Opinion ID: 2843999
Heading Depth: 2
Heading Rank: 1

Heading: Interpretation of the Policy and Missouri Law

Text: The ERISA plan for Liu’s employer granted LINA “the authority, in its discretion, to interpret the terms of the Plan documents, to decide questions of eligibility for coverage or benefits under the Plan, and to make any related findings of fact.” When an ERISA plan grants the plan administrator discretion to interpret a plan, we generally review the interpretation and the resulting grant or denial of benefits only for an abuse of discretion. See Johnson v. United of Omaha Life Ins. Co., 775 F.3d 983, 986–87 (8th Cir. 2014). When the plan administrator is also the claims-paying entity, we take the financial conflict of interest into consideration when conducting our review. See Brake v. Hutchinson Tech. Inc. Grp. Disability Income Ins. Plan, 774 F.3d 1193, 1196 (8th Cir. 2014). The simple fact a conflict exists, however, does not eliminate the administrator’s discretion or change our review of the administrator’s decision to de novo review. See id. (“[W]e take this inherent financial conflict of interest into account in deciding whether an abuse of discretion has occurred.”). Applying this deferential standard, we will not disturb the plan administrator’s decision “if it is reasonable, that is, supported by substantial evidence . . . [which] means ‘more than a scintilla but less than a preponderance.’” Darvell v. Life Ins. Co. of N. Am., 597 F.3d 929, 934 (8th Cir. 2010) (citations omitted). The reformed plan language as quoted above precludes the insurer from relying on a “statement” in an “instrument” unless a copy of that instrument is provided to -8- the insured. The plan also states, “In the event of death or legal incapacity, the beneficiary or representative must receive the copy.” In light of this language and the absence of any express plan language requiring that the copy be provided to the insured prior to death, we conclude it was reasonable for LINA to find that delivery of the application to Huang during the claims process satisfied the plan language. Huang was Liu’s personal representative as well as the beneficiary under the policy. Huang nevertheless argues that the plan language requiring LINA to furnish a copy of the application to the representative or beneficiary is a duty in addition to, rather than a substitute for, the duty to furnish a copy to the insured himself prior to his death. To support this argument, Huang raises two related points. We find neither sufficient to show that LINA’s interpretation is unreasonable. First, Huang argues LINA interpreted only the original plan language, not the reformed plan language, and as such, there is no underlying decision to which we must defer. Had the district court’s reformation under Count 1 effected a material change to the language at issue in the present dispute, we might agree. The change in the plan language, however, merely replaced the word “claimant” with the word “insured” as noted above. Using either the reformed or the original language, the next sentence in the plan permitted delivery of the application to a “beneficiary or representative.” We, therefore, do not view the reformation as material to LINA’s interpretation of the particular language at issue in this appeal. This reformation of the plan language does not permit us to amend our standard of review. Second, Huang argues that LINA’s interpretation of the plan language fails to comport with Missouri law, the purpose of the disclosure requirement, and caselaw from other states interpreting similar requirements. Specifically, Huang notes that ERISA does not preempt otherwise generally applicable state insurance law directed towards insurance companies and regulating the business of insurance. See, e.g., United of Omaha v. Bus. Men’s Assurance Co. of Am., 104 F.3d 1034, 1040–41 (8th -9- Cir. 1997) (discussing application of the “savings clause” of 29 U.S.C. § 1144(b)(2)(A), which limits the scope of ERISA preemption). And, Huang cites Missouri Revised Statutes § 376.697(3) and Johnson v. Prudential Life Ins. Co., 519 S.W.2d 111 (Tex. 1975), for the proposition that delivery of an application to an insured must occur prior to the insured’s death. According to Huang, the disclosure requirement is intended to permit an insured to correct errors that might later defeat coverage. Relying on Johnson, Huang asserts that LINA’s interpretation of the plan unfairly permits insurers to catch unsuspecting policyholders by waiting silently, until the policyholder has died, to comb through the application for statements that might defeat coverage. See Johnson, 519 S.W.2d at 113 (“It has often been held that it is the underlying legislative intention to require that the insured have the material terms of the contract at hand during his lifetime in order that he might examine and correct any misrepresentations which have been made the basis of the insurance coverage.”). Looking first at section 376.697(3), we conclude the statute does not support Huang’s argument. Rather, section 376.679(3) illustrates why LINA’s interpretation of the plan is reasonable. The relevant language of section 376.697(3) provides, “no statement made by any person insured shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to such person or, in the event of death or incapacity of the insured person, to his beneficiary or personal representative.” (Emphasis added). Use of the word “or” plainly sets off delivery of the instrument to the representative as a permissible alternative duty, not merely as an additional duty. The plan language, in contrast, sets forth the duty to furnish the instrument in two separate sentences without use of the conjunction “or.” Accordingly, the plan language at least arguably is ambiguous as to whether the duty to provide the instrument to the representative is an alternative duty or an additional duty. Given this arguable ambiguity, LINA exercised its discretion and interpreted the plan in a manner consistent with the statutory language. -10- Further, it is important to note that LINA indicated in its initial denial letter that Liu had completed the application completely and accurately. Liu did not receive his cancer diagnosis until after he submitted his application, and LINA at no time alleged that Liu’s application itself contained any coverage-defeating statements. Therefore, Huang’s policy argument, which is based on the need for an applicant to receive and review his own statements to ensure the absence of errors, lacks any real application in this case. Huang seeks to exclude reliance on the application in an effort to prevent LINA from relying upon the disclosure duty; she does not seek to prevent LINA from relying on any statement Liu made in his application. Because the express statutory language in Missouri plainly sets forth delivery of the instrument to the beneficiary as an alternative, rather than an additional duty, and because Huang’s public-policy/legislative-intent argument is contrary to the plain language (and inapplicable to the present facts), we reject her arguments. While her arguments are not uncompelling in the abstract, they cannot defeat the plain language of the statute. At a minimum, they cannot establish that LINA abused its discretion when interpreting the plan and denying benefits.