Life Insurance Claim – ERISA – 2

Repeating what was stated in the post immediate to this one, “It is important to understand how difficult claims that are governed by the Employee Retirement Income Security Act (ERISA) can be.  The law in this area of law is very tough for claimants.”  This is illustrated again in a December 2020, opinion styled, Erica Talasek v. Unum Life Insurance Company of America, et al.  The opinion is from the Southern District of Texas, Houston Division.

The insured, Ben Talasek, had life insurance through a Plan his employer, NOV, offered.  NOV delegated authority and discretion to UNUM to handle claims and made benefit determinations.

Ben was covered by basic life insurance coverage and Ben also enrolled in a voluntary supplemental plan during November 2013.  Unlike the basic life insurance, which did not require medical underwriting, the supplemental life insurance required an employee to submit evidence of insurability and obtain approval for coverage by Unum.  On January 18, 2014, Unum sent Ben a letter informing him of an error in his application and the need for additional information.  Around this time, Ben was diagnosed with pancreatic cancer.  Ben called Unum on January 21, 2014 to check on the status of his application and was told about the January 18 letter.  Ben corrected the error on the Evidence of Insurability Form and supplied additional information.  Ben called Unum again on February 12, 2014 to check on the status of the application and was told that the standard turnaround time for a coverage decision was 4-6 weeks.  On March 3, 2014,several weeks after receiving his cancer diagnosis, Ben provided blood and urine samples and basic health history as part of Unum’s requirement that he prove insurability prior to approval of coverage.  He did not mention the cancer diagnosis.

The Administrative Record includes a March 6, 2014, letter addressed to Ben (at the same address as the January 18, 2014 letter Ben received) stating that Unum could not approve Ben’s application due to abnormal blood test results.  The Administrative Record does not contain any letter approving Ben’s application for supplemental life insurance benefits.  NOV received notice that Unum did not approve Ben’s application for supplemental benefits.  Despite the notice and the statements in the Plan that supplemental life insurance coverage is contingent on approval by Unum, NOV began deducting the increased premiums for supplemental coverage from Ben’s paycheck in April 2014 and continued to do so through 2017.  NOV also sent annual benefit confirmation statements to Ben for the years 2014 through 2017 which identified supplemental life insurance coverage as part of his benefits.  Ben passed away from pancreatic cancer on December 24, 2017.

In January 2018, Plaintiff submitted a claim for both basic and supplemental life insurance benefits under the Plan’s group life insurance policy.  Unum approved her claim for basic life insurance benefits but denied the claim for supplemental life insurance benefits.  Unum advised Plaintiff it was denying the claim because it had rejected Ben’s application for supplemental life insurance on March 6, 2014 due to the abnormal test results from his required insurability medical examination.  Plaintiff appealed Unum’s unfavorable decision on grounds that NOV deducted premiums for supplemental life insurance and sent Ben confirmation statements reflecting the supplemental life insurance coverage was part of his benefits and that Ben never received notice that this application for supplemental coverage was rejected.  Unum did not change its original claim decision.

The Defendants in this case filed motions for summary judgment.

First, with only narrow exceptions, the evidence a court may review to decide an ERISA benefits claim is limited to the Administrative Record.  Second, the Federal Rules of Evidence, including the hearsay rule, do not govern the admissibility of, or preclude the court’s consideration of, evidence in the Administrative Record.

Generally, if the plan at issue lawfully delegates discretionary authority to a plan administrator, the Court’s review is limited to determining whether the plan administrator abused that discretion.

The Court then went over, in detail, the evidence in the case.

Plaintiff argues that Unum’s acceptance of the premiums for supplemental life insurance which were deducted from Ben’s paychecks and sent to Unum by NOV creates coverage.  The Fifth Circuit, in it’s 2007 opinion, Amschwand v. Spherion Corp., has rejected the argument that the payment of premiums can create coverage that otherwise does not exist.

Plaintiff also argued estoppel as a cognizable legal theory.  This theory has been recognized by the Fifth Circuit.  The elements of ERISA estoppel are: (1) a material misrepresentation; (2) reasonable and detrimental reliance upon the representation; and (3) extraordinary circumstances.

Material misrepresentations contained in informal documents such as benefits statements can support a claim for ERISA estoppel.  A misrepresentation is “material” if there is a substantial likelihood that it would mislead a reasonable employee in making an adequately informed decision.  On the other hand, a failure to disclose information, particularly if not done with intent to deceive, is not a “material misrepresentation” giving rise to an ERISA estoppel claim.

Plaintiff cannot point to a material misrepresentation made by Unum and therefore cannot demonstrate the first required element of ERISA estoppel as to Unum.  Unum never misrepresented to Ben that the evidence of insurability requirement did not apply to him or that he was approved for supplemental life insurance benefits.  NOV’s actions, such as providing erroneous annual benefits confirmation statements and making erroneous payroll deductions for premiums, cannot be attributed to Unum because the policy expressly prevents NOV from acting as an agent for Unum.  Because Plaintiff cannot demonstrate a misrepresentation by Unum, summary judgment should be granted on Plaintiff’s ERISA estoppel claim against Unum.

The other two elements of estoppel will be discussed in the next two posts on this opinion.

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