Opinion
No. C 13–1478 SI
2013-11-18
Steven Polnicky, Plaintiff, v. Liberty Life Assurance Company of Boston; Wells Fargo & Company Long Term Disability Plan, Defendants.
Corinne Chandler, Beth Davis, Peter Steffens Sessions, Kantor & Kantor, LLP, Northridge, CA, for Plaintiff.Blake J. Russum, Pamela E. Cogan, Ropers Majeski Kohn & Bentley, Redwood City, CA, for Defendants.
Summary judgment for participant.
Corinne Chandler, Beth Davis, Peter Steffens Sessions, Kantor & Kantor, LLP, Northridge, CA, for Plaintiff. Blake J. Russum, Pamela E. Cogan, Ropers Majeski Kohn & Bentley, Redwood City, CA, for Defendants.
ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
SUSAN ILLSTON, United States District Judge
Cross-motions for summary judgment, filed by plaintiff Steven Polnicky and defendants Liberty Life Assurance Company of Boston (“Liberty Life”) and Wells Fargo & Company Long Term Disability Plan (“the Plan”), are scheduled for hearing on November 22, 2013. Pursuant to Civil Local Rule 7–1(b), the Court determines that this matter is appropriate for resolution without oral argument and VACATES the hearing. For the reasons set forth below, the Court GRANTS plaintiff's motion for summary judgment and DENIES defendants' motion for summary judgment.
1. The parties do not dispute that California Insurance Code § 10110.6 applies to the Policy because plaintiff is a California resident. See Cal. Ins.Code § 10110.6(a).
However, this determination does not end the Court's analysis. The parties dispute whether the controlling plan is the Plan as it existed in 2011, when plaintiff first became disabled, or the Plan as it existed in 2013, when Liberty Life issued it final denial of plaintiff's claim. Def.'s Mot. at 10–14; Pl.'s Mot. at 14–15. The Ninth Circuit has addressed this precise issue. In Grosz–Salomon v. Paul Revere Life Ins. Co., the plaintiff became disabled prior to an amendment to the relevant plan in October 1993 conferring discretionary authority to the defendant plan administrator, but the plaintiff's claim for benefits was not denied until 1997. See 237 F.3d 1154, 1157–58 (9th Cir.2001). The Ninth Circuit held that the amended plan was the controlling plan. See id. at 1160–61. The Ninth Circuit explained that an employee's rights under an ERISA welfare benefit plan do not automatically vest and employers are free to amend or terminate ERISA welfare benefit plans unilaterally unless employees have bargained for contractually vested rights. Id. at 1160 & n.24. Therefore, the controlling plan was the plan that existed when the plaintiff's ERISA cause of action accrued–at the time his benefits were denied. See id. at 1159–61; see also Menhorn v. Firestone Tire & Rubber Co., 738 F.2d 1496, 1501 (9th Cir.1984) (“[A]n ERISA cause of action based on a denial of benefits accrues at the time the benefits are denied.”). Here, defendants concede that plaintiff's claim is for non-vested employee welfare benefits. Def.'s Reply at 4, 7. Therefore, the controlling plan in this action is the plan that existed at the time plaintiff's benefits were denied, the Plan as it existed in 2013. See Grosz–Salomon, 237 F.3d at 1159–61. Because any provision in the controlling plan, the 2013 version of the Plan, attempting to confer discretionary authority to Liberty Life was rendered void and unenforceable by California Insurance Code § 10110.6, the de novo standard of review applies to plaintiff's claim.
Defendants argue that under California law, an insured's disability claim is governed by the terms of the insurance policy at the time the disability claim arose. Def.'s Mot. at 10–12; Def.'s Reply at 9–10. Even assuming defendants are correct, plaintiff's claim is brought pursuant to ERISA, not California insurance law. Therefore, federal common law and the Ninth Circuit's holding in Grosz–Salomon apply to the determination of the controlling plan, not the state law authorities cited by defendants. See Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Ins. Program, 222 F.3d 643, 649 (9th Cir.2000) ( “[T]he accrual of an ERISA cause of action is determined by federal, rather than state, law.”); see also Menhorn v. Firestone Tire & Rubber Co., 738 F.2d 1496, 1500 (9th Cir.1984) (“The courts are directed to formulate a nationally uniform federal common law to supplement the explicit provisions and general policies set out in ERISA, referring to and guided by principles of state law when appropriate, but governed by the federal policies at issue.”). In addition, although under California insurance law, an insured's right to disability benefits becomes vested once the disability claim arises, Def.'s Reply at 9, an employee's rights under an ERISA welfare benefit plan do not automatically vest. Grosz–Salomon, 237 F.3d at 1160 & n. 24; see also Serrato by & Through Serrato v. John Hancock Life Ins. Co., 31 F.3d 882, 887 (9th Cir.1994) (“ERISA preempts California's purported ‘vesting’ rule”).
Defendants argue that the application of Insurance Code § 10110.6 to plaintiff's claim is an impermissible retroactive application of the statute. Def.'s Mot. at 7–9; Def.'s Reply at 7–10. However, this argument relies on the incorrect premise that the Plan as it existed in 2011 is the controlling plan. Because the controlling plan is the Plan as it existed in 2013 after section 10110.6 was made effective on January 1, 2012, section 10110.6 is being applied prospectively to plaintiff's ERISA claim rather than retroactively.
Defendants argue that this is an improper extension of Grosz–Salomon because that case merely holds that the amended plan in existence at the time of the final claim denial is the operative plan. Def.'s Reply at 2–3. Defendants further argue that Grosz–Salomon does not stand for the proposition that the plan language in effect at the time of the final claim denial, as modified by all prior legislative enactments, is the operative plan. Id. The Court disagrees. There is no language in Grosz–Salomon stating that its holding is limited to express amendments to the plan made by the plan sponsor and that its holding does not apply to amendments to the plan made by legislature. The Ninth Circuit has explained that any statutory provisions in force at the time of a policy renewal “ ‘are read into each policy thereunder, and become a part of the contract with full binding effect upon each party.’ ” Stephan, 697 F.3d at 927 (quoting Interins. Exch. of the Auto. Club of S. Cal. v. Ohio Cas. Ins. Co., 58 Cal.2d 142, 148 (1962)).
In their reply brief, defendants argue for the first time that a state legislative enactment of a statute governing insurance does not constitute an amendment to an ERISA plan. Def.'s Reply at 10–12. The Court notes that it was improper for defendants to wait until their reply brief to raise this argument. Moreover, defendants' argument is foreclosed by the Ninth Circuit's decision in Stephan, which held that any statutory provisions in force at the time of a policy renewal are read into the policy. See 697 F.3d at 927; see also UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 376, 119 S.Ct. 1380, 143 L.Ed.2d 462 (1999) (rejecting the defendant's argument because it would leave states “powerless to alter the terms of the insurance relationship in ERISA plans”).
In addition, defendants' reliance on Stephan v. Unum Life Ins. Co. of Am., 697 F.3d 917 (9th Cir.2012) is unpersuasive. Defendants argue that in Stephan, the Ninth Circuit analyzed the discretionary provision of the policy at issue in that case as it existed in 2007, even though the plaintiff's claim was denied in 2008 and the policy had an anniversary date of January 1. Docket No. 33, Def.'s Opp'n at 9–11. Stephan involved a California Settlement Agreement (“CSA”) where the defendant plan administrator agreed to “ ‘discontinue use of a[ny] provision that has the effect of conferring unlimited discretion on [it] or other plan administrator to interpret policy language, or requires an “abuse of discretion” standard of review if a lawsuit ensues ... in any California Contract sold after the date set forth in Section V.’ ” Stephan, 697 F.3d at 925. Defendants fail to note that in Stephan both parties agreed that under the CSA, “policies already extant on the CSA effective date and renewals of such policies are not subject to the Agreement's prohibition on discretionary authority provisions, whereas new policies sold after the CSA Effective Date are subject to the prohibition.” Id. at 926. Because the policy at issue in Stephan was a renewal of a policy that was originally effective June 11, 1999, well before the effective date of the CSA, the policy was not subject to the CSA's prohibition on discretionary authority provisions, regardless of any subsequent renewals. See id. at 926–27. Therefore, the passing of the anniversary date on January 1, 2008 had no effect on the policy's discretionary authority provision, and that provision of the policy would have been the exact same in 2007, when the plaintiff became disabled, as it was in 2008, when the plaintiff's claim was denied. Accordingly, a determination of whether the controlling plan was the plan as it existed in 2007 or 2008 was unnecessary to the Ninth Circuit's analysis in Stephan. In contrast, here, California Insurance Code § 10110.6 expressly applies to renewals, including policies “continued in force on or after the policy's anniversary date.” Cal. Ins.Code § 10110.6(a), (b). Therefore, unlike the policy in Stephan, the discretionary authority provision of the Policy in this case was altered on the Policy's January 1, 2012 anniversary date, prior to the denial of plaintiff's claim. Accordingly, because California Insurance Code § 10110.6 rendered void and unenforceable any provision in the Plan attempting to confer discretionary authority to Liberty Life, plaintiff has shown that as a matter of law the de novo standard of review applies to his ERISA claim.
Defendants' reliance on Robinson v. Metro. Life Ins. Co., 2013 U.S. Dist. LEXIS 44004 (E.D.Cal. Mar. 27, 2013) is also unpersuasive. Def.'s Mot. at 13–14. Unlike in the present case and Grosz–Salomon, Robinson did not involve an amendment to an ERISA plan after the plaintiff filed his claim but prior to the denial of his claim. Robinson involved a plaintiff covered under a non-ERISA plan that was later turned into an ERISA plan after that plaintiff filed her disability claim. See 2013 WL 1281868, at *1, 2013 U.S. Dist. LEXIS 44004, at *2–3.
CONCLUSION
For the foregoing reasons, the Court GRANTS plaintiff's motion for summary judgment and DENIES defendants' motion for summary judgment. Docket Nos. 25, 28.
Along with their opposition and reply brief, defendants filed objections to certain evidence submitted by plaintiff in support of his filings. Docket Nos. 34, 37. Because the Court's opinion does not reference or rely on the pieces of evidence at issue in the objections, the Court denies as moot defendants' objections.
IT IS SO ORDERED.