Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00461/USCOURTS-caed-1_05-cv-00461-0/pdf.json

Parties Involved:
Baker Hughes Incorporated
Defendant
Carol Brown
Plaintiff

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

CAROL BROWN,

 Plaintiff,

 v. 

BAKER HUGHES INCORPORATED, and DOES

1-10,

 Defendants.

1:05-CV-00461 OWW SMS

ORDER GRANTING

DEFENDANT’S MOTION FOR

SUMMARY JUDGMENT (DOC.

15)

I. INTRODUCTION

This is an insurance coverage dispute governed by the

Employee Retirement Income Security Act of 1974 (ERISA). The

underlying dispute concerns coverage under a voluntary accidental

death and dismemberment insurance policy (the “Policy”) purchased

by Milton Hunt through his employer, Defendant Baker Hughes

Incorporated (“Baker Hughes”). The Policy contains an exclusion

for accidental death resulting from intoxication. 

Mr. Hunt died on July 29, 2003 in a single-vehicle car

accident. A toxicology report indicated that Hunt’s blood

alcohol level was significantly above the legal limit. Plaintiff

Carol Brown, who was involved in a long-term, committed

relationship with Mr. Hunt, sought benefits under the Policy. 

Coverage was denied on the ground that (1) benefits were not due

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The relevant facts in this case are essentially 1

undisputed. Plaintiff filed a “statement of disputed material

facts in opposition to summary judgment” (Doc. 18), but disputes

only certain legal conclusions reached by Defendant. Plaintiff

also presents her own set of additional material facts, to which

defendant has not responded.

2

because of the Policy’s intoxication and narcotic exclusion; and

(2) Plaintiff was not properly designated as Hunt’s Beneficiary. 

On April 8, 2005, Plaintiff filed this lawsuit seeking

review of this benefit determination. (Doc. 1.) Defendant now

moves for summary judgment on the ground that the initial

coverage determination was justified because (1) the Policy’s

intoxication and narcotic exclusion bars recovery and (2) Brown

was not Hunt’s beneficiary for purposes of the Policy. (Doc. 15,

filed Jan. 30, 2006.) Plaintiff opposes the motion. (Doc. 17,

filed Feb. 13, 2006.) 

II. FACTUAL BACKGROUND1

A. Hunt’s Employment Relationship with Baker Hughes; His

Relationship with Plaintiff; and His Insurance Coverage

Elections and Beneficiary Designations.

Hunt began his employment with Baker Hughes as a directional

driller on May 16, 2003. Hunt’s primary residence was in Three

Rivers, California, but his new appointment with Baker Hughes

required him to be temporarily stationed in Casper, Wyoming.

(Defendant’s Exhibit (“DE”) C 001.) Hunt listed his Three Rivers

address as his permanent address on his employment paperwork and

Baker Hughes sent all paperwork to the California Address. (Id.) 

It is undisputed that Brown lived with Hunt in Three Rivers

and that the two co-existed as husband and wife for over 17

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3

years. (Plaintiff’s initial disclosures (“PID”) at 93-94.) The

two co-mingled finances, filed joint tax returns, and maintained

joint assets and liabilities. (Id.) It is also undisputed that

Brown was the sole beneficiary of Hunt’s personal assets in his

will, and is the administrator of his estate. (DE M 001; DE L

001.)

In 1995, while Hunt was employed by Haliburton Energy

Services, Hunt designated Brown in writing as his beneficiary for

Haliburton-sponsored life and accidental death and dismemberment

insurance policies. (Plaintiff’s Exhibit (“PE”) 11 at 120.) In

1997, Hunt elected on a Haliburton benefits form to provide

health insurance coverage for Brown as his “spouse.” On that

form, check marks appear next to language reading: “Relationship

Choices: Common-law spouse (Declaration of Common Law Marriage

must be attached).” (Id. at 122-23.) However, there is no

declaration of common law marriage in the record.

Hunt began his employment with Baker Hughes in early May

2003. A May 17, 2003 “statement of benefits” sent by Baker

Hughes to Hunt indicates that Hunt elected Medical, Dental, and

Vision coverage for himself and his “spouse,” along with long

term disability and basic life insurance coverage. In early June

2003, Hunt called Baker Hughes’ and elected coverage (for himself

only) under the accidental death and dismemberment Policy in the

amount of $200,000. (DE J.) The record reveals no writing that 

explicitly designates Brown as his beneficiary under the

accidental death and dismemberment policy. Hunt did, however,

designate Brown as his beneficiary for purposes of his pension

plan, and listed his status as “married” on a “New Employee Data

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Sheet” he filed with Baker Hughes. (DE C 001.) Hunt also

indicated that he was married to a non-working spouse on the W-4

form he submitted to Baker Hughes. (DE D 001.)

B. The Accident.

Hunt was killed in a single-vehicle car accident on July 29,

2003 in Utah. A police report of the accident indicates that

Hunt was rounding a curve when he lost control of his vehicle. 

The vehicle overturned and ejected him. (DE F at 001-012.) 

Hunt’s blood was drawn immediately after the accident and a

toxicology screen indicated that his blood alcohol level was 0.26

(more than three times the .08 legal limit in both Utah and

California). (DE G 001.)

C. The Policy.

The Policy, effective April 1, 2003 through April 1, 2004,

consists of 48 pages that are not consecutively numbered. The

first six pages consist of introductory material, followed by a

table of contents which indicates that the Policy contains, among

other things, an Insuring Agreement, Declarations, a “Voluntary

Accident Insurance Contract.” The table of contends indicates

that the contract contains “Exclusions,” and “Endorsements.” The

table of contents does not indicate page references for the

various listed sections, nor does it provide any detailed

information on the nature of the exclusions and/or the

endorsements. (See DE H at 008.) 

//

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1. General Contract Provisions.

The Insuring Agreement provides:

...This insuring Agreement, together with the Premium Summary, Schedule

of Forms, Declarations, Contract, Hazards, and Endorsements, comprise the

policy. 

(DE H 011.) 

The Contract provides, in pertinent part: 

Section I - Coverage

We will pay the applicable Benefit Amount if an Accident results in a Loss

not otherwise excluded. The Accident must result from a covered Hazard

and occur while this policy is in force. The Loss must occur within one (1)

year of the Accident. (DE H 016.)

***

Section VI - Definitions

Accident or Accidental - means a sudden, unforseen, and unexpected

event which happens by chance, arises from a source external to the Insured

Person, is independent of illness, disease or other bodily malfunction and is

the direct cause of loss. (DE H 017.)

***

Section VII - Common Policy Conditions

Entire Contract And Application

This policy, the Policyholder’s application and the Primary Insured

Persons’ application, if any, together with the endorsements and other forms

listed in the Schedule of Forms, constitutes the entire contract of insurance. 

(DE H 023) 

(emphasis in original).

//

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2. The Intoxication and Narcotic Exclusion. 

The critical exclusionary language, which is found on the

second to last page of the 48-page Policy as an endorsement,

provides:

Intoxication and Narcotic Exclusion

The following is added to Section V of the Voluntary Accident

Insurance contract, Exclusions:

Intoxication and Narcotic

This insurance does not apply to Accidental Bodily Injury,

Accident, Loss of Life, or other Loss caused by or resulting from an

Insured Person being intoxicated as defined by the laws of the

jurisdiction where the Accidental Bodily Injury, occurred, or under

the influence of any controlled substance unless taken of the advice of

a Physician and used in accordance with the prescription, at the time

of the Accident. 

All other terms and conditions of the policy remain unchanged.

(DE H 049)(emphasis in original).

3. Policy Language Pertaining to Beneficiary

Designation and Domestic Partners.

Two endorsements define the manner by which an insured may

designate beneficiaries and the default beneficiaries that will

be paid any benefit in the absence of such a designation. Form

44-02-211-(Ed. 1-01) provides the basic framework:

Beneficiary

The policy is hereby amended as follows

(1) Under the Contract Form 44-01-1060 (Ed. 6/96), Section VII

Common Policy Conditions is amended by deleting the Beneficiary

provision in its entirety and replacing it with the following. 

The Loss of Life benefit will be paid to the beneficiary designated by

the Insured Person. Loss of Life benefits payable due to the death

of the Insured Person’s spouse or Dependent Child or Children

will be paid to the Insured Person, absent any beneficiary designation

by such spouse or Dependent Child or Children. All beneficiary

designations must be in writing and filed with the Policyholder. 

All other Benefit Amounts are paid to the Insured person, unless

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otherwise directed by the Insured Person or the Insured Person’s

designee. 

If the Insured Person has not chose a beneficiary, or if there is no

beneficiary alive when the Insured Person dies, we will pay the

Benefit Amount to the first surviving class in the following order:

(a) the Insured Person’s spouse;

(b) in equal shares to the Insured person’s surviving children;

(c) in equal shares to the Insured Person’s surviving parents;

(d) in equal shares to the Insured Person’s surviving brothers and

sisters;

(e) to the Insured Person’s estate

All other terms and conditions of the policy remain unchanged. 

(DE H 050)(bold emphasis supplied, underlining added).

A second endorsement, Form 44-02-1409 (Ed. 6-96), concerns

the designation and benefit entitlements of a Domestic Partner:

Domestic Partner

Whenever the Term “spouse” is used in the policy, the term includes

Domestic Partner. 

The Primary Insured Person and the Domestic Partner agree to provide

additional information and documentation as may be required to substantiate

the relationship and eligibility under the policy. 

Definitions

Domestic Partner means a person designated in writing at enrollment by the

Primary Insured Person, who is at least (18) years of age, and who during

the past (12) months:

1) has been in a committed relationship with the Primary Insured

Person; and 

2) has been the Primary Insured Person’s sole spousal equivalent; and 

3) has resided in the same household as the Primary Insured Person;

and

4) has been jointly responsible with the Primary Insured Person for

each other’s financial obligations; 

and who intends to continue the relationship described above indefinitely. 

(DE H 042).

D. The Summary Plan Description.

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Baker Hughes’ employees are given a Summary Plan Description

(“SPD”) which provides descriptions of the various benefits

offered by Baker Hughes. The SPD describes the terms of the

voluntary accidental death and dismemberment Policy starting on

page 211 of the SPD. (DE I 135) In total, seven pages of text

and figures are dedicated to summarizing the Policy. (SPD 211-

217; DE I 135-141.) The SPD explains how the policy works (SDP

213; DE I 137), what losses are covered (SPD 214; DE I 138), and

the types of losses that are not covered (SPD 216; DE I 140).

Specifically, the SPD lists types of losses that are not covered

in a section entitled “What Losses Are Not Covered by Voluntary

AS&D Insurance?” That heading is in large, bold font. The final

of seven bullet points under the heading reads: “Loss caused by

or resulting from an Insured Person being Intoxicated or under

the influence of any narcotic unless administered on the advice

of a Physician.” (DE I 140.) 

E. The Division of Claims Administration Between Baker

Hughes, Chubb, and Federal.

According to the Policy, Baker Hughes is designated as the

“policyholder,” Chubb is the “producer” and the Federal Insurance

Company is the “issuer.” (See DE H at 010.) In the SPD, Baker

Hughes designates itself as the “plan administrator” with

“discretionary authority to interpret plan provisions, construe

unclear terms, determine eligibility for benefits, and otherwise

make all decisions and determinations regarding plan

administration.” (DE I at 158.) Baker Hughes asserts that it

acted through its fiduciaries Chubb and Federal in denying

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The SPD also provides that “[f]or some of the plans,

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Baker Hughes has delegated authority to third party

administrators to administer benefits claims under the plan. The

claim administrator for each benefits plan is designated on page

159. Subject to Baker Hughes’ overall authority as plan

administrator, the claim administrator has discretionary

authority to interpret plan provisions and determine benefit

claims.” (SPD 234; DE I 158.) The actual designation, which

appears to be on page 84, rather than page 159 of the SPD, names

Chubb as the administrator for the voluntary accidental death and

dismemberment plan. (SPD 89; DE I 008) 

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Brown’s claims.2

F. Plaintiff’s Efforts to Obtain Benefits From Baker

Hughes.

After Milton’s death, Baker Hughes disclosed to Plaintiff

that two life insurance policies existed. However, Baker Hughes

did not inform Plaintiff directly of the existence of the

accidental death and dismemberment policy. Her counsel

discovered the policy in Mr. Hunt’s employee file. Plaintiff

asserts that Mr. Hunt may never even have received a copy of the

policy or the SPD.

Counsel for Plaintiff submitted a claim directly to Chubb on

August 13, 2004 in the form of a letter brief that stated the

reasons why the alcohol intoxication exclusion is not plain,

clear and conspicuous and why she qualifies as Milton’s domestic

partner. 

On November 23, 2004, Federal responded to Plaintiff’s

claim, denying it on two separate grounds. Federal claimed the

alcohol intoxication exclusion precluded coverage and that, even

if a benefit was due under the policy, Carol’s claim to any such

benefit could be contested by other potential beneficiaries to

the estate because Milton did not designate Carol as his domestic

partner in writing at enrollment. 

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III. STANDARD OF REVIEW

A. General Summary Judgment Standard.

Summary judgment is warranted only “if the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact.” Fed. R. Civ. P. 56(c);

California v. Campbell, 138 F.3d 772, 780 (9th Cir. 1998).

Therefore, to defeat a motion for summary judgment, the nonmoving party must show (1) that a genuine factual issue exists

and (2) that this factual issue is material. Id. A genuine

issue of fact exists when the non-moving party produces evidence

on which a reasonable trier of fact could find in its favor

viewing the record as a whole in light of the evidentiary burden

the law places on that party. See Triton Energy Corp. v. Square

D Co., 68 F.3d 1216, 1221 (9th Cir. 1995); see also Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 252-56 (1986). Facts are

“material” if they “might affect the outcome of the suit under

the governing law.” Campbell, 138 F.3d at 782 (quoting Anderson,

477 U.S. at 248). 

The nonmoving party cannot simply rest on its allegations

without any significant probative evidence tending to support the

complaint. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir.

2001).

[T]he plain language of Rule 56(c) mandates the

entry of summary judgment, after adequate time

for discovery and upon motion, against a party

who fails to make a showing sufficient to

establish the existence of an element essential

to the party's case, and on which that party

will bear the burden of proof at trial. In such

a situation, there can be “no genuine issue as

to any material fact,” since a complete failure

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of proof concerning an essential element of the

nonmoving party’s case necessarily renders all

other facts immaterial.

Celotex Corp. v. Catrell, 477 U.S. 317, 322-23 (1986). The more

implausible the claim or defense asserted by the nonmoving party,

the more persuasive its evidence must be to avoid summary

judgment. See United States ex rel. Anderson v. N. Telecom,

Inc., 52 F.3d 810, 815 (9th Cir. 1996). Nevertheless, the

evidence must be viewed in a light most favorable to the

nonmoving party. Anderson, 477 U.S. at 255. A court’s role on

summary judgment is not to weigh evidence or resolve issues;

rather, it is to determine whether there is a genuine issue for

trial. See Abdul-Jabbar v. G.M. Corp., 85 F.3d 407, 410 (9th

Cir. 1996).

B. Summary Judgment in an ERISA Case. 

In a case governed by ERISA, a summary judgment motion is

the vehicle for the trial court to review the propriety of the

benefit decision. Bendixen v. Standard Ins. Co., 185 F.3d 939

(9th Cir. 1999). The parties do not agree on the precise

standard of review to be applied to the benefic decision in this

case. Baker Hughes argues for application of the “arbitrary and

capricious,” or “abuse of discretion,” standard. Plaintiff

insists that a less deferential doctrine should be applied. 

Determining the appropriate standard of review begins with

the general rule that a benefits decision governed by ERISA is

reviewed de novo “unless the benefit plan gives the 

administrator or fiduciary discretionary authority to determine

eligibility for benefits or to construe the terms of the plan.”

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989);

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Jebian v. Hewlett-Packard Co. Employee Benefits Organiz. Income

Protection Plan, 349 F.3d 1098, 1102 (9th Cir. 2003). If the

plan administrator is granted such discretionary authority, a

reviewing court must apply an “abuse of discretion standard.” 

Firestone, 489 U.S. at 115. However, even where a Plain properly

designates discretionary authority, there are circumstances in

which a less deferential standard should be applied. 

IV. DISCUSSION

Plaintiff’s complaint sets forth two causes of action: the

first, brought under the Declaratory Judgment Act, 28 U.S.C. §

2201, seeks a declaration that Plaintiff is entitled to benefits

under the Policy; the second seeks recovery of benefits under

ERISA. Baker Hughes moves for summary judgment on both of

Plaintiff’s claims. 

Plaintiff filed an opposition, but failed to file her own

cross-motion for summary judgment. She requests, however, that

her opposition be deemed a cross-motion for summary judgment. 

Defendant strenuously objects to consideration of Plaintiff’s

opposition as a cross-motion, arguing that her failure to do so

stands in direct contravention of the court’s scheduling order in

this case. In theory, a court may sua sponte grant summary

judgment on a purely legal issue even in the absence of a crossmotion, but “great care must be exercised to assure that original

movant has had adequate opportunity to show that there is genuine

issue and that his or her opponent is not entitled to judgment as

matter of law.” See Kassbaum v. Steppenwolf Productions, 236

F.3d 487, 494-95 (9th Cir. 2000). Here, however, it is not

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necessary to apply Kassbaum, because Defendants motion will be

granted. 

A. Plaintiff’s Standing to Sue.

As a threshold matter, Baker Hughes argues that “Brown lacks

standing to bring this action as she is neither the participant

nor beneficiary of the Policy at issue,” citing 29 U.S.C.

§ 1132(a)(1) for the proposition that only the participants or

beneficiaries of an ERISA governed plan are “empowered to bring a

civil action” to enforce their rights. But “[t]his reasoning

begs the question: If [the plaintiff] is a beneficiary, as she

asserts, then she does have standing.” Sladek v. Bell System

Management Pension Plan, 880 F.2d 972, 979 (7th Cir. 1989).

Plaintiff has standing to test the question of her status as a

beneficiary in this case.

B. The Appropriate Standard of Review. 

Plaintiff raises a second threshold issue -- the applicable

standard of review. A benefits decision governed by ERISA is

reviewed de novo “unless the benefit plan gives the administrator

or fiduciary discretionary authority to determine eligibility for

benefits or to construe the terms of the plan.” Firestone, 489

U.S. at 115; Jebian, 349 F.3d at 1102. If the plan administrator

is grated such discretionary authority, a reviewing court must

apply an “abuse of discretion standard.” Firestone, 489 U.S. at

115. An ERISA plan administrator may abuse its discretion if it

“render[s] decisions without any explanation, or construe[s]

provisions of the plan in a way that conflicts with the plain

language of the plan.” Taft v. Equitable Life Assur. Soc., 9

F.3d 1469, 1472 (9th Cir. 1993). The appropriate inquiry “is not

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into whose interpretation of the plan documents [i.e., the

administrator's or the district court's] is most persuasive, but

whether the plan administrator's interpretation is unreasonable.”

Saffle, v. Sierra Pac. Power Co. Bargaining Unit Long Term

Disability Income Plan, 85 F.3d 455, 458 (9th Cir. 1996). An

ERISA plan administrator may also abuse its discretion if it

relies on clearly erroneous findings of fact in making benefit

determinations. Taft, 9 F.3d at 1472. 

Here, it is undisputed that Baker Hughes designated itself

as the “plan administrator” under the Policy, and assigned to

Chubb/Federal the discretion to interpret plan provisions and

determine eligibility for benefits. But, as noted above, even

where a Plan properly designates discretionary authority, there

are several exceptions to the “abuse of discretion” standard. 

First, it is not disputed that “[t[he degree of judicial

deference associated with this standard of review may...be

affected by factors such as conflict of interest.” Lang v.

Long-Term Disability Plan of Sponsor Applied Remote Techn., Inc.,

125 F.3d 794, 797-98 (9th Cir. 1997)(emphasis added). An

apparent conflict may exist where claims are both funded and

administered by the insurer. See Gaines v. Sargent Fletcher, 329

F. Supp. 2d 1198, 1212 (C.D. Cal. 2004). Such a situation

appears to exist here, where Baker Hughes both funds and

administers the plan. However, the mere presence of an apparent

conflict is not enough on its own. Atwood v. Newmont Gold Co.,

Inc., 45 F.3d 1317, 1322 (9th Cir. 1995). 

[The Ninth Circuit’s] traditional abuse of discretion

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Brown raises several other unpersuasive arguments in

3

support of her theory that a serious conflict exists here. She

suggests that it was inappropriate for Chubb/Federal, rather than

Baker Hughes itself, to deny her claim. But, Baker Hughes

designated Chubb/Federal as its fiduciary for such purposes. A

denial by Chubb/Federal is sufficient. Plaintiff also suggests

that Baker Hughes did not issue its denial within 90 days of the

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review is not altered in the absence of facts

indicating that the conflicting interest caused a

serious breach of the plan administrator's fiduciary

duty to...the plan beneficiary. Instead..we must review

the decisions of an apparently conflicted employer- or

insurer-fiduciary under the traditional abuse of

discretion standard unless it appears that the conflict

may have influenced the decision. To make such a

showing, the affected beneficiary must come forward

with “material, probative evidence, beyond the mere

fact of the apparent conflict, tending to show that the

fiduciary's self interest caused a breach of the

administrator's fiduciary obligations to the

beneficiary.” Id. If the beneficiary satisfies that

burden, our review remains for abuse of discretion, but

it becomes “less deferential.”

Lang, 125 F.3d 797-98. Examples of such “material, probative

evidence” include: (1) “inconsistencies in the plan

administrator’s reasons” for the denial of benefits, Lang, 125

F.3d at 799; (2) a plan administrator’s failure to provide the

claimant a full and fair review; and/or (3) the administrator’s

failure to follow plan procedures, Fredrich v. Intel, 181 F.3d

1105, 1110 (9th Cir. 1999).

Plaintiff’s arguments do not fall neatly within any of these

categories. As evidence of a conflict, Plaintiff alleges that

Baker Hughes did not exercise its “overall authority” because the

denial of Brown’s claim was actually issued by Chubb/Federal. 

(Doc. 17 at 17.) But, Baker Hughes rejoins that it simply

designated Chubb/Federal as its fiduciary and delegated its

discretionary authority to Chubb/Federal. (DE I 158.)3

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claim, as required by ERISA, 29 C.F.R. 2560.503-1(f)(1),(3).

Plaintiff, however, presents no concrete evidence to rebut Baker

Hughes’ assertion that it did in fact deny her claim within 84

days. (Doc. 23, Reply, at 5-6.) Brown also argues that Baker

Hughes “delegates and then tries to insulate itself” from

liability for the actions of third party administrators like

Chubb. It is undeniable and common knowledge that employers

utilize third party administrators who are experts in the

administration of ERISA benefit plans. Again, Plaintiff points

to no authority suggesting that this constitutes a breach of

fiduciary duty. Finally, Plaintiff argues that Baker Hughes did

not provide her with a review or appeal policy as required by

ERISA. This is not accurate. The SPD explains how one may

appeal a benefits determination. Plaintiff does not suggest how

this notice or process is inadequate. 

16

Plaintiff next points out that Baker Hughes’ failed to

inform her of the existence of the Chubb policy. Plaintiff

complains that “[t]here was no system to ensure Milton’s estate

or his beneficiaries be provided with all plan documents [and]

[i]f there was, the system was not followed.” (Doc. 17 at 17.) 

But, Baker Hughes maintains that it was under no obligation to

inform Plaintiff of the existence of the policy, because

Plaintiff was neither Hunt’s spouse nor his designated

beneficiary. Plaintiff points to no legal authority in support

of the proposition that such a failure constitutes evidence of a

conflict of interest. In sum, Plaintiff has not established that

the standard of review should be heightened on conflict of

interest grounds.

Alternatively, Plaintiff points to a line of pre-Firestone

cases which hold that a plan administrator’s “erroneous

application of law” is an independent basis for overturning the

benefits decision. See Malhiot v. S. Cal. Retail Clerks Union,

735 F.2d 1133,1135 (9th Cir. 1984); Ellenburg v. Brockway, Inc.

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Plaintiff also cited Allen v. Shalala, 48 F.3d 456 (9th 4

Cir. 1995), during oral argument, in which the Ninth Circuit

reiterated the well-established principle that a district court

may abuse its discretion if it “does not apply the correct law.”

But, Allen was not an ERISA case nor did it address the standard

of review to be applied to a benefits decision made by an

administrator. Allen is inapposite.

17

763 F.2d 1091, 1093 (1985). Plaintiff maintains that 4

Chubb/Federal applied the incorrect standard to determine the

enforceability of the intoxication/narcotics exclusion. 

Specifically, Plaintiff suggests that the appropriate analysis is

to examine the “interrelationship of [the policy’s] parts and the

surrounding circumstances,” a standard drawn from Middlesex Mut.

Ins. Co. v. Bright, 106 Cal. App. 3d 282, 292 (1980). Middlesex,

in turn, draws this rule from Gray v. Zurich, 65 Cal. 2d 263, 273

(1966), in which the California Supreme Court found that an

exclusionary clause was not conspicuous, in part because it

“appears only after a long and complicated page of fine print,

and is itself in fine print,” finding “its relation to the

remaining clauses of the policy and its effect is surely not

‘plain and clear.’” However, both Middlesex and Gray recognize

that “overriding consideration [is] that the interpretation of

the insurance policy must be pursued in light of the insureds'

reasonable expectations.” Middlesex, 106 Cal. App. 3d at 292

(citing Gray, 65 Cal. 2d at 270.) 

Although Chubb/Federal’s denial letter may not have

articulated the standard in the exact terms Plaintiff suggests,

Chubb/Federal applied the appropriate law and performed an

appropriate analysis. Critically, Chubb/Federal discussed Haynes

v. Farmers Ins. Exch., 32 Cal. 4th 1198 (2004) in considerable

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detail. In Haynes, the California Supreme court examined the

placement of exclusionary language vis-a-vis other policy

provisions, the form and placement of headings used to alert the

insured, and other policy language that suggested exactly the

opposite of the exclusionary language. Id. at 1205-08. 

Chubb/Federal concluded that Haynes was distinguishable because

“the Intoxication And Narcotics exclusion is contained on its

own, separate endorsement bearing a large, bolded, italicized

descriptive heading.” (See Denial Letter at 8-9, attached to

Doc. 19-4.) Chubb/Federal applied the correct standard of law. 

Even if a heightened standard of review was called for here,

it is not clear that it would make a difference in practical

terms. As discussed below, Chubb/Federal’s determination as to

the enforceability of the intoxication exclusion is correct and

survives scrutiny under any standard of review, even a de novo

“totality of the circumstances” analysis. 

C. The Merits of the Underlying Benefit Decision. 

Baker Hughes’ argues that it is entitled to summary judgment

because (1) the intoxication and narcotic exclusion is valid and

enforceable because it is “plain, clear, and conspicuous”; and

(2) Federal properly invoked the exclusion because Hunt was

intoxicated at the time of his death. Alternatively, Baker

Hughes argues that Brown does not qualify as Hunt’s Beneficiary

under the policy. 

1. The Validity and Enforceability of the Narcotics

Exclusion.

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The California Supreme Court applies this rule in a 5

similar manner.

[A]n insurer cannot escape its basic duty to insure by

19

A plan administrator may abuse its discretion by

unreasonably interpreting an insurance policy. Plaintiff asserts

that Baker Hughes, through Chubb/Federal, has done just this, by

misapplying the law to find that the narcotics exclusion is

“plain, clear, and conspicuous.” 

The applicable legal standard is drawn from California state

law, which is relevant to interpretation of ERISA-governed

insurance contracts. See Saltarelli v. Bob Baker Group Medical

Trust, 35 F.3d 382, 387 (9th Cir. 1994). The Ninth Circuit has

specifically adopted California’s doctrine of reasonable

expectation as “a principle of uniform federal common law

informing interpretation of ERISA-governed insurance contracts.” 

Id. (affirming a district court’s “legal determination” that a

policy’s exclusion was not clear, plain and conspicuous enough to

negate layman’s objectively reasonable expectation of coverage). 

The Ninth Circuit describes the doctrine as follows:

In general, courts will protect the reasonable

expectations of applicants, insureds, and intended

beneficiaries regarding the coverage afforded by

insurance carriers even though a careful examination of

the policy provisions indicates that such expectations

are contrary to the expressed intention of the insurer.

Id. Specifically, courts applying this doctrine examine whether

any exclusions are “clear, plain, and conspicuous enough to

negate [a] layman[’s] []objectively reasonable expectations of

coverage.” If not, the exclusion is unenforceable. Id. at 386-

87. Here, Plaintiff essentially argues that Chubb/Federal

5

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means of an exclusionary clause that is unclear. As we

have declared time and again any exception to the

performance of the basic underlying obligation must be

so stated as clearly to apprise the insured of its

effect. Thus, the burden rests upon the insurer to

phrase exceptions and exclusions in clear and

unmistakable language. The exclusionary clause must be

conspicuous, plain and clear. 

MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 648 (2003)

(internal quotations and citations omitted).

Plaintiff asserts that application of the reasonable

6

expectations doctrine must proceed via an examination of “the

totality of the policy.” Plaintiff however cites no cases which

directly support the application of a “totality of the

circumstances” analysis. Rather, both parties point to federal

and California cases that suggest the inconspicuous placement of

exclusions may render them unenforceable. 

20

interpreted the Policy unreasonably (thereby abusing its

discretion) by improperly applying the “reasonable expectations

doctrine” to reach the conclusion that the intoxication and

narcotics exclusion is valid and enforceable.

The mere presence of the exclusion in an endorsement, as

opposed to placement in the main contract, is not dispositive. 

The use of endorsements to set forth exclusions is accepted as

standard practice in California. See Burak v. Gen. Am. Life Ins.

Co., 836 F.2d 1287 (10th Cir. 1988)(applying California Law). 

However, the inconspicuous placement of an endorsement

excluding coverage may render that exclusion unenforceable. In

6

Fields v. Blue Shield of Cal., 163 Cal. App. 3d 570 (1980), the

challenged limitation of coverage was placed, “not in the

limitation or exclusion section, but at the end of benefit

granting provisions.” Id. at 579. Therefore, the insurer failed

to provide “conspicuous notice in an expected place.” Id.

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In Haynes, the California Supreme Court found unenforceable

limiting language which appeared “on the policy's 10th page [] as

the second of four paragraphs under the heading ‘Other

Insurance....’” 32 Cal. 4th at 1205. The Haynes court reasoned

that “[t]here is nothing in the heading to alert a reader that it

limits permissive user coverage, nor anything in the section to

attract a reader's attention to the limiting language.” Id. 

Similarly, inconspicuous placement of exclusionary language

in a summary plan document provided to employees may also be

grounds for invalidating an exclusion. For example, in

Saltarelli, the Ninth Circuit examined whether a 43 page summary

plan description effectively informed the beneficiaries of a

purported exclusion for pre-existing medical conditions. 35 F.3d

at 385. The factual summary from Saltarelli provides a helpful

overview:

The preamble [to the summary plan description] states

that the Plan is subject to all terms, provisions and

conditions recited on the following pages. Among the []

plan provisions is an exclusion for “pre-existing

conditions.” However, an insured reading the table of

contents of the plan summary would find no heading for

this critically important item. The only arguably

relevant heading apparent from the table of contents,

“Eligibility Rules: Employee Eligibility and Effective

Date,” contains no reference to it at all. The “Medical

Care Benefits” chapter in the body of the document does

reveal a subsection entitled “Exclusions and

Limitations,” but the pre-existing conditions exclusion

receives no mention here either. Instead, the exclusion

can be found only in the midst of the “Definitions”

chapter. Even then, it requires a coordinated reading

of three separate definitions: those for “Pre-Existing

Condition,” “Illness,” and “Injury.”

Id. Based on these facts, the district court in Saltarelli found

that the “purported exclusion for pre-existing conditions is not

conspicuous enough to attract the attention of a reasonable

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Plaintiff’s alternative argument that the language of 7

the intoxication exclusion is not sufficiently clear is

unpersuasive. (See Doc. 17 at 13.) She points to nothing in the

language that is confusing or ambiguous.

22

layman.” Id. The Ninth Circuit affirmed. Id. at 388.

Here, the placement of the exclusionary language in the

Policy itself is not designed as the most conspicuous provision. 

The 48-page policy has a table of contents which indicates that

the Policy contains, among other things “Exclusions,” and

“Endorsements.” The table of contents does not indicate page

references for the Exclusions or Endorsements, nor does it

specify that additional exclusionary language may be contained

within the Endorsements. (See DE H at 008.) On the other hand,

the intoxication and narcotics exclusion itself is set off by

itself on a single endorsement page and bears a bold-face heading

to catch the reader’s attention.

Intoxication and Narcotic Exclusion

The following is added to Section V of the Voluntary Accident

Insurance contract, Exclusions:

Intoxication and Narcotic

This insurance does not apply to Accidental Bodily Injury,

Accident, Loss of Life, or other Loss caused by or resulting from an

Insured Person being intoxicated as defined by the laws of the

jurisdiction where the Accidental Bodily Injury, occurred, or under

the influence of any controlled substance unless taken of the advice of

a Physician and used in accordance with the prescription, at the time

of the Accident. 

All other terms and conditions of the policy remain unchanged.

(DE H 049)(emphasis as in original). This particular endorsement

is located on the second to last page of the 48-page policy and

is nowhere mentioned in the table of contents or introductory

materials.

7

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If this case concerned only the Policy itself, it might be a

close call as to whether it puts an insured person adequately on

notice of the existence of the intoxication exclusion. However,

the SPD, given to all Baker Hughes Employees, is also relevant to

the “plain, clear, and conspicuous” inquiry. The Ninth Circuit

has indicated that the language contained in the SPD should

actually be given more weight than the policy language itself. 

Atwood, 45 F.3d at 1321, considered a case in which the SPD and

the plan conflicted in their descriptions of the circumstances

which may result in a denial of benefits. The Ninth Circuit held

that the SPD controls over the plan, pointing out that “ERISA

requires that the SPD explain the ‘circumstances which may result

in disqualification, ineligibility, or denial or loss of

benefits.’” Id. (quoting 29 U.S.C. § 1022(b)).

In straightforward language, the SPD explains how the policy

works (SPD 213; DE I 137), what losses are covered (SPD 214; DE I

138), and the types of losses that are not covered (SPD 216; DE I

140). Specifically, the SPD lists types of losses that are not

covered in a section entitled “What Losses Are Not Covered by

Voluntary AS&D Insurance?” That heading is in large, bold font. 

The final of seven bullet points under the heading reads: “Loss

cause by or resulting from an Insured Person being Intoxicated or

under the influence of any narcotic unless administered on the

advice of a Physician.” (DE I 140.) The SPD plainly, clearly,

and conspicuously informs the reader of the intoxication

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Plaintiff suggests that Defendant has failed to 8

establish that Hunt was ever given a copy of the SPD, and points

to 29 U.S.C. 1022(a), which requires that “[a] summary plan

description of any employee benefit plan shall be furnished to

participants and beneficiaries.” Baker Hughes maintains that

it’s workplace is an entirely “paperless environment” and that

the SPD was readily available to all employees on the internet.

Plaintiff presents no legal authority that suggests this

mechanism fails to satisfy section 1022(a)’s “shall be furnished”

requirement.

24

exclusion.

8

In sum, Chubb/Federal’s determination that the

intoxication/narcotics exclusion is valid and enforceable is not

unreasonable and is entitled to deference. Even under a de novo

standard of review, Chubb/Federal’s determination would stand,

because it is a correct application of the law to the facts of

this case. Brown does not separately challenge Chubb/Federal’s

factual determination that the intoxication exclusion bars

recovery for Mr. Hunt’s accident. Therefore, Chubb/Federal is

entitled to summary judgment on the ground that no benefits are

due under the policy.

D. Plaintiff’s Status as a Beneficiary Under the Policy.

Defendant argues that, even if benefits were due under the

policy, Chubb/Federal properly concluded that Plaintiff would not

be entitled to benefits because she was not designated in writing

as a beneficiary, nor does she otherwise qualify as a beneficiary

under the Domestic Partner provision. Plaintiff contends that

she was properly designated in writing as a beneficiary and, in

the alternative, that she should be deemed Hunt’s “Domestic

Partner” for purposes of the policy.

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1. Defendants’ Argument that Plaintiff Cannot Have

Her Cake and Eat it Too.

Defendant argues that Plaintiff should not be permitted to

argue for the invalidity of the narcotics exclusion endorsement

while, at the same time, arguing for the validity and

applicability of the Domestic Relations endorsement. This

argument is totally misplaced. The reasonable expectations

doctrine is a one-way street that allows the insured to challenge

the validity of exclusionary clauses. The doctrine has no

applicability to non-exclusionary policy language. 

2. Did Hunt Properly Designate Plaintiff as His

Beneficiary In Writing Under the Policy?

Defendant asserts that Chubb/Federal properly determined

that Hunt had not designated Plaintiff as a beneficiary for

purposes of the Policy. The pertinent policy language provides:

Beneficiary

The policy is hereby amended as follows

(1) Under the Contract Form 44-01-1060 (Ed. 6/96), Section VII Common

Policy Conditions is amended by deleting the Beneficiary provision in its

entirety and replacing it with the following. 

The Loss of Life benefit will be paid to the beneficiary designated by the

Insured Person. Loss of Life benefits payable due to the death of the

Insured Person’s spouse or Dependent Child or Children will be paid to

the Insured Person, absent any beneficiary designation by such spouse or

Dependent Child or Children. All beneficiary designations must be in writing

and filed with the Policyholder. 

All other Benefit Amounts are paid to the Insured person, unless otherwise

directed by the Insured Person or the Insured Person’s designee. 

If the Insured Person has not chose a beneficiary, or if there is no

beneficiary alive when the Insured Person dies, we will pay the Benefit

Amount to the first surviviing class in the following order:

(a) the Insured Person’s spouse;

(b) in equal shares to the Insured person’s surviving children;

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(c) in equal shares to the Insured Person’s surviving parents;

(d) in equal shares to the Insured Person’s surviving brothers and sisters;

(e) to the Insured Person’s estate

All other terms and conditions of the policy remain unchanged.

(DE H 0050.)

Plaintiff suggests that Chubb/Federal reads the writing

requirements in these two provisions too narrowly and that any

writing “filed with the Policyholder” indicating Hunt’s intent to

designate Plaintiff as his beneficiary would suffice under the

plain language of the Policy. Specifically, Plaintiff points out

that Hunt designated Plaintiff as his beneficiary for purposes of

Baker Hughes’ pension benefit plan and indicated that he and

Plaintiff were “married” on Baker Hughes’ “Employee Data Sheet.” 

Plaintiff was also designated as Hunt’s beneficiary in Hunt’s

will.

In support of her assertion, Plaintiff cites Liberty Life

Assurance Co. of Boston v. Kennedy, 358 F.3d 1295, 1298 (11th

Cir. 2004). In that case, the Eleventh Circuit considered a

beneficiary designation dispute in the context of an ERISA life

insurance plan held by Clint Kennedy. In 1988, while the insured

was married to his first wife, Barbara, Mr. Kennedy named his

then-wife Barbara as the sole beneficiary of the insurance policy

on an approved form. In 1991, when the couple divorced, they

executed a settlement agreement in which Mr. Kennedy agreed to

maintain his employer-sponsored life insurance, with Barbara

Kennedy named as trustee for their children as beneficiaries of

50% of the total death benefits. However, the agreement allowed

Mr. Kennedy to reduce the children’s share to 18.75% each if he

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remarried. The divorce agreement did not obligate Mr. Kennedy to

keep his first wife as a beneficiary. In 1993, after getting remarried, Mr. Kennedy executed a will that included the following

provision:

...I hereby give and bequeath all the proceeds of life

insurance provided to me by my employer to the

following persons:

(a) To my wife Mary Beth Kennedy, one-fourth (25%)

outright;

(b) To each of the two (2) children of my first

marriage, Bridget and Presley, or their living lineal

descendants, per stirpes, three-sixteenths (18.75%)

respectively;

(c) To each of the two (2) children of my second

marriage, Katherine and William, or their living lineal

descendants, per stirpes, three-sixteenths (18.75%)

respectively; provided

The Eleventh Circuit agreed with the district court that the

will could serve as an alternative beneficiary designation, after

closely examining the language in the policy’s beneficiary

designation provision: 

Change of Beneficiary. An employee may change the

Beneficiary. Any change requires acceptable written

notice to the Policyholder. The notice can be on forms

approved by the Policyholder. The change shall be filed

with the Company and will take effect from the date the

employee signed the notice. If the notice is not

signed, it will be void. The employee does not have to

be living at the time of such filing.

Liberty Life Assurance Co. of Boston v. Kennedy, 228 F. Supp. 2d

1367, 1374 (N.D. Ga. 2004)(emphasis added). The Eleventh Circuit

noted the use of the permissive language “can be on forms

approved by the policy holder” rather than “shall be,” reasoning

that this permitted the use of alternative forms. The Kennedy

court also emphasized the language allowing posthumous

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designations. This, the court reasoned, suggested that a will

would be an appropriate manner of designating a beneficiary.

Here, in contrast, the policy language is almost totally

devoid of detail with respect to the manner by which a

designation must be made. Under normal circumstances, a

reviewing court would examine whether Chubb/Federal’s conclusion

that Plaintiff was not designated as the beneficiary in writing

is supported by the record. The problem here is that both

parties appear to be reading more into Chubb/Federal’s

beneficiary ruling than is warranted. The November 23, 2004

letter relies almost exclusively on the exclusionary clause in

determining that Plaintiff is not entitled to benefits under the

Policy. The following two paragraphs of the fourteen-page letter

address the beneficiary issues:

Notwithstanding the application of the Intoxication And

Narcotics exclusion, Federal furthermore cannot

conclude as a matter of law that Ms. Brown qualifies as

a Domestic Partner and thereby a Beneficiary under the

policy. Mr. Hunt did not designate Ms. Brown as a

Domestic Partner “in writing at enrollment,” and the

issue is subject to challenge by Mr. Hunt’s children. 

If Ms. Brown does not qualify as a Domestic Partner,

and thereby the primary Beneficiary, then Mr. Hunt’s

children would be the Beneficiaries and they would

share equally the proceeds of the policy. 

We conclude that even if coverage existed, Ms. Brown

may not qualify as a Beneficiary under the policy as

the issue could be contested by the children of Mr.

Hunt. If coverage otherwise existed, Federal would be

obligated to interplead the policy benefits and allow

the interested parties to litigate the issue.

(PE 2 at 8 (emphasis added).) Given the state of the record on

these issues and the fact that Chubb/Federal’s denial is

supportable on other grounds, in is neither necessary or

appropriate to “review” Chubb/Federal’s alternative reasoning for

reasonableness. The same problem arises with respect to the

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“Domestic Partner” determination. Chubb/Federal has yet to

actually deny Plaintiff’s status as Hunt’s Domestic Partner.

They merely suggested that they might need to interplead other

parties prior to making such a determination. Because there is

no basis for coverage based upon the narcotics and intoxication

exclusion and because the domestic partner/written designation

issue was not thoroughly briefed or argued by the parties, the

district court declines to issue a ruling on this alternative

ground. 

V. CONCLUSION

For the reasons set forth above, Defendants’ motion for

summary judgment is GRANTED.

SO ORDERED

Dated: May 17, 2006 /s/ OLIVER W. WANGER

OLIVER W. WANGER

United States District Judge

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