Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-1_08-cv-00474/USCOURTS-almd-1_08-cv-00474-1/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1001 E.R.I.S.A.: Employee Retirement

---

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE

MIDDLE DISTRICT OF ALABAMA, SOUTHERN DIVISION

THE PRUDENTIAL INSURANCE )

COMPANY OF AMERICA, )

)

Plaintiff, ) CIVIL ACTION NO.

) 1:08cv474-MHT

v. ) (WO)

)

WINONA CHUMNEY, etc., )

et al., )

)

Defendants. )

OPINION

The final issue presented to the court is whether

decedent Christine Ann Chumney's two minor children and

her estate may recover Voluntary Accidental Death and

Dismemberment (“AD&D”) and Group Universal Life (“GUL”)

benefits they claim are due under an insurance policy

Chumney entered into with Prudential Insurance Company of

America. As guardian of the children and representative

of the estate, Chumney's sister-in-law has filed a

counterclaim on their behalf against Prudential for these

benefits. This counterclaim, which is the only remaining

claim in this litigation, arises under the Employee

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Retirement Income Security Act (“ERISA”), 29

U.S.C. § 1132(a)(1)(B). Jurisdiction is proper under 29

U.S.C. § 1132(e). For the reasons that follow, the court

holds that Prudential is entitled to judgment in its

favor on Chumney's sister-in-law’s counterclaim. 

I. BACKGROUND

A.

Chumney began working for HealthSouth Corporation in

February 2004. At that time, Prudential provided life

insurance benefits to qualifying employees of HealthSouth

under a group contract. As a new hire, Chumney signed up

for Basic Employee Term Life (“Basic Life”) insurance in

the amount of $ 51,000, as well as other benefits.

Although she was given the option to enroll for AD&D and

GUL benefits, she did not do so.

In October 2005, HealthSouth conducted an annual

enrollment period for optional insurance benefits.

During that month, Chumney had the opportunity to enroll

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in benefits for 2006 that she had not previously elected.

HealthSouth mailed its employees various materials,

including a “FlexChoice” booklet (which explained the

available benefits options) and an “Annual Enrollment

Worksheet.” The cover page to the enrollment worksheet

instructed employees to complete the sheet and return it

to a HealthSouth representative. The worksheet, which

was sent to Chumney and personalized for her, stated

under the “EMPLOYEE AD&D INSURANCE” heading: 

“Your current AD&D coverage is: No

coverage. This coverage will continue

in 2006 unless you make a new election.

To make a new election, mark the desired

coverage option box. Prudential will

mail an Enrollment Form to you once we

notify them of your new coverage

election.”

Record (Doc. No. 74), Exh. 1, p. 5. In the boxes below,

Chumney checked the option for $ 200,000 of AD&D

coverage. Similarly, in the “EMPLOYEE GROUP UNIVERSAL

LIFE INSURANCE” section, the worksheet provided that

Chumney’s current coverage was “No Coverage” and

instructed: “If you request to increase your current

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coverage, Prudential will mail an Enrollment Form and

Health Questionnaire to you once we provide them with

your enrollment request.” Record (Doc. No. 74), Exh. 1,

p. 4. Chumney checked the option for $ 140,000 of GUL

coverage. 

The parties agree that Chumney submitted this

worksheet (requesting $ 200,000 of AD&D and $ 140,000 of

GUL benefits) to the appropriate HealthSouth

representative, who in turn transmitted Chumney’s

elections to Prudential. The central dispute of this

case is whether Chumney’s completion and submission of

that worksheet effected her enrollment in the requested

benefits.

Representatives of both HealthSouth and Prudential

agree that completion of the worksheet was insufficient

to enroll for AD&D and GUL benefits; rather, they state

that the purpose of the sheet was to enable HealthSouth

to transmit employee enrollment requests to Prudential,

which would in turn mail the appropriate enrollment

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materials to the requesting employee. As described

above, the worksheet itself indicated that Prudential

would mail additional materials after receiving the

elections made on the worksheet. Likewise, the

“FlexChoice” booklet, which was mailed to employees,

provided, under the “Next Steps” heading, that additional

forms were needed to complete enrollment.

After Prudential would receive employee requests from

HealthSouth, the insurance company’s automated computer

system would generate a letter addressed to the employee;

enclose the letter and an enrollment form in an envelope;

and have the materials mailed to the employee.

Prudential performed quality-assurance checks on the

automated system to ensure its proper functioning. Here,

after Prudential received Chumney’s requests, it

generated such a letter for her, dated December 22, 2005.

The letter instructed Chumney to complete the enclosed

form and provided: “Once we receive your completed

enrollment form, we will process your request and provide

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confirmation of your approved coverage amounts.” Record

(Doc. No. 74), Exh. 3, p. 96. If Prudential’s automated

system properly functioned (which is not disputed by any

evidence in the record), the letter and form were mailed

to Chumney. There is no evidence, however, that Chumney

ever completed the form and returned it to Prudential.

Prudential never received the form, or any other

response, from Chumney. Neither Chumney nor HealthSouth

paid any premiums to Prudential for the AD&D or GUL

benefits that Chumney had requested on the earlier

worksheet. There is no evidence that Chumney, after

submitting the worksheet to her employer, ever followed

up with either Prudential or HealthSouth.

B.

On August 14, 2007, Chumney was found dead in her

home; her body had multiple gunshot wounds. Her husband

was arrested and charged with her murder. Some time

later, an attorney was retained by Chumney’s sister-inCase 1:08-cv-00474-MHT-WC Document 91 Filed 09/14/12 Page 6 of 19
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law, the legal custodian of Chumney’s two minor children,

to probate Chumney’s estate. The attorney sent a letter

to Prudential informing it of these events and of pending

interpleader litigation that had been filed in state

court by State Mutual Insurance Company to determine the

rightful owner of insurance proceeds to be distributed by

that company. The attorney requested Prudential’s

participation in the litigation. The letter claimed that

Chumney had enrolled with Prudential for not only Basic

Life benefits, but also for AD&D and GUL benefits

(although the letter did not explicitly use those names).

The attorney’s letter appears to be the first notice

Prudential had of possible claims for AD&D and GUL

benefits.

Prudential then filed an interpleader complaint in

this federal court, claiming that Chumney was insured for

Basic Life in the amount of $ 51,000 and the company was

prepared to pay those funds and accrued interest to the

proper beneficiary, the identity of whom would be

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1. Prudential paid into court $ 60,148.58, which

represented the undisputed Basic Life benefits due plus

interest. Prudential was discharged from further

liability with respect to those benefits. Discharge and

Disbursement Order (Doc. No. 78). Only the AD&D and GUL

benefits are disputed in this litigation.

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determined in the litigation; the interpleader complaint

did not address AD&D or GUL benefits. Chumney’s sisterin-law, as guardian for the minor children and as

representative of Chumney’s estate, filed a third-party

complaint against HealthSouth and a counterclaim against

Prudential, asserting, in short, that $ 140,000 of GUL

benefits were due and that the two companies had violated

fiduciary duties owed to Chumney. The third-party

complaint against HealthSouth was dismissed and Chumney's

sister-in-law elected to pursue Prudential alone. The

counterclaim against Prudential was later amended to

state that both AD&D and GUL benefits were due. The

counterclaim asserts a single cause of action under 29

U.S.C. § 1132(a)(1)(B).1

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C.

By agreement of Prudential and Chumney's sister-inlaw, the dispute over whether Chumney’s children and

estate are entitled to AD&D and GUL benefits was

submitted to the court for resolution on a jointly

prepared record, without a trial, but after briefing.

II. DISCUSSION

A.

The parties dedicate significant space in their

briefs to the proper standard of review for this court to

apply in adjudicating Prudential’s denial of AD&D and GUL

benefits. The dispute centers around the Supreme Court’s

decision in Firestone Tire & Rubber Co. v. Bruch, 489

U.S. 101, 109 (1989). There, the Court held that, in an

ERISA action under § 1132(a)(1)(B), an employee-benefit

plan administrator’s denial of benefits “is to be

reviewed under a de novo standard unless the benefit plan

gives the administrator or fiduciary discretionary

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authority to determine eligibility for benefits or to

construe the terms of the plan,” in which case, the

arbitrary-and-capricious standard is applied instead.

Id. at 115. Chumney's sister-in-law asks this court to

conduct de novo review, while Prudential argues for the

deferential arbitrary-and-capricious standard.

There is no question that the plan at issue expressly

grants Prudential “as Claims Administrator ... the sole

discretion to interpret the terms of the Group Contract,

to make factual findings, and to determine eligibility

for benefits.” Record (Doc. No. 74), Exh. 2, pt. 2, pp.

44 (AD&D) & 80 (GUL). The plan further states that, “The

decision of the Claims Administrator shall not be

overturned unless arbitrary and capricious.” Id. On

first appearance, this explicit grant of discretion would

seem plainly to invoke arbitrary-and-capricious review.

However, the unique posture of this case distinguishes it

from the typical action under § 1132(a)(1)(B) and muddies

the waters to some extent. In a typical case, a claimant

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seeking benefits due under an employee-benefit plan will,

first, before resorting to judicial remedies, utilize

administrative procedures outlined in the plan. Through

this claims procedure, the administrator creates a record

of factual findings and legal conclusions (for example,

interpretations of the plan). In the ordinary case, a

judicial action is filed only after the administrator has

made a final decision to deny benefits. The court will

then, after determining that the arbitrary-and-capricious

standard is appropriate, apply it to the administrator’s

record.

Here, unlike the typical case, no claim was ever

submitted to Prudential under the plan, and no

administrative appeal was made. The plan’s

administrative procedures were simply disregarded by both

parties. It appears that, after Chumney’s death,

Prudential was first made aware of possible claims for

AD&D and GUL benefits on April 15, 2008, when Chumney's

sister-in-law’s counsel wrote a letter to Prudential (and

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2. Chumney's sister-in-law now argues that the

attorney’s letter constitutes a claim under the plan’s

administrative procedures that went unanswered. That

argument cannot be correct. The plan clearly requires

that a “claim form” be used and the “instructions on the

form” be followed, neither of which occurred here.

Record (Doc. No. 74), Exh. 2, pt. 2, pp. 15 (AD&D) & 57

(GUL). Moreover, the attorney’s letter did not assert

that benefits were owed to any particular beneficiary,

but rather requested that “any benefits to be paid due to

Mrs. Chumney’s death be interpled into” pending

litigation for the purpose of determining the proper

beneficiaries. Record (Doc. No. 74), Exh. 3, p. 24-25.

The attorney’s letter plainly does not constitute a claim

under the plan’s administrative procedures.

12

others) raising the possibility.2

 There is no evidence in

the record that Prudential requested use of the plan’s

administrative procedures. Instead, Prudential filed an

interpleader complaint asserting only that Chumney was

insured for Basic Life benefits in the amount of

$ 51,000. The record makes clear that the plan’s

administrative procedures were never used.

It appears then that, when Prudential asks this court

to apply the arbitrary-and-capricious standard of review,

it contemplates the court’s deferring to its litigation

position, as opposed to conclusions embodied in a record

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made in the course of ordinary claim administration, as

such a record does not exist in this case. Prudential

cites no law supporting this argument. There appears to

be no clear binding precedent in this circuit on the

appropriate standard of review to be applied where the

parties jointly bypass administrative procedures in favor

of litigation, although other circuits have wrestled with

similar situations. See Nat’l Auto. Dealers and Assoc.

Ret. Trust v. Arbeitman, 89 F.3d 496, 498 (8th Cir. 1996)

(applying de novo review where the administrator filed an

interpleader action before rendering a determination on

entitlement to benefits); compare Alliant Techsystems,

Inc. v. Marks, 465 F.3d 864, 870 (8th Cir. 2006)

(applying the abuse-of-discretion standard where the

administrator first made an initial determination but

subsequently filed an interpleader action). Fortunately,

this court need not decide the appropriate standard of

review, because whether it conducts de novo review or

defers to the conclusions of Prudential, the outcome is

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the same: Chumney did not properly enroll for AD&D and

GUL benefits.

B.

It is well-settled that the party bringing an action

for benefits under § 1132(a)(1)(B) bears the burden of

proving entitlement. Horton v. Reliance Standard Life

Ins. Co., 141 F.3d 1038, 1040 (11th Cir. 1998). To

determine whether a party is properly enrolled in a

benefits plan and is entitled to benefits, the court must

turn to the terms of the plan itself.

Here, the group contract between Prudential and

HealthSouth provides that, “All of the provisions of the

Group Insurance Certificate(s) ... apply to the Group

Contract as if fully set forth in the Group Contract.”

Record (Doc. No. 74), Exh. 3, p. 83. Group insurance

certificates, which were created by Prudential for each

individual HealthSouth employee, consist of two separate

documents: the booklet and certificate of coverage.

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Therefore, the language of the booklet and certificate of

coverage controls as to entitlement to benefits. 

The part of the booklet addressing AD&D

(specifically, the “Schedule of Benefits” section, which

describes the options for amounts of coverage employees

can elect) provides: “The option for which you enroll

will be reported to Prudential.” Record (Doc. No. 74),

Exh. 2, pt. 2, p. 13. Citing this language, Chumney's

sister-in-law argues that the plan impliedly envisions

AD&D enrollees completing the full enrollment process

with HealthSouth (presumably on forms provided by

HealthSouth), and then having their elections, already

operable, reported to Prudential. Although that

interpretation is plausible, it is clearly incorrect when

the clause is read in light of the rest of the booklet.

The “When You Become Insured” section of the booklet

provides that an employee is not insured until she has

“enrolled” and that, “For Contributory Insurance”

(including AD&D) “you must enroll on a form approved by

Prudential ....” Record (Doc. No. 74), Exh. 2, pt. 2, p.

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18) (emphasis added). Chumney's sister-in-law argues

that the enrollment worksheet, created by HealthSouth and

completed by Chumney, constituted such an approved form.

As both HealthSouth and Prudential representatives agree,

it did not. It is irrelevant that Chumney successfully

enrolled for Basic Life benefits without completing a

form from Prudential, for, as the booklet makes clear,

contributory insurance (for example, AD&D) requires

enrollment “on a form approved by Prudential,” while noncontributory insurance (for example, Basic Life) does

not. The only form approved by Prudential for AD&D

enrollment was the one sent to Chumney, which Chumney did

not complete. Therefore, she did not enroll for AD&D

benefits.

 As to GUL benefits, the conclusion is the same.

The part of the booklet addressing GUL likewise provides

that an employee is not enrolled until she has “enrolled

on a form approved by Prudential ....” Record (Doc. No.

74), Exh. 2, pt. 2, p. 60. That form would be the one

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sent to Chumney, but which she did not complete. Chumney

did not enroll for GUL benefits either.

Chumney's sister-in-law next argues that some form of

relief is due because Prudential breached fiduciary

duties by maintaining a confusing enrollment process or

by failing to follow up with Chumney after she did not

return the proper enrollment forms. ERISA imposes

fiduciary duties that prohibit administrators from making

affirmative misrepresentations; require them to provide

complete and accurate information in response to

participants’ questions; and, generally speaking, demand

that they act in the best interests of the plan

participants. See, e.g., Varity Corp. v. Howe, 516 U.S.

489, 506 (1996) (finding a violation where the plan

administrator “knowingly and significantly ...

deceiv[ed]” beneficiaries); Jones v. American General,

370 F.3d 1065, 1072 (11th Cir. 2004) (collecting cases).

Here, the facts do not make out a breach of fiduciary

duties. The evidence reveals that Chumney was provided

ample written notice that, after completing the October

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2005 worksheet, additional forms would be required before

she would be properly enrolled for AD&D and GUL benefits.

The worksheet itself clearly stated so in the respective

AD&D and GUL sections. Similarly, the “FlexChoice”

booklet that was mailed to Chumney provided, under the

“Next Steps” heading, that additional forms were needed

to complete enrollment. As to the process for enrolling

in AD&D and GUL benefits, there is no evidence in the

record demonstrating that Prudential made any

misrepresentations or failed to answer properly any

inquiries from Chumney. On the other hand, it is also

true that after Chumney used the worksheet to clearly

express her intent to enroll for AD&D and GUL benefits,

not once did Prudential follow up with Chumney to find

out why she had not done so, despite having nearly two

years to make an inquiry. Indeed, it is Prudential’s

ordinary practice not to make such inquiries. While this

practice may reflect poor customer service, there is no

basis in the law for finding that it rose to the level of

breaching a fiduciary duty.

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* * *

The evidence reflects that, because Chumney did not

return the enrollment “forms” which Prudential sent to

her, she did not properly enroll for the benefits claimed

by her sister-in-law; merely completing and submitting a

“worksheet” was not enough. There is also no evidence

that Prudential violated a fiduciary duty owed to

Chumney. An appropriate judgment in favor of Prudential

and against Chumney's sister-in-law, as guardian of

Chumeny's children and representative of her estate, will

be entered.

DONE, this the 14th day of September, 2012.

 /s/ Myron H. Thompson 

UNITED STATES DISTRICT JUDGE

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