United States District Court, D. South Carolina, Florence Division
Kimberly B. Winburn, Plaintiff,
Progress Energy Carolinas, Inc., and Prudential Insurance Company of America, Defendants.
OPINION AND ORDER
R. BRYAN HARWELL, District Judge.
Pending before the court are cross-motions for summary judgment by the plaintiff (ECF No. 64) and Defendant Progress Energy (ECF No. 61). Also before the court is Defendant Prudential's Motion for Final Judgment on the Administrative Record (ECF No. 63). Plaintiff asserts entitlement to certain benefits pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B) (i.e., a claim for benefits), a claim for attorney's fees pursuant to ERISA § 502(g), 29 U.S.C. § 1132(g), and a claim for equitable relief pursuant to ERISA § 502(a)(3), 29 U.S.C. §1132(a)(3) (i.e., a breach of fiduciary duty claim). The parties entered into a Joint Stipulation agreeing to certain relevant portions of the administrative record and certain relevant portions of the plan documents. They agree that the plan documents confer discretion upon Prudential and that the applicable standard of review for the claim for benefits (the Section 502(a)(1)(B) claim) is an arbitrary and capricious standard of review. The Joint Stipulation also provided that "[t]he parties do not agree on the application of the arbitrary and capricious standard of review to Plaintiff's claims under ERISA § 502(a)(3)." (breach of fiduciary duty claim) (ECF No. 60, p. 2) The parties also agree that the court may dispose of this matter based upon the joint stipulation, the attachments thereto, and the memoranda in support of judgment. (ECF No. 60)
Plaintiff's employer, Progress Energy, Inc. ("Progress") established an employee welfare benefit plan to provide various benefits to employees and their families. The plan is entitled "Progress Energy, Inc. Life, AD&D and Business Travel Accident Plan" (D002031-45.) Under the Plan documents, Progress is the plan sponsor and administrator. (D002035-2037.) "The Plan Administrator shall have control of the day-to-day administration of this Plan and the component Plans..." (D002035) The duties of the Plan Administrator include the responsibility "[t]o comply with all requirements of the law with respect to notice and disclosure" and "[t]o prepare and distribute information explaining the Plan and the applicable component Plans to Eligible Employees and Participants." (§ 3.2; D002036). Prudential is the third-party claims administrator and insurer. (D002041; D000648.) It is undisputed that, as between Progress and Prudential, Progress had the responsibility to provide notice and disclosure regarding the plan. "The Plans are maintained through separate summary plan descriptions and in some cases insurance and other contracts which taken together are intended to conform to the written plan document and other requirements of the (ERISA)". (D002033).
The Progress Energy, Inc. Life, AD&D and Business Travel Accident Plan has three "component plans", all administered by Prudential Insurance Company. One of the component plans is the Progress Energy, Inc., Accidental Death and Dismemberment Plan." (D002041). Prudential has the "[c]omplete discretionary authority to construe and interpret [the Plan] including, without limitation, ... eligibility to participate in and receive benefits under [the Plan]." (D002036; see also D000648.) In the wrap plan document, Progress as plan sponsor reserved "without limitation the right to amend, modify or change the Plan and/or any Component Plan at any time with or without reason..." (D776; see also D2037.)
In the fall of 2001, as part of the enrollment process for 2002 benefits, Progress provided its employees a hard copy booklet by mail entitled Total Rewards Progress Energy Benefits Program ("Total Rewards Booklet"). (D000876; D002046-2510). The Total Rewards Booklet contained the 2002 SPDs for the various benefit plans offered by Progress, including the AD&D Plan. (D2298-2323.) As relevant here, the 2002 AD&D SPD provided that coverage will apply if the covered party's injuries are "in a covered accident." (D002308.) In addition, the 2002 AD&D SPD contained an exclusion for injuries caused during the "[c]ommission of or attempt to commit a felony". (D002314) The 2002 AD&D SPD contained in the Total Rewards Booklet did not, however, contain a "legally intoxicated" exclusion. Plaintiff claims that she read the 2002 AD&D SPD as found in the Total Rewards Booklet. (D000887.) Plaintiff enrolled her husband, Roger Winburn, in the AD&D Plan, effective January 1, 2002, with a coverage amount of $400, 000. Plaintiff stated that the reason she did so was "[b]ecause [he] wouldn't quit drinking and driving and I had three boys around the age of eleven, fifteen, [and] seventeen years old.... And if anything were to happen to him, you know, I had three boys to support." (D000876.)
Like the 2002 AD&D SPD, the AD&D SPDs for Plan years 2003-2008 all (1) required the injury at issue to be "accidental" and (2) contained the "felony" exclusion. (D001618-25; D001709-16; D001786-93; D001870-76; D001933-35; D001987-89; D00201315.) In addition, the 2003-2008 SPDs all contained the "legally intoxicated" exclusion. (D001625; D001716; D001793; D001876; D001934-35; D001988-89; D002014-15.) The record is not clear as to the exact date when the intoxication exclusion was added. The remand decision states that the exclusion "appears to have been added in 2003." (D003031) The AD&D SPDs provide that, in the event of any conflicts between the SPDs and the insurance policy between Progress and Prudential ("Group Policy"), the Group Policy will govern. ( See, e.g., D001543.)
The parties stipulated in the Joint Stipulation that the issues before this court are as follows: 1) whether Plaintiff's state law claims are preempted by ERISA; 2) whether Plaintiff's claims are untimely; 3) whether Prudential abused its discretion in denying Plaintiff's claim for accidental death benefits; 4) whether Plaintiff is entitled to assert a breach of fiduciary duty claim under the circumstances of this case; 5) whether Prudential is a proper party to Plaintiff's claims for equitable relief; 6) whether either Defendant committed a breach of fiduciary duty; and 7) whether, under the circumstances of this case, Plaintiff is entitled to a remedy.
Plaintiff has conceded that her state law claims are preempted by ERISA. (ECF No. 73, p. 2 n. 1)
Factual Background and Filing of Claim
A. Plaintiff Submits a Claim for Accidental Death Benefits.
Plaintiff Kimberly B. Winburn ("Plaintiff") is a participant in the Progress Energy, Inc. Life, AD&D and Business Travel Accident Plan sponsored by Progress and insured by Prudential under Group Contract No. LG-24541 (the "Plan"). This case involves Plaintiff's claim for AD&D benefits under the Plan after the death of her husband, Roger Winburn. Mr. Winburn died in a multi-vehicle accident on May 11, 2008 while operating a motorcycle, during Bike Week in Myrtle Beach, South Carolina. According to the police report, Mr. Winburn attempted to take a curve too fast on his motorcycle and was forced to lay his bike down, after which it skidded across the road and into two oncoming motorcycles driven by an Anthony Thompson and a Richard Coble. At the time of the wreck, Winburn had a blood alcohol level of 0.276, more than three times the legal limit of 0.08. The toxicology report was also positive for opiates. (D 000128) All three motorcyclists were taken to Grand Strand Regional Medical Center. (D103) Mr. Winburn was pronounced dead at the hospital as a result of blunt trauma. ( Id ., D118). The other motorists also suffered injuries. (D103)
Sometime in June of 2008, Plaintiff filed a claim for AD&D benefits. ( See D000009) On June 12, 2008, Prudential wrote the plaintiff and stated that additional time was needed to evaluate the claim and that the following information was needed: a signed HIPAA form, copy of the autopsy report, copy of the toxicology report, and a copy of the police/accident report. On July 14, 2008, Prudential again wrote the plaintiff and indicated that it did not yet have a copy of the autopsy or toxicology report but that it would make all requests necessary for the information. On August 13, 2008, September 12, 2008, and October 13, 2008, Prudential wrote the plaintiff indicating that the toxicology report had not been completed by the Horry County Coroner.
B. Prudential Denies Plaintiff's Claim.
Subsequently, after investigating the claim, Prudential denied the claim by letter dated November 12, 2008, solely on the basis of the legal intoxication exclusion. (D130-32) This exclusion excluded coverage due to an insured "[b]eing legally intoxicated or under the influence of any narcotic unless administered or consumed on the advice of a Doctor." (D 000187) The denial letter informed the plaintiff of her right to appeal to the Appeals Coordinator within the Plan and indicated that the plaintiff could file a lawsuit for policy benefits after completion of the first level of appeal. The letter does not state any deadline for the initiation of a lawsuit. The record does not indicate when the plaintiff received the denial letter.
C. Plaintiff Appeals the Denial Within the Plan.
By letter dated May 29, 2009, Plaintiff (through counsel) appealed the denial of benefits, claiming that the legal intoxication exclusion did not exist at the time of Mr. Winburn's death because it was not contained in the Total Rewards booklet and the plaintiff was never notified of the addition of the exclusion to the policy. (D141-42) Prudential responded by letter dated June 8, 2009 in which it provided a copy of the Group Policy that was allegedly in effect on May 11, 2008 (the date of Mr. Winburn's death) and requested Plaintiff to provide any supplemental information in support of her appeal within 60 days. The record contains an internal email from a Jill Vivian of the Group Life Claims Division of Prudential to an Allyson Kambach, also of Prudential, conveying Plaintiff's counsel's request for a copy of all policy provisions that were in effect on January 1, 2002, when the plaintiff first obtained the coverage, and the effective date of and a copy of any changes to the policy that came into existence after January 1, 2002. (D 000216) By letter dated July 10, 2009 (D000224), Prudential forwarded Plaintiff's counsel the policy booklet allegedly in effect on January 1, 2002; a copy of changes to the policy after January 1, 2002; and a copy of the accident report. The Court has reviewed the attachments to the letter and each policy booklet attached to the letter contains the legal intoxication exclusion. The letter directed counsel to Progress for information concerning communication of the changes to the insured.
By letter dated August 11, 2009, Plaintiff's counsel referenced the 400 page "Total Rewards" booklet, in which a 24 page section described and certified AD&D coverage for employees and dependents. He also referenced the Certificate of Insurance, page 3, which stated: "Participants become covered by the (AD&D) Plan as described in this booklet. This booklet constitutes the participant's Certificate of Coverage while covered under the (AD&D) Plan." He also asserted that the AD&D section of the "TotalRewards" booklet delivered to Ms. Winburn in the fall of 2001 certified AD&D coverage beginning January 1, 2002 and expressly listed 9 exclusions but did not include a legal intoxication exclusion. Counsel noted that the policy booklets provided by Prudential revealed that Prudential "held out one set of exclusions in the certified disclosures it delivered to Mrs. Winburn in the fall of 2001 for coverage year 2002, while now claiming to have maintained a materially more restrictive, but undisclosed, exclusion which it now relies on to deny coverage." (D 000448) Counsel also attached the ProgressLife newsletter sent to employees in the fall of 2005 regarding annual benefit enrollment for 2006 which summarizes some changes to medical plans but states that the other benefit plans are not changing. (D 000456) Exhibit 6 to counsel's letter was a letter dated July 21, 2008 (after Mr. Winburn's death in May of 2008) from Progress to employees enclosing a CD-Rom of the 2008 benefits booklets, formerly referred to as Summary Plan Descriptions, and states: "The SPDs have been updated to incorporate changes that were communicated during previous benefit enrollments and through the annual distribution of the Summary of Material Modifications." (D 000461)
By letter dated October 15, 2009, Prudential notified counsel for the plaintiff that the decision to deny the claim was being upheld. (D 000560) Prudential indicated that it contacted Progress and learned that the SPDs are updated annually; employees are notified each year when the SPDs have been published and are available on the company's intranet; hard copies are available by request; Progress Energy is not legally required to physically send the SPD's to employees each year; and the 2007 SPD contained the legally intoxication exclusion. The letter also stated that the 2005 and 2006 SPDs contained the exclusion. The letter again denied the claim solely on the basis of the legal intoxication exclusion and notified Plaintiff that she could file a second level appeal or file a lawsuit. The deadline for the administrative appeal was provided, but no deadline was given for a lawsuit.
D. Plaintiff Files an Action in State Court which was Removed to this Court.
Plaintiff initiated an action in the Darlington County Court of Common Pleas on November 18, 2011, alleging a claim for a declaratory judgment that the defendants breached their legal and contractual duties to the plaintiff by failing to notify her of changes made to the policy exclusions and that the defendants are liable for the full AD&D coverage on her husband. She further alleged claims for breach of contract and specific performance/equitable payment of benefits. The case was removed to this Court on December 28, 2011 on the basis of diversity of citizenship and federal question jurisdiction on the basis of ERISA. Both defendants filed Answers. Defendant Progress asserted as affirmative defenses the doctrine of waiver and estoppel and the statute of limitations and also asserted that any benefits due are subject to offset, integration or other deductions in accordance with the plan terms. Defendant Prudential's Answer did not assert affirmative defenses but did assert that any benefits due under the plan are subject to offset, integration or other deductions in accordance with the plan terms. Prudential's Answer also alleged failure to comply with the terms of the plan. Plaintiff filed an amended complaint on June 4, 2012, adding a claim for benefits under ERISA Section 502(a)(1)(B) and a claim for "appropriate equitable relief" under ERISA Section 502(a)(3). The defendants filed Answers to the Amended Complaint alleging the same or similar affirmative defenses described above.
E. Court Grants Plaintiff's Motion to Supplement the Record.
On October 4, 2012, Plaintiff filed a motion to supplement the record with her affidavit and to permit her to serve requests to admit on the defendants. The grounds for the motion were that she seeks equitable remedies under Secton 1132(a)(3) pursuant to CIGNA Corp. v. Amara, ___ U.S. ___, 131 S.Ct. 1866 (2011) and McCravy v. Metropolitan Life Ins. Co ., 690 F.3d 176 (4th Cir. 2012). This Court issued an order on July 25, 2013 granting the motion to supplement the record. In the order, the Court granted the plaintiff's discovery requests and also allowed a deposition of the plaintiff at the defendant's request. The order provided:
After conclusion of discovery, the case shall be remanded back to the plan administrator for consideration of the effect, if any, of the new evidence resulting from this discovery on the administrator's decision as to the terms of the plan which governs this claim and as to the merits of the claim.
(ECF No. 41, p. 8)
F. Court Remands the Case to the Administrator.
After completion of the discovery, this Court signed a Consent Order of Remand on October 30, 2013. The case was remanded to the claims administrator, Prudential, to consider the plaintiff's claim in light of the new evidence.
G. Administrator Again Denies the Claim.
On remand, Prudential issued a decision on December 30, 2013 upholding its decision to deny the claim. However, in addition to denying the claim on the original ground of the legal intoxication exclusion, Prudential denied it on two additional grounds, neither of which had been previously argued or raised by any defendant at any time. These two grounds consisted of Prudential denying the claim on the basis that Mr. Winburn did not sustain an accidental death and that, even if the death was accidental, recovery was also barred by the felony exclusion. (D 003029)
H. The case is now Briefed and Ready for Disposition.
The parties have now filed their Joint Stipulation with this Court. Progress and the plaintiff have filed cross-motions for summary judgment. (ECF Nos. 61 and 64, respectively) Prudential has filed a motion for judgment. (ECF No. 63) The ...