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Wallace v. Beaumont Healthcare Employee Welfare Benefit Plan

United States District Court, E.D. Michigan, Southern Division

November 2, 2017

CHERYL L. WALLACE, Plaintiff,
v.
BEAUMONT HEALTHCARE EMPLOYEE WELFARE BENEFIT PLAN f/k/a OAKWOOD HEALTHCARE, INC. EMPLOYEE WELFARE BENEFIT PLAN, HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, and RELIANCE STANDARD LIFE INSURANCE CO., Defendants.

          OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR JUDGMENT [ECF NO. 43] AND DENYING DEFENDANT RELIANCE STANDARD LIFE INSURANCE COMPANY'S MOTION FOR JUDGMENT [ECF NO. 44]

          HONORABLE LINDA V. PARKER JUDGE.

         This is an action for long term disability (“LTD”) benefits pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”). Plaintiff Cheryl L. Wallace (“Wallace”) filed the lawsuit on February 19, 2016, against the following Defendants: Beaumont Healthcare Employee Welfare Benefit Plan, f/k/a Oakwood Healthcare, Inc. Employee Welfare Benefit Plan (“Plan”); Hartford Life and Accident Insurance Company (“Hartford”); and Reliance Standard Life Insurance Company (“Reliance”). In an Amended Complaint filed May 20, 2016, Wallace asserts these claims:

(I) Action under ERISA Section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), to recover full employee benefits against Defendants Hartford and Reliance;
(II) Violation of Procedural Due Process under ERISA Section 503, 29 U.S.C. § 1133, against Defendants Hartford and Reliance; and
(III) Action under ERISA Section 502(a)(3), 29 U.S.C. § 1132(a)(3), against Defendants Beaumont EBP [the Plan] and Reliance for appropriate equitable relief.

(ECF No. 16.)

         In an opinion and order issued January 18, 2017, the Court dismissed Counts II and III of Wallace's Amended Complaint. (ECF No. 36.) Pursuant to a stipulated order entered February 28, 2017, Wallace's claims against Hartford were dismissed without prejudice. (ECF No. 41.) Presently pending before the Court are cross-motions for judgment on the administrative record and for declaratory judgment, filed by Wallace and Reliance on May 22, 2017. (ECF Nos. 43, 44.) The parties have fully briefed those motions. Finding the facts and legal arguments adequately presented in their briefs, the Court is dispensing with oral argument pursuant to Eastern District of Michigan Local Rule 7.1(f).

         I. Factual and Procedural Background

         Wallace began working at Oakwood Healthcare, Inc. Health System (“Oakwood”) as a registered nurse on April 11, 2005. (Am. Compl. ¶ 11, ECF No. 16; Admin. R. (“A.R.”) at 40, ECF No. 42-1 at Pg ID 768.) Incident to her employment, Wallace was a participant in the Oakwood Healthcare, Inc. Employee Welfare Benefit Plan, which afforded LTD benefits to eligible employees.[1] (Am. Compl. ¶¶ 4, 5.) Hartford served as the Plan's insurer until Oakwood cancelled its contract with Hartford, effective January 1, 2013. (Id. ¶ 25.) On that date, Reliance became the Plan's insurer. (Id. ¶ 34.)

         In the interim, on October 8, 2012, Wallace stopped working at Oakwood due to a serious and worsening health condition.[2] (Id. ¶ 11.) She remained off work from October 12, 2012 through April 7, 2013. (Id. ¶ 27.) Wallace returned to work on April 7, 2013, but found it necessary to take a medical leave of absence again starting May 12, 2013. (Id. ¶¶ 28, 29.) Wallace was not able to return to work thereafter. (Id. ¶ 30.) She submitted a claim for short-term disability benefits, which was approved for the period July 15, 2013 through November 22, 2013. (A.R. at 156, ECF No. 42-1 at Pg ID 884.) She thereafter filed a claim for LTD benefits with Hartford and Reliance. (Am. Compl. ¶ 31; ECF No. 16 at Pg ID 157.)

         Hartford denied Wallace's claim on the basis that she failed to satisfy the eligibility requirements in Hartford's insurance policy-specifically the 180-day Elimination Period. (Id. ¶ 32.) In making this determination, Hartford maintained that Wallace's first date of actual disability was October 12, 2012, rather than October 8, 2012. (Id.)

         Reliance denied Wallace's claim based on the Pre-Existing Condition exclusion in its policy. (Id. ¶ 36; A.R. at 91-93, ECF No. 42-1 at Pg ID 819-21.) Reliance maintained that, pursuant to the terms of its insurance contract, Wallace did not become insured under the policy until April 7, 2013, when she returned to active work from her medical leave. (A.R. at 91-92, ECF No. 42-1 at Pg ID 819-20.) Reliance determined that Wallace then became disabled on May 13, 2013, when she again went on medical leave. (Id.) Reliance concluded that Wallace had been receiving medical treatment, consultation, care or services during the three months immediately before the effective date of insurance and that, therefore, the Pre-Existing Condition clause of the insurance policy barred her claim for LTD benefits. (Id.) Wallace did not submit a written request seeking review of Reliance's decision, but instead filed this lawsuit on February 19, 2016.

         II. Standard of Review

         The parties agree that a de novo standard applies to this Court's review of Reliance's decision to deny Wallace benefits.[3] This de novo standard of review applies to the plan administrator's factual determinations and legal conclusions. Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 613 (6th Cir. 1998) (citing Rowan v. Unum Life Ins. Co., 119 F.3d 433, 435 (6th Cir. 1997)). A court's review is limited to the record that was before the plan administrator. Id. at 615 (citing Perry v. Simplicity Eng'g, 900 F.2d 963, 966 (6th Cir. 1998)).

         When a court reviews a denial of ERISA benefits de novo, it must determine “whether or not it agrees with the decision under review.” Perry, 900 F.2d at 966. “The administrator's decision is accorded no deference or presumption of correctness.” Hoover v. Provident Life & Accident Ins. Co., 290 F.3d 801, 809 (6th Cir. 2002). “[T]he court must determine whether the administrator properly interpreted the plan and whether the insured was entitled to benefits under the plan.” Id.

         Under ERISA, “every employee benefit plan [must] be established and maintained pursuant to a written instrument, ” 29 U.S.C. § 1132(a)(1), “specify[ing] the basis on which payments are made to and from the plan.” Id. § 1102(b)(4). An insured's claim for benefits “stands or falls by ‘the terms of the plan[.]'” Kennedy v. Plan Adm'r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 300 (2009) (quoting 29 U.S.C. § 1132(a)(1)(B)). ERISA requires benefit plans to be “written in a manner calculated to be understood by the average plan participant.” 29 U.S.C. § 1022(a). As such, “[i]n interpreting a plan, the administrator must adhere to the plain meaning of its language as it would be construed by an ordinary person.” Morgan v. SKF USA, Inc., 385 F.3d 989, 992 (6th Cir. 2004).

         III. Analysis

         A. Whether Reliance Correctly Determined that its Policy's Pre-existing Condition Clause Barred Wallace's Claim for LTD Benefits

         Reliance's determination that the Pre-Existing Condition clause of the LTD policy barred Wallace's claim for benefits was premised on its determination that Wallace was not covered under the plan until April 7, 2013, when she returned to work from a leave of absence.

         With respect to the effective date of individual insurance, the policy provides in relevant part: “The insurance … will not go into effect on a date he/she is not Actively at Work because of a Sickness or Injury. The insurance will go into effect after the person is Actively at Work for one (1) full day in an Eligible Class, as shown on the Schedule of Benefits page.” (A.R. at 17, ECF No. 42-1 at Pg ID 745.) Thus while the policy was effective January 1, 2013, Reliance contends that the effective date of individual insurance for Wallace was not until April 7, 2013, when she returned to work. Next, because Wallace remained at work for less than 40 days after the date of her coverage, Reliance maintains that the policy's PreExisting Condition exclusion was triggered.

         Wallace contends that she was eligible for coverage under the policy effective January 1, 2013, pursuant to its Transfer of Insurance Coverage provisions.[4] These provisions state in relevant part:

If an employee was covered under any group long term disability insurance plan maintained by you prior to this Policy's Effective Date, that employee will be insured under this Policy, provided that he/she is Actively at Work and meets all of the requirements for ...

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