) weekly status

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reports indicating approval of employees. With regard to (a), the record includes the spreadsheet for the relevant period, which should have included Lanpher, but it does not. With regard to (b), the approval letter Lanpher received from MetLife does not indicate that a copy was sent to Merrill Lynch. With regard to (c), MetLife has not produced the weekly status reports, claiming that it has discarded them as part of its document handling policies.

Lanpher brings this suit under the Employee Retirement Income Security Act (" ERISA" ), 29 U.S.C. § § 1001, et seq., alleging first under 29 U.S.C. § 1132 that MetLife improperly denied him benefits due under the Supplemental plan and seeking reversal of that denial, and second, that MetLife and/or Merrill Lynch breached their fiduciary duties under 29 U.S.C. § 1104(a)(1) by failing to enroll him properly and subsequently denying benefits on that account. All parties have moved for summary judgment, with Lanpher moving only against MetLife.

The Court concludes that it was an abuse of discretion and an unreasonable interpretation of the policy documents for MetLife to conclude that, although Lanpher had fulfilled all of the enrollment requirements, he was not entitled to benefits because of a determination that he was not " covered" at the time of his disability because premiums had not been paid, where the plan language did not expressly make coverage contingent upon the employee's payment of premiums. The Court will therefore grant Lanpher's motion for summary judgment on his claim for benefits under 29 U.S.C. § 1132(a)(1)(B). In the alternative, the Court concludes that Lanpher would alternatively be entitled to equitable relief on account of MetLife's breach of its fiduciary duty to Lanpher. Finding insufficient evidence of any breach of fiduciary duty by Merrill Lynch, the Court will grant Merrill Lynch's motion for summary judgment.

BACKGROUND

I. THE PLAN

There are two long-term disability plans involved in this case. First, the Basic plan provides benefits of sixty percent of the first $5,000 of the employee's pre-disability monthly earnings to a disabled employee after six months of continuous disability. (Aff. of William D. Hittler, Ex. A (" ML" ) 22-23, Feb. 1, 2014, Docket No. 47.) The Basic plan required no contribution from employees. (ML 56.)

Employees who made more than $60,000 per year could elect to enroll in the second plan, the Supplemental long-term disability benefit plan (" the Supplemental Plan" or " the Plan" ). (ML 121.) Employees who enrolled in the Supplemental Plan could elect to receive benefits of either forty percent or sixty percent of their predisability earnings over $60,000 after an elimination period of twenty-six weeks. (ML 115, 121, 159.)

The Plan allowed employees to enroll in the Supplemental Plan without providing evidence of insurability if they requested the insurance within forty-five days of becoming eligible. (ML 121.) But if an employee requested the Supplemental insurance more than 45 days after becoming eligible, the employee was required to give evidence of their insurability to MetLife by submitting a " Statement of Health" form, which was subject to MetLife's approval. (ML 121.) The Plan's Certificate of Insurance provided that in such a circumstance, " [i]f We determine that You are insurable, such insurance will take effect on the date We state in Writing, if You are Actively at Work on that date." (ML 121.) The Certificate of Insurance describes the enrollment process as follows:

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If You are eligible for insurance, You may enroll for Disability Income Insurance: Long Term Benefits by completing the required form. . . . If You enroll for Contributory Insurance, You must also give the Employer Written permission to deduct premiums from Your pay for such insurance. You will be notified by the Employer how much You will be required to contribute.

( ML 121.) MetLife is the insurer and claims fiduciary for the Plan, and Merrill Lynch is the employer and plan administrator. (ML 147-49.)

II. ENROLLMENT IN THE PLAN

Lanpher was automatically enrolled in the Basic plan as part of his benefit package with Merrill Lynch. (Second Aff. of Katherine L. MacKinnon in Supp. of Mot. for Summ. J. (" Second MacKinnon Aff." ), Ex. 2 (" Lanpher Statement" ) ¶ 4, Feb. 1, 2014, Docket No. 52.)[1] He explained in a written statement made in the course of this dispute that in early 2001 he sought to enroll in the Supplemental Plan because he " needed the added income protection from the [Supplemental] plan because my income was far in excess of the $60,000 threshold at that time and I had a wife and three children to support." (Lanpher Statement ¶ ¶ 5, 7.) After seeking to enroll with his employer, he received a letter dated April 4, 2001 from Merrill Lynch confirming his enrollment and indicating that he would need to fill out, and MetLife would need to approve, a " Statement of Health" form before coverage would take effect. (Aff. of William D. Hittler in Supp. of Mot. for Summ. J. (" Hittler Aff." ), Ex. B at BA 26, Feb. 1, 2014, Docket No. 47.) The letter stated:

You recently enrolled in the Supplemental Long-Term Disability (LTD) Plan for the 2001 plan year, and made the following election:

 

Coverage Option

Annual Benefit

Monthly Premium

60%

$294,126.54

$330.89

For this coverage to take effect, the plan's insurer, MetLife, must review your statement of health and may also require you to undergo a physical examination. Please complete the statement of health (if you have not done so already) and return it in the business reply envelope. . . .
Your new coverage goes into effect once your application for coverage is approved by MetLife. MetLife will notify you directly by letter of its decision.

( Id.) When Lanpher received this letter on April 4, 2001, he had already submitted the Statement of Health form to MetLife on March 20, 2001, which MetLife received on March 22, 2001. (Hittler Aff., Ex. A at 1737-38.) Lanpher then received an approval letter dated from MetLife April 16, 2001 stating:

Your request for the above listed benefit(s) was received and reviewed by our Medical Department.
We are pleased to advise you that your request has been approved. . . .
Your employer's benefits department will make the appropriate changes to your coverage.

( Hittler Aff., Ex. B at BA 27.) Lanpher stated that " [f]rom these two letters, I was under the impression that I had properly enrolled in the SLTD plan and had been

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approved for the coverage. I had no idea that there were any additional steps I needed to take to [e]nsure that coverage was effective." (Lanpher Statement ¶ 11.)

III. DISABILITY AND REQUEST FOR BENEFITS

On December 17, 2007, after a visit to the Mayo Clinic, Lanpher stopped working on account of severe depression. (ML 356-58; ML 310; ML 380-81, ¶ ¶ 13-14, 16-17, 23-27.) He applied to receive long-term disability benefits on June 13, 2008. (ML 1314-20.) At some point in early 2008, he was contacted by a representative from Merrill Lynch and told that he did not have SLTD coverage, with which he disagreed. (Lanpher Statement ¶ ¶ 14-15.) On April 22, 2008, Lanpher submitted another application for Supplemental benefits (a new Statement of Health). (ML 1778-81.) He explained that he did this " as a precautionary measure to make sure that if I became disabled in the future my family would still have income protection. But I was not in any way conceding that I had not been properly enrolled in the SLTD plan before." (Lanpher Statement ¶ 18.)

On August 25, 2008, Lanpher received a letter from MetLife denying his claim for benefits. (ML 177.) The letter stated that " MetLife has completed its review of your claim for Long Term Disability (LTD) benefits" and that the claim was " denied effective June 17, 2008." ( Id.) The letter stated that the " medical evidence reviewed does not demonstrate any functional impairment that would prevent you from working." (ML 178.) Lanpher appealed the decision on September 9, 2008 on the grounds that the evaluation had excluded reports from several physicians who had treated his depression, (ML 1295), but his claim was again denied: he received a second claim denial letter on October 6, 2008. (ML 180.) Lanpher submitted a review of the appeal, but upon review MetLife upheld its previous determination in a letter dated November 19, 2008. (ML 183.)

Lanpher, this time represented by counsel, again appealed this denial of benefits " under both the basic and the supplemental disability insurance policy with MetLife" on May 14, 2009. (ML 187, 354.) On June 23, 2009, MetLife sent a notice that his previous claims decision would be reversed. (ML 322.) On July 2, 2009, MetLife sent Lanpher a letter stating that " Your claim for LTD benefits has been approved effective June 18, 2008." (ML 190.) On November 10, 2009, Lanpher received a letter notifying him that his claim for " LTD benefits" was approved effective June 18, 2008 and specifically listing out the benefit payments he would receive. (ML 170-71.) The letter stated that because his disability fell into the " mental or nervous disorders or diseases" category, his benefits would be capped at 24 months, and would extend through June 17, 2010. (ML 170.)

IV. ONGOING ISSUES WITH SUPPLEMENTAL BENEFITS

After receiving the Basic benefits, Lanpher's counsel sought to figure out what had occurred with regard to his Supplemental benefits. The record indicates that this inquiry set off months of communications between MetLife and Merrill Lynch in late 2009 and through 2010, seeking to determine the status of Lanpher's enrollment in the Supplemental plan.

A. Lanpher's Inquiries

On August 7, 2009, Lanpher's counsel sent a letter to MetLife to " clarify a few matters concerning" his long-term benefits award. (ML 193.) One of the issues raised in the letter was the " Award of Supplementary LTD Benefits" -- Lanpher's

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counsel sought to understand why the benefit award included only benefits under the Basic rather than also the Supplemental Plan. (ML 194.) The letter stated:

In his appeal, Mr. Lanpher explicitly requested an award of both the basic LTD benefit and the supplementary benefit. Your letter of 7/2/09 does not address his entitlement in benefits under the supplementary policy. Would you kindly provide him with payment under that policy as well? Given that the definitions of disability are virtually identical under the basic and the supplementary policies, he should be entitled to benefits under both.

( ML 194.) MetLife responded to the letter on August 21, 2009, stating:

A review of the employment information received from Merrill Lynch . . . confirmed that Mr. Lanpher, as of December 17, 2007 (last day he worked prior to his disability), was eligible for the basic LTD benefit only. I sent a request to Jarmaine Parker, Human Resources to confirm whether Mr. Lanpher was covered for the supplemental LTD benefit. If we are notified that he in fact did have supplemental [sic] LTD coverage appropriate action will be taken.

( ML 195.)

On October 30, 2009, Lanpher's counsel sent a letter to MetLife about his claim for SLTD, observing that " we have received no explanation for not paying this claim," and " lay[ing] out our reasons for urging the insurer to either pay this claim or deny it in accordance with the claims regulations so that a proper administrative appeal can be made." (ML 175.) The letter explained that in all three claim denial letters, " there was explicit reference made to denying claims under both policies," and no indication that there was a problem unique to SLTD. (ML 175.) The letter also explained that, after the Basic benefits were awarded, his counsel sent a letter to MetLife regarding the SLTD policy and received a response that was " not helpful" because it did " not indicate what MetLife's issue [wa]s with respect to Mr. Lanpher's Supplemental LTD claim." (ML 176.) The letter requested that if the insurer contended that he was not covered, " it must communicate this to Mr. Lanpher . . . and permit him to challenge the lack of coverage on an administrative appeal." (ML 176.) A document attached to the letter calculated the SLTD award to be $162,216.26, which is 60% of the portion of Lanpher's annual earnings of $330, 360.44 above $60,000. (ML 196.)

Merrill Lynch sent a letter to counsel for Lanpher on December 11, 2009, denying his request for Supplemental LTD benefits. (Decl. of Wood W. Lay in Supp. of Mot. for Summ. J. (" Lay Decl." ), Ex. 14, Jan. 31, 2014, Docket No. 40.) The letter stated:

A review of the employment information received from Merrill Lynch . . . confirmed that Mr. Lanpher, as of December 17, 2007 . . . was eligible for the basic LTD benefit only. I confirmed with Jermaine Parker, Human Resources, Merrill Lynch on August 21, 2009 that Mr. Lanpher did not have Supplemental LTD coverage. I received this confirmation in writing from Mr. Parker.
Since Mr. Lanpher did not have Supplemental LTD coverage effective on his last day worked . . . we have no alternative but to deny his request for Supplemental LTD benefits.

( Id.; ML 1753.)[2] On December 29, 2009, Lanpher sent an email to Jermaine Parker

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at Merrill Lynch stating that he was entitled to the sixty percent benefits under the Supplemental plan and attaching the April 4, 2001 confirmation of enrollment from Merrill Lynch and the April 16, 2001 approval his Statement of Health from MetLife, along with a 2006 pay summary supporting the figures Lanpher requested. (Lay Decl., Ex. 18 at 36.) Parker responded, stating that he had " contacted MetLife requesting to have the SLTD payment processed." ( Id., Ex. 18 at 37.)

B. Communications Between MetLife and Merrill Lynch

On January 5, 2010, Parker sent an email to a MetLife specialist with the " original approval letter for SLTD for Richard Lanpher." (ML 1603.) It stated that " [h]e was approved in April 2001 when we converted our systems in 2005 from peoplesoft to oracle it was never converted to oracle so it did not show. Please process the SLTD payments for Richard the annual sltd amount is 162,216.44. 330,360.44 - 60,000.00 = 270,360.44 x 60% = 162, 216.26." (ML 1603.) A claim comment on January 6, 2010, reflected this email, stating:

[R]eceived confirmation from HR (Jermaine Parker) that [employee] did have supplemental coverage effective April 16, 2001. Had further [sic] questions whether [employee] was still actively covered for supplemental benefits at dlw (121707); did further investigation and found out that [employee] applied for supplemental coverage through statement of health unit in 2008 and was approved effective 4/22/2008 (which was after the dlw). If [employee] was continuously approved for supplemental coverage from 4/16/01 -- why did [employee] apply in 2008 -- was there a drop in coverage at some point?

( ML 1603-04 (abbreviations in original).)

MetLife sent an email to Merrill Lynch on January 14, 2010, seeking several documents to " determine if Mr. Lanpher's supplemental coverage was active on his date last worked," including " history of his pay since April 2001 through December 2007 showing payment of premium for his supplemental coverage; and enrollment documentation for the years 2002 through December 2007 showing confirmation of supplemental coverage." (ML 1604-05.)

Additionally, Lanpher sent an email to MetLife on January 30, 2010 stating, " Jermaine Parker requested MetLife to process my STLD on December 30, 2009. Please advise when I will receive the SLTD payment" (and including email from Parker to Lanpher). (ML 1617.) MetLife sent an email response to Lanpher on January 30, 2010 stating:

We were alerted that you have an approved " Evidence of Insurability" application in 2001 and another in 2008. . . . Evidence of insurability is an application of good health that an applicant makes when applying for coverage, implying that they did not have the coverage in place before. Because you have a disability date that commences on December 2007 and an application that was approved in 2008, this implies that you would not have had the coverage in place prior to that application. In this regard, despite Jermaine [Parker]'s request to MetLife to process such a claim, MetLife must first validate that you have in fact properly elected, have been enrolled in, and covered for supplemental benefits[.] . . . Further, when Penny asked you why you had made

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application for Evidence of Insurability in 2008 it is my understanding that you did not answer the question.

( ML 1621-22; 1732.) On February 9, 2010, Merrill Lynch responded to MetLife's January 25, 2010 email, stating that it had the " spreadsheets from MetLife to [Merrill Lynch] from 2001 forward," and that Lanpher was on the 2008 list showing approval as of May 19, 2008, but that that it did " not show on any spreadsheet from 2001 through 2007 that MetLife told ML of his approval of SLTD," and asking whether MetLife had proof that they informed Merrill Lynch. (ML 1690.)

On February 11, 2010, Merrill Lynch sent an email to Lanpher stating:

I have been working with MetLife on your issue,
Metlife provided the copy of the approval letters that show you were approved Supplemental LTD coverage. We are in agreement with the approval that occurred on 5/19/08 . . . .
What we do not have (and what MetLife is requesting proof from Merrill Lynch of) is the approval from 2001. Merrill Lynch has not [sic] record from MetLife that we were informed of this approval. Therefore the system was not updated and you did not have deductions for Supplemental LTD taken from any of your pays.
The reason why this is important is that MetLife is pushing back on Merrill Lynch to show proof that you paid for the Supplemental LTD Coverage. I cannot show that proof. Now [Merrill Lynch] has counter argued that it is MetLife's fault as they never followed proper procedures to inform Merrill Lynch of your approval.

( Lay Decl., Ex. 15.) Lanpher responded that evening, requesting Merrill Lynch, as the " only named plan fiduciary" to " instruct MetLife to process my SLTD payment based on my 2006 compensation." ( Id., Ex. 18 at 38.)

As of February 19, 2010, MetLife was still trying to figure out from Merrill Lynch whether Lanpher was covered for supplemental benefits on his last day worked and sent an email to a different department within Merrill Lynch seeking help in getting the information. (ML 1637.) At this point, a MetLife Statement of Health Specialist confirmed internally in an email to a Client Services Analyst that Lanpher had been approved for the benefits on April 16, 2001:

I was able to locate the 2001 request in our archived files. He was approved for LTD on 4/16/01. Unfortunately, we cannot reproduce the weekly status reports since they're automated. However, we could have either communicated this Approval via paper report or email. System comments say that at ...

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