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granting summary judgment dismissing claims for breach of contract and declaratory judgment on the same grounds
Summary of this case from Kinsey v. Cendant Corp.Opinion
02-CV-0748E(F).
March 26, 2004
MEMORANDUM and ORDER
This decision may be cited in whole or in any part.
Barbara A. Charles ("plaintiff") filed a complaint in the New York State Supreme Court, County of Chemung, on September 11, 2002 asserting various claims against First Unum Life Insurance Co. ("First Unum"), Aon Consulting, Inc. and Aon Select, Inc (both Aon entities will be collectively referred to as "Aon") with respect to a group life insurance policy ("the Policy") under which her husband, Eddie Charles, was purportedly insured as a dependent of plaintiff. Defendants removed the case to this Court on October 23, 2002 on the ground that it was preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"). On July 14, 2003 First Unum filed a motion for "judgment based on the administrative record." This motion was argued and submitted on August 22, 2003. For the reasons set forth below, First Unum's motion will be granted.
As noted below, plaintiff and her husband were members of a union that had a group insurance policy for the benefit of its members.
Although First Unum styled its motion as a "judgment based on the administrative record," this Court will treat such as a motion for summary judgment under Rule 56(c) of the Federal Rules of Civil Procedure ("FRCvP"). Indeed, the Court of Appeals recently noted that "[First Unum's] `motion for judgment on the administrative record' [is] a motion that does not appear to be authorized in the Federal Rules of Civil Procedure." Muller v. First Unum Life Ins. Co., 341 F.3d 119, 124 (2d Cir. 2003). Nonetheless, Muller also noted that "[m]any courts have either explicitly or implicitly treated such motions, which are frequently made by insurers in ERISA benefits cases, as motions for summary judgment under Rule 56." Ibid. Likewise, this Court will treat First Unum's motion as a motion for summary judgment.
See also Keiser v. CDC Investment Mgt. Corp., 2003 WL 1733729, at *9 n. 2 (S.D.N.Y. 2003) (noting that First Unum's "motion for `judgment on the administrative record' has no mooring in the Federal Rules of Civil Procedure," but concluding that "such a motion is proper in certain circumstances"); Henar v. First Unum Life Ins. Co., 2002 WL 31098495, at *1-4 (S.D.N.Y. 2002) (treating motions "for judgment on the administrative record" as motions for summary judgment); Napoli v. First Unum Life Ins. Co., 2003 WL 22454481, at *2 (2d Cir. 2003) (noting that "First Unum filed a `Motion for Judgment on the Administrative Record'", which the district court treated as a motion for summary judgment), pet. for cert. filed, 03-1091 (Jan. 27, 2004). One district court, however, has noted that motions addressing "whether the denial of ERISA benefits was arbitrary and capricious" are "more properly considered as one akin to a motion under Rule 12(c) for judgment on the basis of the pleadings and the transcript of the record before the Plan." Rizk v. Long Term Disability Plan of the Dun Bradstreet Corp., 862 F. Supp. 783, 791 (E.D.N.Y. 1994) (treating a motion seeking review of the denial of ERISA benefits as a motion for summary judgment); see also Larsen v. Prudential Ins. Co. of Am., 151 F. Supp.2d 167, 172 (D. Conn. 2001) (citing Rizk with approval and noting that "a district court reviewing an ERISA denial of benefits is effectively functioning in an appellate capacity because it is precluded from considering new evidence").
Muller, however, treated First Unum's motion as a bench trial "on the papers" because First Unum had already made a motion for summary judgment that the district court had denied. Ibid.
This treatment is also supported by the fact that First Unum filed the present motion on July 14, 2003 — the deadline for filing summary judgment motions.
FRCvP 56(c) states that summary judgment may be granted only if the record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." In other words, after discovery and upon a motion, summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Summary judgment is thus appropriate where there is "no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Of course, the moving party bears the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995) (citing Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970)). If the moving party makes such a showing, the non-moving party must then come forward with evidence of specific facts sufficient to support a jury verdict in order to survive the summary judgment motion. Ibid.; FRCvP 56(e).
With respect to the first prong of Anderson, a genuine issue of material fact exists if the evidence in the record "is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, at 248. Stated another way, there is "no genuine issue as to any material fact" where there is a "complete failure of proof concerning an essential element of the nonmoving party's case." Celotex, at 323. Under the second prong of Anderson, the disputed fact must be material, which is to say that it "might affect the outcome of the suit under the governing law * * *." Anderson, at 248.
See also Anderson, at 252 ("The mere existence of a scintilla of evidence in support of the [movant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [movant].")
Furthermore, "[i]n assessing the record to determine whether there is a genuine issue as to any material fact, the district court is required to resolve all ambiguities and draw all factual inferences in favor of the party against whom summary judgment is sought." St. Pierre v. Dyer, 208 F.3d 394, 404 (2d Cir. 2000) (citing Anderson, at 255). Nonetheless, mere conclusions, conjecture, unsubstantiated allegations or surmise on the part of the non-moving party are insufficient to defeat a well-grounded motion for summary judgment. Goenaga, supra note 6, at 18.
First Unum has failed to comply with Rule 56.1(a) of this Court's Local Rules of Civil Procedure ("LRCvP") — which constitutes grounds for dismissal. This Court will nonetheless overlook First Unum's noncompliance in this instance.
In addition to the summary judgment standard set forth above, this Court must determine what standard of review to apply to First Unum's denial of benefits. As the Court of Appeals has noted, "[a] denial of benefits under ERISA is reviewed by the District Court `under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.'" Charles concedes that First Unum has such discretionary authority. Indeed, the Policy provides that
Muller, at 123-124 (quoting Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)).
See Pl.'s Mem. of Law, at 8.
"When making a benefit determination under the policy, UNUM has discretionary authority to determine your eligibility for benefits and to interpret the terms and provisions of the policy." FULCL 00033.
First Unum attached the administrative record — which is referenced as FULCL — as Exhibit A to the affidavit of its counsel, Paul K. Stecker, Esq.
Consequently, the deferential arbitrary and capricious standard applies. "Under the arbitrary and capricious standard, the scope of judicial review is narrow * * * [because] [a] court may overturn a plan administrator's decision to deny benefits only if the decision was without reason, unsupported by substantial evidence or erroneous as a matter of law." Indeed, "courts are not free to substitute [their] own judgment for that of the [plan administrator] as if [they] were considering the issue of eligibility anew." Moreover, this Court's review is generally limited to the administrative record. Consequently, the "question before this Court * * * is whether there is a genuine issue of material fact whether First Unum's decision that plaintiff [was not entitled to a dependent life insurance benefit for her deceased husband] was arbitrary and capricious."
See, e.g., Rosenthal v. First Unum Life Ins. Co., 2002 WL 975627, at *5-6 (S.D.N.Y. 2002) (construing substantively similar policy language and holding that the arbitrary and capricious standard applied).
Celardo v. GNY Auto. Dealers Health Welfare Trust, 318 F.3d 142, 146 (2d Cir. 2003) (citations and internal quotations omitted); see also Kinstler v. First Reliance Std. Life Ins. Co., 181 F.3d 243, 249 (2d Cir. 1999) (quoting Pagan v. NYNEX Pension Plan, 52 F.3d 438, 442 (2d Cir. 1995) for the same proposition).
Celardo, supra note 12, at 146 (internal quotations omitted).
Muller, at 125 ("The decision whether to consider evidence from outside the administrative record is within the discretion of the district court. Nonetheless, the presumption is that judicial review is limited to the record in front of the claims administrator unless the district court finds good cause to consider additional evidence.") (citations and internal quotations omitted); Zervos v. Verizon New York, Inc., 277 F.3d 635, 646 (2d Cir. 2002); Miller v. United Welfare Fund, 72 F.3d 1066, 1071 (2d Cir. 1995).
Henar, supra note 3, at *4.
Plaintiff is a correctional officer who is a member of the New York State Correctional Officers Police Benevolent Association (the "Union"). Her husband, Eddie, was also a correctional officer and a member of the Union. The Union was the policyholder for the Policy, a group insurance policy offered by First Unum. Under the Policy, the Union offered its members basic life insurance of $10,000. Union members were permitted to purchase additional coverage for themselves or their dependents. Eddie Charles purchased $200,000 worth of coverage. Plaintiff allegedly enrolled and paid premiums for $100,000 worth of life insurance covering her husband as a dependant ("the disputed coverage"). Eddie Charles died on February 17, 2000.
First Unum paid plaintiff this benefit, which is not at issue in this case.
First Unum paid plaintiff this benefit, which is not at issue in this case.
First Unum denied plaintiff's claim for the disputed coverage on the ground that such is prohibited under the terms of the Policy, which provides in relevant part that
The following dependants are eligible for life coverage under the plan:
"Your lawful spouse, including a legally separated spouse. You may not cover your spouse as a dependent if your spouse is enrolled for coverage as a member." FULCL 00037.
Furthermore, the Policy defines "member" as
"a citizen or permanent resident of the United States or Canada who is in active employment in the United States with your Employer unless an exception is applied for and approved in writing by UNUM." FULCL 00064.
Inasmuch as Eddie Charles was also a member of the Union covered under the Policy, it was not arbitrary and capricious for First Unum to have denied plaintiff's claim with respect to the disputed coverage. Accordingly, her breach of contract, failure to pay benefit and declaratory judgment claims (counts 1-3) will be dismissed.
Plaintiff's Complaint also asserts a claim for estoppel. She alleges that (1) she enrolled for the disputed coverage and had the premiums automatically deducted from her paycheck and (2) that she contacted the Union's third-party administrator, Aon, to verify the coverage that she and her husband maintained — and that Aon responded by letter dated December 22, 1999 confirming that plaintiff had, inter alia, $100,000 of the disputed coverage. Inasmuch as First Unum made no determination with respect to whether the doctrine of promissory estoppel prevented it from denying plaintiff's claim for the disputed coverage, this Court will review her promissory estoppel claim de novo. In addressing such estoppel claim, First Unum asserts, inter alia, that Aon is not First Unum's agent and that Aon's representations should not be imputed to First Unum. With respect to whether Aon may be deemed First Unum's agent for purposes of Aon's representations concerning the disputed coverage, First Unum points to language in the Policy stating that
"[f]or purposes of the policy, [the Union] acts on its own behalf or as your agent. Under no circumstances will [the Union] be deemed the agent of Unum" FULCL 00041.
This Policy language, however, does not refer to Aon. Although First Unum contends that this language implicitly extends to the Union's agents — i.e., Aon —, the record contains insufficient evidence concerning the circumstances of Aon's relationship (or lack thereof) to First Unum. There is, however, evidence in the record that plaintiff did not receive a copy of the Policy until after her husband had died. Because plaintiff did not possess the Policy language set forth above, there exists a genuine issue of material fact as to whether Aon may be deemed First Unum's apparent agent — who could thus bind First Unum based on its representations. Even assuming arguendo, however, that Aon is First unum's agent, plaintiff's promissory estoppel claim nonetheless fails as discussed below.
A plaintiff asserting a promissory estoppel claim in an ERISA action must demonstrate the following elements: (1) a promise, (2) reliance on the promise, (3) injury caused by the reliance, (4) an injustice if the promise is not enforced and (5) extraordinary circumstances. In the Complaint, plaintiff's estoppel claim is based upon the December 22, 1999 representation made by Aon. As noted by First Unum, however, plaintiff's promissory estoppel claim must fail because she cannot demonstrate injury caused by her reliance inasmuch as her husband had been diagnosed with cancer in September of 1999. Plaintiff failed to demonstrate that Eddie would have been able to obtain other life insurance in December of 1999 — which is highly doubtful given his diagnosis.
Devlin v. Empire Blue Cross Blue Shield, 274 F.3d 76, 85 (2d Cir. 2001), cert. denied sub nom. Empire Blue Cross Blue Shield v. Byrnes, 537 U.S. 1170 (2003).
In her reply brief, plaintiff changed the theory of liability on her promissory estoppel claim — suggesting that First Unum's enrollment form was the promise upon which liability should be based. Her promissory estoppel claim nonetheless fails because, at most, she alleges that First Unum's enrollment form erroneously failed to inform her that she was ineligible for the disputed coverage — no evidence of intentional inducement has been proffered. Such, however, is insufficient to establish the existence of extraordinary circumstances. Accordingly, plaintiff's promissory estoppel claim (count 4) will be dismissed.
This Court does not address whether the enrollment form was a sufficient promise for purposes of establishing a promissory estoppel claim.
See Hart v. Equitable Life Assurance Soc'y, 2002 WL 31682383, at *5 (S.D.N.Y. 2002) (finding that statements containing erroneously calculated benefit estimates did not constitute extraordinary circumstances, even though plaintiff would "suffer the consequences of an unfortunate mistake"), aff'd, 2003 WL 22148771 (2d Cir. 2003); Cerasoli v. Xomed, Inc., 47 F. Supp.2d 401, 411 (W.D.N.Y. 1999) (dismissing promissory estoppel claim on the ground that "plaintiff's allegations amount to little more than a claim that [defendant] made a mistake when it told him that he would be covered"); cf. Patterson v. J.P. Morgan Chase Co., 2002 WL 207123, at *6 (S.D.N.Y. 2002) (finding that extraordinary circumstances existed where defendant made a "promise directly to Plaintiff in order to persuade Plaintiff to return to work," and noting that "[t]he case at hand is not one where a general promise was made to a community of individuals, without any expectation that it would affect their behavior"). Notably, the Court of Appeals has not yet addressed whether conduct other than intentional inducement constitutes extraordinary circumstances. Devlin supra note 18, at 86.
Furthermore, for the reasons set forth in First Unum's Memorandum of Law, plaintiff's negligent misrepresentation claim (count 6) against First Unum will be dismissed because it is preempted by ERISA inasmuch as the representation at issue relates to an ERISA Plan. See Smith v. Dunham-Bush, Inc., 959 F.2d 6, 7-8 (2d Cir. 1992) (dismissing negligent misrepresentation claim as preempted by ERISA where representation concerned the benefits available to plaintiff); Cerasoli v. Xomed, Inc., 952 F. Supp. 152, 157-158 (W.D.N.Y. 1997) (same).
Additionally, in response to First Unum's motion, plaintiff refers to alleged violations of ERISA — to wit section 502(a)(1) for breach of fiduciary duty and section 1024(b)(1) for failure to timely disclose the Policy, i.e., the summary plan description. The Complaint, however, contains no such claims and this Court will therefore not address her arguments with respect to such. Although this Court would ordinarily be inclined to permit her to file a motion seeking leave to file an amended complaint, the advanced stage of this case counsels against doing so because discovery ended on June 20, 2003 and the deadline for filing summary judgment motions was July 14, 2003.
See Pl.'s Mem. of Law, at 9-15.
If plaintiff had wanted to assert these ERISA claims, she should have sought permission to file an amended complaint before the deadline for summary judgment motions.
Accordingly, it is hereby ORDERED that First Unum's motion will be granted, that counts 1-4 and 6 of the Complaint are dismissed, that First Unum shall be dismissed as a party to this action, that the remaining parties shall appear before Part III of this Court on May 14, 2004 at 3:00 p.m. (or as soon thereafter as they may be heard) to set a date for trial and that the caption of this case shall be changed to read as follows:
Count 5 sets forth a claim against Aon but not First Unum.
"BARBARA A. CHARLES, Plaintiff,
-vs-
AON CONSULTING, INC. and AON SELECT, INC., Defendants."