Petition for Writ of Certiorari — UNUM Life Ins. Co. of America v. Ward
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Supreme Court, U,8,
FILED
it 971868 way 201998
oem
In THE
Supreme Court of the United States
OCTOBER TERM, 1997
UNUM LIFE INSURANCE COMPANY OF AMERICA,
y. Petitioner,
JOHN E. WARD,
Respondent.
Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Ninth Circuit
PETITION FOR A WRIT OF CERTIORARI
Of Counsel:
TAMARRA T. RENNICK
Litigation Counsel
UNUM LIFE INSURANCE
COMPANY OF AMERICA
2211 Congress Street
Portland, ME 04122
(207) 770-2211
LESLEY C. GREEN
RUSSELL G. PETTI
BANNAN, GREEN &
FRANK LLP
555 South Flower Street
44th Floor
Los Angeles, CA 90017
(213) 362-1177
Davip L. BACON
Counsel of Record
BENJAMIN I. DELANCY
CHARLES M. DYKE
THELEN, MARRIN, JOHNSON
& Bripces LLP
833 So. Grand Avenue
84th Floor
Los Angeles, CA 90071
(213) 621-9800
Attorneys for Petitioner
UNUM Life Insurance
Company of America
WILSON - EPEsS PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001
QUESTIONS PRESENTED
1. Whether, in an opinion expressly acknowledging a
circuit conflict—indeed, one affecting eight circuits—the
Ninth Circuit erred in holding that a state law (the
“notice-prejudice” rule) need not satisfy all three Mc-
Carran-Ferguson Act criteria for the “business of insur-
ance” in order to be saved from preemption under ERISA.
2. Whether the Ninth Circuit—contrary to the law in
nine other circuits—erred in holding that a state law
survives ERISA preemption even though it conflicts not
only with ERISA’s requirement that fiduciaries administer
all plans “in accordance with” their written terms, but
also with ERISA’s exclusive civil enforcement scheme by
expanding the remedies beyond those expressly provided
for in the Act.
3. Whether—also contrary to the law in other circuits
—the Ninth Circuit erred in holding that ERISA does not
preempt a state law (one incorporating agency principles)
even though it conflicts not only with ERISA’s regulation
of initial claims filing and processing and its allocation of
fiduciary responsibility, but also with the remedies pro-
vided in its exclusive civil enforcement scheme.
(i)
ii
PARTIES
The petitioner is UNUM Life Insurance Company of
America (“UNUM”). The respondent is John E. Ward.
Pursuant to Rule 29.6 of the Rules of the Supreme
Court, petitioner states that UNUM Corporation is the
parent of UNUM. UNUM Corporation has two non-
wholly owned subsidiaries, Boston Compania Argentina
de Seguros S.A. and UNUM Delaware Company. UNUM
Life Insurance Company of America has one non-wholly
owned subsidiary, SP Administrator, LLC.
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED oo ceeeccecceesseseesees i
nel G2 ak le a Ra a aa ii
I I as i 2 1
i a a a a 1
STATUTES AND REGULATIONS INVOLVED... 1
STATEMENT OF THE CASE cece 2
ee 2
B. The District Court Proceeding ............. 4
C. The Ninth Circuit’s Decision ......... 5
REASONS FOR GRANTING THE WRIT... 9
I. THE NINTH CIRCUIT’S ERISA PREEMP-
TION DECISION CONFLICTS DIRECTLY
WITH HOLDINGS IN THE THIRD, FIFTH,
SEVENTH, EIGHTH, TENTH AND ELEV-
EE Ue ee EE 9
Il. THE NINTH CIRCUIT’S PREEMPTION DE-
CISION CONFLICTS DIRECTLY WITH NINE
OTHER CIRCUITS WHICH ENFORCE WRIT-
TEN PLAN PROVISIONS SUCH AS NOTICE
Ill. THE NINTH CIRCUIT’S PREEMPTION DE-
CISION COMPLETELY DISRUPTS THE
UNIFORMITY OF LAW INTENDED
aac Set 16
A. Disruptions Caused By The “Notice-
Prejudice” Rule ..................... leon 18
IV.
iv
TABLE OF CONTENTS—Continued
B. Disruptions Caused By The “Elfstrom”
TD ccccrecimascistnentdhninncecetcnadinegieesemmnenacictorbennimatcinens
THE NINTH CIRCUIT’S PREEMPTION DE-
CISION IS AN ATTEMPT TO CIRCUMVENT
THIS COURT’S CONTROLLING PILOT LIFE
te ee
THE QUESTIONS PRESENTED BY THIS
PETITION HOLD IMPORTANT IMPLICA-
TIONS FOR ERISA PLANS THAT SHOULD
BE ADDRESSED BY THIS COURT ...............
CORICIAIEIOIN necnenceescceceeccnsnsecvscoesntntiasinindentnensccosisannennnte
APPENDIX
St eee
Ee eee a ee A
Order of the Court of Appeals denying Petition for
Rehearing, with Suggestion for Rehearing en Banc,
entered March 23, 1998 ........... ~
Order of the District Court granting Summary
Judgment, filed August 8, 1995.
Declaration of John A. Houser, III And Portions
of Exhibits In Support of Motions for Summary
Judgment, filed June 26, 1995 ................
Exhibit Portions (MacQuarrie and Ward Deposi-
tion Excerpts) to Declaration of Jeffrey P. Smith,
Bo |} ars Peat eS eee
District Court Complaint, filed September 19, 1994..
18
S
la
27a
77a
v
TABLE OF AUTHORITIES
CASES
Accardi v. Davidson, 469 U.S. 899 (1984)...
Anschultz v. Connecticut General Life Ins. Co.,
850 F.2d 1467 (11th Cir. 1988) 00000
Belasco v. W.K.P. Wilson & Sons, Inc., 883 F.2d
NS ES ee ee
Boggs v. Boggs, 117 S. Ct. 1754 (1997)
Boyer v. Douglas Components Corp., 986 F.2d 999
SRE See Se eer ee ee.
Brazinski v. Amoco Petroleum Additives Co., 6
3. EY ere
Brezan v. Prudential Insurance Co. of America,
507 F. Supp. 962 (E.D.Pa. 1981) .
Brewer v. Lincoln Nat'l Life Ins. Co., 921 F.2d 150
EE ae ee aE
Burnham v. Guardian Life Ins. Co., 873 F.2d 486
(1st Cir. 1989) .
California Div. of Labor ‘Standards Enforcement
v. Dillingham Const., 117 S. Ct. 832 (1997)...
Cefalu v. B.F. Goodrich Co., 871 F.2d 1290 (5th
ERE a a Se ee
Central States, Southeast and Southwest Areas
Pension Fund v. Mississippi Warehouse Corp.,
853 F. Supp. 1053 (N.D. Ill. 1994)
Christie v. K-Mart Corp. Employees Retirement
Pension Plan, 784 F. Supp. 796 (D. Kan. 1992) ..
CIGNA Healthplan v. Louisiana, 82 F.3d 642 (5th
Cir.), cert. denied, 117 S.Ct. 386 (1996)...
Cisneros v. UNUM Life Ins. Co. of America, 134
fF ne ee
Coleman v. Nationwide Life Ins. Co., 969 F.2d 54
(4th Cir. 1992) (same), cert. denied, 506 U.S.
ET ee ee oe
Curtis-Wright Corp. v. Schoonejongen, 514 U.S.
oS Sno: es
Davies v. Centennial Life Ins. Co., 128 F.3d 934
RE es as ee
Davison v. Cook, 564 F. Supp. 225 (E.D. Va.
1983), aff'd. mem., 784 F.2d 10 (4th Cir. 1984).
Dawes Mining Co. v. Callahan, 246 Ga. 531
0
vi
TABLE OF AUTHORITIES—Continued
Page
DeBruyne v. Equitable Life Assurance Soc., 920
2° By, Vt Se ) ee 10
Dedeauz v. Pilot Life Ins. Co., 770 F.2d 1311 (5th
Cir. 1985) soveesenesenusenneessnnetsnsesnnessensesnnecssnanenstennanssstts 8
District of Columbia v. The Greater Washington
Bd. of Trade, 506 U.S. 125 (1992) .....................- 20
Doe v. Blue Cross & Blue Shield United, 112 F.3d
ON Lt Sb . __, / Sane ne 13
Edwards v. Great-West Life Assur. Co., 20 F.3d
Oy. + | | emer anen Se een 14
Elfstrom v. New York Life Ins., Co., 67 Cal.2d 503
CID a vscccrneecnnsnnteeteinetiindeasiatiiarianctiacsessiieimasiisaentl 5, 18, 22
First National Bank of Anson County v. Gatewood,
eens Ts BS 28
Fort Halifax Packing Co. v. Coyne, 482 US. 1 om
| TTT 2) Wa ES SS
Group Life & Health Ins. Co. v. Royal Drug Co.,
P . ie | Sa eae 6,9
Heath v. Varity Corp., 71 F.3d 256 (7th Cir. .
Ta a ree mk eee
Howard v. Gleason Corp., 910 F.2d 1154 (2d Cir ‘
| ener PT ee ee
Hunt v. Hawthorne Associates, Inc., 119 F.3d 888
CRD GR. BOT anccsncctce ci cccsenctnsneescnsdctrnsnincesstnmnes 14
Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 =
| ee ae wees en
Insurance Bd. v. Muir, 819 F.2d 408 (3d Cir “s
DODD scicnictliickicncncoeephictnintinthissinictnehiilhncbecsitejebatectindentiimantiiae
Jass v. Prudential Healthcare Plan, Inc., 88 F.3d
oF 2. 9 A eee 18, 18, 20
Justice v. Bankers Trust Co., Inc., 607 F. Supp.
I ES 22
Kelley v. Sears, Roebuck & Co., 882 F.2d 453 (10th
es Tees a 10
Kennedy v. System One Holdings, Inc., 835 F
Supp. 947 (S.D. Tex. 1998) .....-------ee 15
Kinkead v. Southwestern Bell Sick. & Acci. Corp.
Disability Benefit Plan, 111 F.3d 67 (8th Cir. ”
gp eS Se eee oe ee
Laws v. Calmat, 852 F.2d 430 (9th Cir. 1988) ........ 16
vii
TABLE OF AUTHORITIES—Continued
Page
Massachusetts Mutual Life Ins. Co. v. Russell, 478
SS 8, | er eee ra ee 16, 20
McKinsey v. Sentry Ins. Co., 986 F.2d 401 (10th
EEE SE ae Le te 22
McMahan v. New England Mut. Life Ins. Co., 888
F.2d 426 (6th Cir. 1989) 00000 10
Member Services Life Ins. Co. v. Amer. National
Bank and Trust Co., 130 F.3d 950 (10th Cir.
eee se. TT Nee 14
Mertens v. Hewitt Associates, 508 U.S. 248
FIAT RE SE Coal oes TUS ee Sere es 11
Metropolitan Life Ins. Co. v. Henry, 217 Ind. 38
FRR OR EA PCRs ee ee ee SPE Cee 28
Metropolitan Life Ins. Co. v. Massachusetts, 471
— Ee ne See BES 6
Nachwalter v. Christie, 805 F.2d 956 (11th Cir.
EAE ee Se ae te 14
National Conf. of Blue Cross-Blue Shield Plans v.
Travelers Ins. Co., 514 U.S. 645 (1996) 11, 16, 20, 28
Nazay v. Miller, 949 F.2d 1823 (3d Cir. 1991)... 13
Perkins v. Time Ins. Co., 898 F.2d 470 (5th Cir.
EEE TO REE ee a TEL es se eee 20
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41
SS EE eT A 6, 12, 18, 16, 17
Pohl v. National Benefits Consultants, Inc., 956 ;
F.2d 126 (7th Cir. 1992) 00 12, 14
Roe v. General American Life Ins. Co., 712 F.2d
Sr 13
Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983). 12, 26
Smith v. Jefferson Pilot Life Ins. Co., 14 F.3d 562
Et IRE ere ee ae eT ee ee 13
Tiger v. AT&T Tech. Plan for Employees’ Pen-
Tingle v. Pacific Mut. Ins. Co., 996 F.2d 105 (Sth
AS Seen ete SER A ET aT Tal Ee 7,9, 10
Turrill v. Life Ins. Co. of North America, 753 F.2d
SS FR Sd Ls ee 8,19
Vaca v. Sipes, 386 U.S. 171 (1967) ne. - 8
vili ~
TABLE OF AUTHORITIES—Continued
Page
Varsic v. United States Dist. Ct., 607 F.2d 245
eS a ae 26
White v. Jacobs Engineering Group Long Term
Disability Plan, 896 F.2d 344 (9th Cir. 1990)... 15
Williams v. UNUM Life Ins. Co. of Am., 118 F.3d
OR, OR Ry RR enh Eee e ee eee 10
STATUTES AND REGULATIONS
0 Oe Bh eciitticntninanmmnnmnitiiie 2
ERISA § 2(a), 29 U.S.C. § 1001 (a) ........................ 29
ERISA § 3(16) (A) (B), 29 U.S.C. § 1002(16) (A) .. 2
ERISA §§ 401-414, 29 U.S.C. §§ 1101-1114 ............... 12
ERISA § 402(a) (2), 29 U.S.C. § 1102(a) (2) ......... 13
ERISA § 404(a) (1) (D), 29 U.S.C. §§ 1104(a) (1) ;
| REESE ee aeRO Ferny \ a deere
ERISA § 502(a) (1) (B), 29 U.S.C. § 1132(a) (1)
EE ee eee eae 7, 8, 18, 24
ERISA § 608, 29 U.S.C. § L1BB 2... ccecceneeeecceeeene 2
ERISA § 504(a), 29 U.S.C. § 1144(a) ...................... 5, 8, 12
ERISA § 504(b) (2) (A), 29 U.S.C. § 1144(b) (2) ihe
OD | cs iia, inci isteialiasisitenditiiinintiiiiantilinlnititibislencaittidiniatines ‘
ERISA § 504(b) (2) (B), 29 U.S.C. § 1144(b) (2) Pe
OO ih Siiccshi csttiethintalichnittinnsitencsctitlandibiiileaiie
BD C.F. B BESOBEB-1 CD) ~..2002200000000-000cccrcceesnesrcccessess 15
29 C.F.R. § 2560.508-1 (0) =~ (GD) ooo cccccccccccceneeeenenenes 25
29 C.F.R. § 2560.50B-1 (0) = (Gf) -....-.-ccccccccecccneneennnees 25
29 C.P.R. § 2660.503-1(G) (2) ..........-ccccccceeceeceeecnennnes 25
OTHER AUTHORITIES
13A George J. Couch et al., Couch Cyclopedia of
Insurance Law § 49.49 at 276-77 (2d ed. 1982).. 27
In THE
Supreme Court of the United States
OcToBEeR TERM, 1997
No.
UNUM Lire INsuRANCE CoMPANY OF AMERICA,
» Petitioner,
JouHNn E. Warp,
Respondent.
Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Ninth Circuit
PETITION FOR A WRIT OF CERTIORARI
Petitioner, UNUM Life Insurance Company of America
(“UNUM”), respectfully submits that a writ of certiorari
should issue to review the judgment and opinion of the
United States Court of Appeals for the Ninth Circuit in
this case.
OPINIONS BELOW
The opinion of the Court of Appeals is reported at 135
F.3d 1276 (9th Cir. 1998), and is reprinted in the Ap-
pendix (“App.”) at la to 25a. The Court of Appeals’
denial of UNUM’s petition for rehearing, with a sugges-
tion for rehearing en banc, entered on March 23, 1998, is
unreported. App. at 26a. The District Court's opinion
granting summary judgment to UNUM (App. at 27a to
33a) is unreported.
2
JURISDICTION
The Court of Appeals’ order denying UNUM'’s petition
for rehearing, with a suggestion for rehearing en banc, was
entered on March 23, 1998. This petition is being timely
filed within 90 days of that date. This Court has jurisdic-
tion pursuant to 28 U.S.C. § 1254(1).
STATUTES AND REGULATIONS INVOLVED
This case involves the statutes and regulations set forth
at App. 99a to 108a.
STATEMENT OF THE CASE
A. Factual Background
In February of 1983, UNUM issued a group long-term
disability insurance policy to fund an employee welfare
benefit plan (the “Plan”) sponsored by Management
Analysis Company (“MAC”), an employer with multi-
state operations. App. at 59a, 47a. Respondent John
Ward worked for MAC in California, serving as its Presi-
dent and Chief Executive Officer (“CEO”). App. at 2a,
78a, 83a to 86a. The Plan is covered by the Employee
Retirement Income Security Act (“ERISA”). App. at 2a.
While the employer-sponsor served as Plan Administrator,’
UNUM performed not only the Plan’s initial claims-
handling and payment functions, but also the fiduciary
review procedure for denied claims required by ERISA.’
The Plan explicitly stated that the employer serves as
Plan Administrator and acts on its own behalf or as an
agent for its employees, and not as UNUM’s agent. App.
at 44a.
A participant in the Plan since its inception in 1983,
Ward concedes that he was aware of the Plan and had
received from MAC in 1983 a certificate of coverage con-
1 App. at 18a; ERISA § 3(16)(A), (B), 29 U.S.C. § 1002(16)(A),
(B).
2 App. at 39a; ERISA § 503, 29 U.S.C. § 1133.
3
taining the Plan’s summary plan description. App. at 2a.
This certificate described not only the Plan’s benefits and
requirements for eligibility and participation, but also the
procedures and deadlines Ward had to follow in submit-
ting claims to UNUM. App. at 4la to 43a. As CEO,
Ward met annually with the company’s human resources
division to review MAC’s insurance plans, including the
Plan, and five months before his resignaticn he attended
a company-wide meeting relating to MAC’s benefits at
which a UNUM representative gave a summary of the
Plan’s benefits. App. at 32a to 33a.
Ward served as President and CEO of MAC until May
8, 1992, when he resigned upon the Board of Directors’
request over financial concerns about a particular com-
pany project. App. at 27a. Ward asserts that by May
of 1992, he had begun to experience a disabling condition,
and that by December of that year he had received a
medical diagnosis of his diabetes and alleged disability. In
early 1993, he applied for and received state disability
benefits, and alleges that he contacted MAC’s human
resources division to discuss extension of his COBRA con-
tinuation insurance. In July of 1993, he received a Social
~ Security Determination that he was eligible for Social
Security benefits, a copy of which he sent to the human
resources division. App. at 28a.
Ward, however, did not submit a claim for plan bene-
fits until April, 1994. UNUM received Ward’s notice and
proof of claim form on April 11, 1994, nearly two years
after the onset of his claimed disability. This was UNUM’s
first actual notice of the claimed disability. App. at 38a.
The Plan’s written notice and proof of claim provisions
required a participant to submit to UNUM written notice
of claim for plan benefits within 30 days of the date a
disability starts, if possible, and a written proof of claim,
at the latest, one year and 180 days after the onset of
disability. App. at 42a to 43a. Ward’s notice of claim
4
was untimely by nearly 15 months, and his written proof
of claim was submitted nearly five months after the Plan’s
last deadline. App. at 5a. Accordingly, no benefits were
“due” under the Plan’s written terms.
Ward asserted, however, that he did not know about
the “availability” of the Plan until April of 1994, when
he claims he discovered his certificate of coverage among
papers in his safety deposit box. App. at 3a. Ward also
contended that MAC should be considered the “agent” of
UNUM notwithstanding that MAC was the Plan Adminis-
trator and the Plan expressly stated that MAC was not
UNUM'’s agent; that MAC purportedly knew he was “dis-
abled” by 1992 or 1993; and that this claimed knowledge
should not only be imputed to UNUM but also free him
from the Plan’s written requirements of timely written
notice and proof of claim to UNUM. App. at 7a to 8a.
After reviewing Ward’s claim for plan benefits and sup-
porting materials, UNUM determined that he was inelig-
ible because he did not submit his written claim within the
Plan’s written time limits. UNUM notified him of its deci-
sion in April of 1994; he, in turn, requested a review.
App. at 29a, 90a to 95a. In the ERISA-required fiduciary
review procedure for denied claims, UNUM upheld the
decision to deny plan benefits. App. at 96a to 98a.
B. The District Court Proceeding
On September 15, 1995, Ward filed sut against UNUM
and the Plan in United States District Court for the South-
ern District of California to recover plan benefits under
ERISA. App. at 77a to 98a. He did not assert a claim
against MAC. On August 8, 1995, the District Court
granted UNUM and the Plan summary judgment under
ERISA. App. at 27a to 33a. The District Court held that
the Plan’s written proof of claim provision required that
proof of claim be filed with UNUM in writing within one
year and 180 days after the onset of disability. and that
Ward failed to comply with this provision. Additionally,
5
the District Court rejected Ward’s arguments that Califor-
nia’s common-law “Elfstrom” rule* survived ERISA pre-
emption and governed the payment of plan benefits. App.
at 30a to 33a. The “Elfstrom” rule, if appliceble, would
make MAC the “agent” of UNUM, imputing to UNUM
any knowledge which the employer had of Ward’s disabil-
ity and, also in Ward’s view, requiring the payment of
benefits regardless of the fact that the Plan’s written proof
of claim provision had been violated. Ward appealed.
C. The Ninth Circuit’s Decision
On appeal of the summary judgment, the Ninth Circuit
reversed the District Court's decision on two grounds, the
“Elfstrom” rule and California’s “notice-prejudice” rule.
The Ninth Circuit’s holdings on both rules warrant a
plenary review.
The Ninth Circuit agreed that Ward failed to satisfy
the Plan’s unambiguous written proof of claim provision.
It then addressed Ward’s contention that the “notice-
Prejudice” rule would preclude UNUM—the claims re-
view fiduciary—from upholding the claim denial unless it
could establish “actual prejudice” from the failure to
comply with the proof of claim provision. The Ninth
Circuit held that California’s common-law “notice-preju-
dice” rule was within the scope of ERISA preemption as a
state law which “related to” an employee benefit plan.
ERISA § 514(a), 29 U.S.C. § 1144(a). It held, how-
ever, that the rule was “saved” from ERISA’s preemption
because it was a state law regulating insurance, ERISA
§514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A), and
therefore could be applied to Ward’s claim for plan bene-
fits. In so doing, the Ninth Circuit followed its earlier
decision in Cisneros v. UNUM Life Ins. Co. of America,
134 F.3d 939 (9th Cir. 1998) (“Cisneros”), App. at Sa
* The rule takes its name from Elfstrom v. N
Co., 67 Cal.2d 503, 505 (1967). . en See ae ap,
6
to 6a, a case in which a petition for writ of certiorari is
being filed concurrently herewith.*
In Cisneros, the Ninth Circuit had concluded that under
Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S.
724, 744 (1985), and Pilot Life Ins. Co. v. Dedeaux, 481
U.S. 41, 48-50 (1987), ERISA’s “saving” clause may be
applicable only if the state law clears two hurdles: a
common-sense test that the law be “specifically directed
at the insurance industry, and the “saving” clause require-
ment that the law must “regulate insurance.” 134 F.3d at
944-945. To determine whether the state law regulated
insurance, the Court analyzed whether it satisfies the three
McCarran-Ferguson Act criteria for the “business of in-
surance.” Id. at 945. Under these criteria as articulated
by the Supreme Court, the state law must first have the
effect of transferring or spreading the policyholder’s risk
of loss to the insurer, “an indispensable characteristic of
insurance.” Group Life & Health Ins. Co. v. Royal Drug
Co., 440 U.S. 205, 211-212 (1979). Second, the state law
must be an integral part of the insurance policy relation-
ship between insurer and insured. Third, it must be lim-
ited to entities within the insurance industry. Metropolitan
Life, 471 U.S. at 743; Pilot Life, 481 U.S. at 48-50, Ad-
ditionally, to avoid a conflicts-preemption bar, the state
law—even if it otherwise satisfies the “saving” clause—
must not conflict with one of ERISA’s substantive provi-
siens, including its exclusive civil enforcement scheme.
Pilot Life, 481 U.S. at 51-57.
In Cisneros, the Ninth Circuit found that California’s
“notice-prejudice” rule did not transfer or spread the pol-
icyholder’s risk of loss to the insurer, and thus failed to
satisfy the first McCarran-Ferguson criterion. Finding that
the rule satisfied the last two criteria, the court then held
that ERISA’s “saving” clause would preserve a state
common-law rule even though it did not satisfy all three
criteria. 134 F.3d at 945-946. The Cisneros court ex-
* Respondent has been provided a copy of the petition in the
Cisneros case.
7
pressly acknowledged that its ERISA “saving” clause hold-
ing conflicted with two decisions by the Fifth Circuit,
CIGNA Healthplan v. Louisiana, 82 F.3d 642, 650 (Sth
Cir.), cert. denied, 117 S.Ct. 386 (1996), and Tingle v.
Pacific Mut. Ins, Co., 996 F.2d 105, 108 (Sth Cir. 1993).
It stated: “We recognize that the Fifth Circuit has held
that all three of the McCarran-Ferguson factors must be
satisfied .... We... disagree.” 134 F.3d at 946,
The Cisneros court also rejected UNUM’s arguments,
based on Pilot Life, 481 U.S. at 51-57, that the “notice-
prejudice” rule should nevertheless be preempted under
conflicts-preemption because it conflicted with a number
of ERISA’s key substantive provisions. UNUM pointed
out that the rule would require the payment of plan bene-
fits under circumstances where payment is barred not only
by the Plan’s written terms, but also by ERISA’s fiduciary
responsibility provisions requiring that plans must be ad-
ministered “in accordance with” their written terms, and
its exclusive civil enforcement scheme allowing suit for
benefits only if “due” under those terms. ERISA §§ 404
(a)(1)(D), 502(a)(1)(B), 29 U.S.C. §§ 1104(a)(1)
(D), 1132(a)(1)(B). UNUM also pointed out that the
Cisneros holding would result in situations where a claim
would be granted or denied depending on which state’s
law applied. The Ninth Circuit acknoweldged a direct
conflict between the “notice-prejudice” rule and ERISA,
conceding that the rule caused “a plan's written terms [to
be] altered,” caused “complications and extra burdens” on
plan administration, and made the plan “more difficult to
administer.” Furthermore, it acknowledged that the rule
“differ[ed| markedly” in various states. 134 F.3d at
947 (emphasis added). Nevertheless, the court rejected
UNUM’s argument that ERISA preempted the “notice-
prejudice” rule.
In addition to adopting the “notice-prejudice” rule, the
Ward court held that ERISA did not preempt California’s
8
common-law “Elfstrom” rule® under which the employer,
as administrator of a group insurance plan, is deemed the
‘agent” of the insurer and its knowledge is imputed to the
insurer. Ward thus allowed two state law rules to penetrate
ERISA’s regulatory sphere, in contrast to Cisneros. Sim-
ilarly to the “notice-prejudice” rule, the “Elfstrom” rule
would require the payment of plan benefits under circum-
stances where payment is barred both by the Plan’s written
terms and ERISA’s fiduciary responsibility and civil en-
forcement provisions. The Ninth Circuit nevertheless held
that the rule did not “relate to” an ERISA plan within the
meaning of ERISA’s preemption clause in §514(a). It
based this extraordinary holding on Turrill v. Life Ins. Co.
of North America, 753 F.2d 1322 (Sth Cir. 1985),
which preceded this Court’s 1987 landmark decision in
Pilot Life, supra. App. at 16a to 20a. The Ninth Circuit
inferred that Turrill, a 1985 diversity jurisdiction case,
supported a holding of no ERISA preemption because the
Fifth Circuit had discussed state law agency theory with-
out, as the Ninth Circuit put it, “even hint{ing] that state
agency law is somehow preempted by ERISA.” App. at
18a. This is hardly surprising, given that prior to Pilot
Life the lower courts, including the Fifth Circuit, uni-
formly—but incorrectly—held that ERISA did not pre-
empt such claims. See, e.g., Dedeaux v. Pilot Life Ins.
Co., 770 F.2d 1311 (Sth Cir. 1985), decided by the
same three judge panel as Turrill, reversed by Pilot Life,
supra. Pilot Life in 1987 held that state common-law ac-
tions involving claims processing and the failure to pay
benefits under an insured ERISA plan obviously “relate to”
the plan because they have “‘a connection with or refer-
ence to such a plan.’” It therefore held that ERISA pre-
empted these claims both through the preemption clause
in §514(a) and through the exclusivity of its civil en-
forcement scheme in § 502(a). 481 U.S. at 47-48, 52-57.
It was on this impliedly overruled and discredited Fifth
Circuit authority that the Ninth Circuit relied in adopting
state agency law in a suit for plan benefits.
5 Elfstrom v. New York Life Ins. Co., 67 Cal.2d 503, 505 (1967).
9
REASONS FOR GRANTING THE WRIT
I. THE NINTH CIRCUIT'S ERISA PREEMPTION DE-
CISION CONFLICTS DIRECTLY WITH HOLDINGS
IN THE THIRD, FIFTH, SEVENTH, EIGHTH,
TENTH AND ELEVENTH CIRCUITS.
Once again, the Ninth Circuit has brought itself sharply
into conflict with other Circuits on important federal is-
sues which require unformity nationwide. The ERISA pre-
emption decision on the “notice-prejudice” rule in Ward
and Cisneros creates an acknowledged, direct conflict
among holdings in the Circuits which only this Court can
resolve. The Ninth Circuit's holding has engendered a
similar holding in the Sixth Circuit but squarely conflicts
with the holdings of the Fifth Circuit, which require a state
law to satisfy all three of the McCarran-Ferguson Act fac-
tors for the “business of insurance” in order to be “saved”
from ERISA preemption. CIGNA Healthplan v. Loui-
siana, 82 F.3d 642, 650 (Sth Cir.), cert. denied, 117
S.Ct. 387 (1996); Tingle v. Pacific Mut. Ins. Co. 996
F.2d 105, 108 (Sth Cir. 1993). The Cisneros decision
pe gy poe this direct conflict. 134 F.3d at 946. In
deed, conflict is even more widespread as shown
Tingle’s observation that “(t]he Eleventh, Sixth, Tenth
and Eighth Circuits have all held that a statute's failure
to satisfy one or more of the Metropolitan Life factors
excludes it from the ERISA saving insurance clause.”
996 F.2d at 110. Most recently in Davies v. Centennial
Life Ins. Co., 128 F.3d 934, 940 (6th Cir. 1997), the
Sixth Circuit acknowledged the widening Circuit conflict
as to .hether all three McCarran-Ferguson factors are
required, holding that “no single one is dispositive.” It
followed Cisneros and provided a but see reference to the
Fifth Circuit’s CIGNA decision.
The Ninth Circuit’s holding that the “saving” clause
does not require satisfaction of the first prong of the
McCarran-Ferguson test—the actual spreading or trans-
fer of the of loss—further conflicts with the
of the Third, Seventh, Eighth, Tenth and Eleventh Cir-
10
cuits, all of which have uniformly ruled that state laws
which fail to spread or transfer an insurance policyhold-
er’s risk, an “indispensable characteristic of insurance,”
Group Life & Health Ins. Co. v. Royal Drug Co., 440
U.S. 205, 211-213 (1979), are not saved from preemp-
tion by ERISA § 514(b)(2)(A).°
The Ninth Circuit’s preemption decision not only de-
stroys the national uniform: y of law in plan administra-
tion that is one of ERISA’s chief goals, but also causes
a Circuit split that is certain to widen in the future and
encompass additional state law rules. This Court need look
no further than two companion cases involving petitioner
UNUM for a sampling of what the Ninth Circuit has in
store for ERISA preemption law and ERISA plan spon-
sors. See Cisneros, petition for a writ of certiorari filed
concurrently herewith (the same “notice-prejudice” rule
at issue herein); Williams v. UNUM Life Ins. Co., 113
F.3d 1108, 1113 (9th Cir. 1997) (California’s “rolling
accrual” proof of loss provision (each monthly failure
to pay benefits constitutes a new cause of action) may
void an ERISA plan’s limitation of actions provision).
The Ninth Circuit’s reasoning in both of those cases is
the same as its reasoning in the present case. It was
because of the significant consequences the Ninth and
Sixth Circuits’ new preemption holdings will have on
* Insurance Bd. v. Muir, 819 F.2d 408, 412 (3d Cir. 1987) (state
law which does not affect transfer of risk or satisfy any other
McCarran-Ferguson Act factor is preempted); Tingle, 996 F.2d at
108 (state law which fails to transfer risk is preempted) ; McMahan
v. New England Mut. Life Ins. Co., 888 F.2d 426, 428-30 (6th Cir.
1989) (state law which fails to transfer risk or satisfy third factor
is preempted) ; DeBruyne v. Equitable Life Assurance Soc., 920 F.2d
457, 468-70 (7th Cir. 1990) (same); Brewer v. Lincoln Nat'l Life
Ins. Co., 921 F.2d 150, 153-54 (8th Cir. 1990) (state law which fails
to transfer risk is preempted); cert. denied, 501 U.S. 1238 (1991);
Kelley v. Sears, Roebuck & Co., 882 F.2d 453, 455-56 (10th Cir.
1989) (state law which fails to transfer risk or satisfy second factor
is preempted) ; Anschultz v. Connecticut General Life Ins. Co., 850
F.2d 1467, 1468-69 (11th Cir. 1988) (same).
Il. THE NINTH CIRCUITS PREEMPTION DECISION
CONFLICTS DIRECTLY WITH NINE OTHER CIR-
CUITS WHICH ENFORCE WRITTEN PLAN PRO-
VISIONS SUCH AS NOTICE REQUIREMENTS.
Still another reason supports the granting of a writ of
certiorari. In a direct clash with ERISA’s plain language
and decisions from nine other Circuits, the Ninth Circuit's
adoption of the “notice-prejudice” and “Elfstrom” rules
will allow state common-law claims in one or more states
to void a number of ERISA’s key substantive provisions
and prohibit written plan notice requirements permitted
by ERISA. In so doing, the decision not only destroys
ERISA’s goals of a “uniform body of benefit law” and the
“nationally uniform administration” of plans, National
Conf. of Blue Cross-Blue Shield Plans v. Travelers Ins.
Co., 514 U.S. 645, 657 (1996) (citation omitted) (em-
phasis added) (“Travelers”), but also overlooks signifi-
cant constraints which ERISA, this Court and the other
Circuits have imposed on the adoption of state common-
law principles in the employee benefit field.
As set forth in more detail at pages 8 to 14 of the peti-
tion for a writ of certiorari in Cisneros, ERISA is a “ ‘com-
prehensive and reticulated statute,’ the product of a dec-
ade of congressional study of the nation’s private em-
ployee benefit system.” Mertens v. Hewitt Associates.
508 U.S. 248, 251 (1993) (citation omitted). One of
ERISA’s purposes is to avoid a “multiplicity of regula-
tion”, a “ ‘conflict in ... . law’” and ‘“ conflicting direc-
tives’ ” between federal and state regulatory systems.
Travelers, 514 U.S. at 656-657. ERISA contains a pre-
emption clause in § 514(a) which, among other effects,
12
preempts state laws that “mandate[] employee benefit
structures or their administration,” “prohibit” what is
“permitted” by federal law, “preclude uniform administra-
tive practice,” or provide “alternate enforcement mecha-
nisms.” 29 U.S.C. § 1144(a); 514 U.S. at 657-658, 660.
In striking a balance between competing federal and state
interests, Congress made the administration of both in-
sured and self-funded ERISA plans, including claims
processing, “ ‘exclusively a federal concern.’” Pilot Life
Ins. Co. v. Dedeaux, 481 U.S. 41, 45-46 (1987) (citation
omitted). Congress intended to “minimize[] the need for
interstate employers to administer their plans differently
in each State in which they have employees.” Shaw vy.
Delta Air Lines, Inc., 463 U.S. 85, 105 (1983).
To ensure uniformity of law, Congress enacted a broad
array of national, uniform fiduciary standards to govern
the administration of both self-funded and insured ERISA
plans. ERISA §§ 401-414, 503, 29 U.S.C. §§ 1101-1114,
1133. Indeed, Congress codified federal “trust” principles
in ERISA not merely to ensure “uniformity,” but also to
ensure that certain “plans, such as insured plans, which
do not use the trust form as their mode of funding,” would
be subject to the same exacting standards.’
Additionally, one “of ERISA’s purposes is to protect
the financial integrity of pension and welfare plans by con-
fining benefits to the terms of the plan as written.” Pohl v.
National Benefits Consultants, Inc., 956 F.2d 126, 128
(7th Cir. 1992) (Posner, J.) ERISA’s “written plan
instrument” rule, one of ERISA’s “core functional re-
quirements,” Curtis-Wright Corp. v. Schoonejongen, 514
U.S. 78, 84 (1995), assists in ensuring the nationally
uniform administration of plans. It requires that all
plans—self funded and insured alike—be in writing and
be administered by fiduciaries “in accordance with” their
‘H.R. Rep. No. 533, 93d Cong., Ist Sess. 12 (1973) 2 Legislative
History of the Employee Retirement Income Security Act at 2259
(emphasis added).
13
written terms to the extent not inconsistent with ERISA.
ERISA §§401(a), (b), 404(a)(1)(D), 29 U.S.C.
§§ 1102(a), (b), 1104(a)(1)(D) (emphasis added).
Moreover, ERISA’s exclusive civil enforcement provisions
ensure the same goals, authorizing suit only if benefits are
“due” under those written terms. ERISA § 502(a)(1)(B),
29 U.S.C. §1132(a)(1)(B); Pilot Life, 481 U.S. at
52-57.
Apart from the Ninth Circuit, the Courts of Appeals
have consistently carried forward ERISA’s goal of a uni-
form national body of law to govern plan administration
by holding that ERISA preempts state common-law “no-
tice” rules or “notice” statutes, or state law agency rules,
all of which vary from state to state. The decisions’ ra-
tionale is that these state laws not only “relate to” ERISA
plans, but also conflict either with the sponsor’s freedom
of plan design or the Act’s comprehensive regulatory
scheme. See, ¢.g., Nazay v. Miller, 949 F.2d 1323, 1336-
1337 (3d Cir. 1991) (ERISA preempts “notice-prejudice”
rule with respect to self-funded plan); Howard v. Gleason
Corp., 910 F.2d 1154, 1157-1158 (2d Cir. 1990)
(ERISA preempts state statute requiring a terminated
employee be notified of insurance conversion options) ;
Smith v. Jefferson Pilot Life Ins. Co., 14 F.3d 562, 571
(11th Cir.) (ERISA preempts state statute governing
notice to insured of termination of coverage), cert. denied,
513 U.S. 808 (1994); Doe v. Blue Cross & Blue Shield
United, 112 F.3d 869, 874-875 (7th Cir. 1997) (ERISA
plan’s internal limitations period controls over state stat-
ute); Jass v. Prudential Health Care Plan, Inc., 88 F.3d
1482, 1488-1490 (7th Cir. 1996) (ERISA preempts state
law agency claims related to a denial of plan benefits).
* The plan documents, which include the “contract or other in-
struments under which the plan is established or operate,” encom-
pass group insurance policies. ERISA § 104(a)(1), (b)(2); see
¢.g., Belasco v. W.K.P. Wilson & Sons, Inc., 833 F.2d 277, 280 (11th
Cir. 1987); Roe v. General American Life Ins. Co., 712 F.2d 450
(10th Cir. 1983).
14
Furthermore, other Circuits have consistently held that
ERISA precludes the use of any state or federal doctrines
—similar to the two state law rules involved here—that
would cause a departure from the plan’s unambiguous
written terms, or any of ERISA’s carefully-drawn statu-
tory provisions which ensure uniformity in plan adminis-
tration. See, e.g., Nachwalter v. Christie, 805 F.2d 956,
960 (1ith Cir. 1986) (“federal courts may not use state
common law to re-write a federal statute”); Member Serv-
ices Life Ins. Co. v. Amer. National Bank and Trust Co..,
130 F.3d 950, 957-958 (10th Cir. 1997) (courts cannot
“rewrite [ERISA] to satisfy [their] proclivities”); Pohl,
956 F.2d at 128 (ERISA “confin{es] benefits to the terms
of the plan as written”); Hunt v. Hawthorne Associates,
Inc., 119 F.3d 888, 891 (11th Cir. 1997) (“{t]he corner-
stone of an ERISA plan is the written instrument”);
Edwards v. Great-West Life Assur. Co., 20 F.3d 748, 750
(7th Cir. 1994) (courts cannot “rewrit{[e] the plan”);
Burnham v. Guardian Life Ins. Co., 873 F.2d 486, 490
(Ist Cir. 1989) (same); Coleman v. Nationwide Life Ins.
Co., 969 F.2d 54, 56, 59 (4th Cir. 1992) (same), cert.
denied, 506 U.S. 1081 (1993); Boyer v. Douglas Com-
ponents Corp., 986 F.2d 999, 1005 (6th Cir. 1993)
(same); Cefalu v. B.F. Goodrich Co., 871 F.2d 1290,
1295-1296 (5th Cir. 1989) (same).
The Ninth Circuit’s decision on the “notice-prejudice”
and “Elfstrom” rules not only directly conflicts with other
Circuits, but also will spur additional litigation across the
country as plan participants whose claims would be barred
under the provisions of ERISA seek refuge in the more
generous provisions of state law. If one or two judicial
revisions of ERISA’s text governing fiduciary duties and
civil enforcement are appropriate through artful but errone-
ous readings of the preemption and “saving” clauses, plain-
tiffs and the lower courts will ask, why not twenty? If
twenty, why not two hundred? This departure from the
national uniformity of law required by ERISA, the chaos
in plan administration and the increased litigation and
15
transaction costs will only lead plan sponsors to a reduc-
tion or elimination of benefits, Fort Halifax Packing Co. v.
Coyne, 482 U.S. 1, 13 (1987), all in conflict with the
“public interest in encouraging the formation of em-
ployee benefit plans,” Pilot Life, 481 U.S. at 54.
As explained in more detail at pages 12-14 of the peti-
tion in Cisneros, the Ninth Circuit’s decision frustrates yet
another principle central to ERISA’s statutory scheme—
the orderly internal resolution of benefit disputes as a pre-
requisite to filing suit under the Act’s civil enforcement
system. Notice of claim deadlines are not only standard
features of many ERISA plans, but they also protect
against the difficulties of proof, expenses and errors asso-
ciated with stale claims.’ A plan’s written procedures and
time limits for the filing of ERISA claims,”’ no less than
the ERISA fiduciary review procedure required by § 503,
are essential steps in the plan’s administrative remedies.”
A significant part of this Court’s Pilot Life holding is that
ERISA suits must be regarded as arising under federal law
in a manner similar to those under § 301 of the Labor-
Management Relations Act (“LMRA”). 481 U.S. at 55-
56. Under § 301, an agreement’s administrative remedies
— including its written requirements and time limits for
filing a claim—must be followed as a prerequisite to filing
® Central States, Southeast and Southwest Areas Pension Fund
v. Mississippi Warehouse Corp., 853 F.Supp. 1053, 1058 (N.D. Il.
1994); Tiger v. AT&T Tech. Plan for Employees’ Pensions, Dis-
ability Plan, 633 F.Supp. 532, 534 (E.D. N.Y. 1986).
10 29 C.F.R. § 2560.503-1(b), (c).
1! See Kinkead v. Southwestern Bell Sick & Acci. Corp. Disability
Benefit Plan, 111 F.3d 67, 68 (8th Cir. 1997); Kennedy v. System
One Holdings, Inc., 835 F.Supp. 947, 950 n. 3 (S.D. Tex. 1993);
Christie v. K-Mart Corp. Employees Retirement Pension Plan, 784
F.Supp. 796, 804 (D. Kan. 1992); see also White v. Jacobs Engi-
neering Group Long Term Disability Plan, 896 F.2d 344, 346-47
(9th Cir. 1990) (plan’s 60 day time limit for appealing denied
claim is enforceable).
16
suit.” In permitting Ward’s-suit to proceed in admitted
violation of the Plan's requirements, the decision below
defers to the plaintiff but only at the cost of cutting
across the grain of uniform federal law under ERISA,
its antecedents in § 301 of the LMRA, and recent de-
cisions by this Court. The carefully-crafted nature of
ERISA’s statutory scheme precludes the Ninth Circuit's
continuing efforts to use state law doctrines to rewrite
plan provisions and “fine-tune” the statute in favor of
participants. Massachusetts Mutual Life Ins. Co. v. Rus-
sell, 473 U.S. 134, 147-148 (1985); Pilot Life, 481 U.S.
at 54.
Ill. THE NINTH CIRCUIT’S PREEMPTION DECISION
COMPLETELY DISRUPTS THE UNIFORMITY OF
LAW INTENDED BY CONGRESS.
The Ninth Circuit’s decision adopting the “E/fstrom”
and “notice-prejudice” rules should be reviewed not only
because it creates significant conflicts among the Circuits
on ERISA preemption, but also because it has a far-
ranging impact which destroys ERISA’s key objectives of
governing the administration of both self-funded and in-
sured plans in accordance with an exclusive, uniform body
of federal law. As this Court has noted, the “potential for
conflict in substantive law” is “[plarticularly disruptive”
under ERISA. /ngersoll-Rand Co. v. McClendon, 498
U.S. 133, 142 (1990) (emphasis added). The decision’s
severe repercussions—-which will create a crazy quilt of
conflicting plan rules across the land—warrant swift inter-
vention by this Court.
The Ninth Circuit’s new ERISA preemption standard,
announced in connection with the “Elfstrom” rule. is so
narrow and restricted, and the Court’s disregard for con-
flicts-preemption is so complete, that the standard reopens
2 See, e.g., Laws v. Calmat, 852 F.2d 430, 484 (9th Cir. 1988):
Brazinski v. Amoco Petroleum Additives Co., 6 F.3d 1176, 1179
(7th Cir. 1998); Vaca v. Sipes, 386 U.S. 171, 184-185 (1967).
17
a door closed by Pilot Life to state law suits based on
virtually any claim arising out of a denial of plan bene-
fits. Similarly, the Court’s new standard for construing
ERISA’s “saving” clause is so broad and indiscriminate
that it will arguably include virtually any common-law rule
of general application that can be identified with the in-
surance industry regardless of whether it conflicts with
ERISA’s substantive provisions. Under the combined effect
of these two standards, ERISA plan design, administra-
tion and civil enforcement will be challenged by an almost
unlimited range of state laws. This will both conflict with
Pilot Life, as discussed in more detail in section IV, below,
and, at the same time, resurrect the same obstacles to plan
growth and development—the “multiplicity of regulation”
and “ ‘conflict .. . in law’”—that the Act was designed
to eliminate. Travelers, 514 U.S. at 656-657 (citation
omitted ).
In misconsrtuing ERISA’s preemption and “savings”
clauses, the Ninth Circuit’s decision produces a result
exactly opposite to ERISA’s fundamental purposes. To
require all ERISA plans to be administered the same
way in each state, Congress carefully crafted each of the
Act’s major components. It framed the definition of em-
ployee benefit plans explicitly to include all plans whether
established “through the purchase of insurance or other-
wise.” ERISA § 3(1). It also inserted a “deliberately
expansive” preemption provision designed to make the
regulation of all ERISA plans “ ‘exclusively a federal
concern.” Pilot Life, 481 U.S. at 45-46 (citation omit-
ted) (emphasis added). Similarly, it added a “deemer”
clause which precludes any plan from being “deemed” an
“insurance company” or “engaged in the business of in-
surance.” ERISA § 514(b)(2)(B). This significant quali-
fication to the “saving” clause—which was completely
overlooked by the Ninth Circuit—reflects Congress’ com-
mitment to free the administration of insured plans from
the possibility of state regulation through some artful or
overly-broad construction of the insurance exception. The
“deemer” clause makes explicit Congress’ objectives to
18
achieve federal uniformity in benefits law and plan ad-
ministration by barring direct state regulation of plans
irrespective of their funding mechanisms. When the
“deemer” clause is thus read in conjunction with the Act’s
key objectives, it is clear that state regulation impacting
plan administration and benefit payment—regulation which
strikes at the very core of ERISA—would be preempted,
notwithstanding that plan administration is conducted in
part by an insurance company or a Blue Cross/Blue
Shield organization.
A. Disruptions Caused By The “Notice-Prejudice”
Rule.
The disruptions caused by the Ninth Circuit’s error in
allowing a state law rule, such as the “notice-prejudice”
rule, to seize control over plan structure and administra-
tion, and the resulting conflict with ERISA’s goals and
Pilot Life, are discussed in detail at pages 18 through 22
of the petition for a writ of certiorari in the Cisneros case.
B. Disruptions Caused By The “Eifstrom” Rule.
In finding the California agency law announced in “E/f-
strom” not preempted, the Ninth Circuit’s decision not
only once again flouts Pijot Life, but also conflicts with
the law in other Circuits and produces a disruptive result
that is contrary to ERISA’s objectives. Apart from the
Ninth Circuit, the courts have held that ERISA § 514(a)
preempts state common-law agency doctrines which impact
plan administration and the payment of benefits and thus
“conflict with Congress’ intent that a plan not be subject to
a myriad of state laws.” See, e.g., Jass v. Prudential Health
Care Plan, Inc., 88 F.3d 1482, 1488-1490, 1493 (7th Cir.
1996) (ERISA , reempts state law agency claims relating
to a benefit denia‘). The decision below plainly conflicts
with the Seventh Circuit’s agency law decision in Jass. In
addition, field preemption and conflicts-preemption bar the
decision below because the common-law agency rule clashes
19
with ERISA’s exclusive framework regulating fiduciary
responsibility, claims-filing and civil enforcement.
In its haste to subject ERISA plans to state law con-
trol, the Ninth Circuit did not correctly analyze whether
California agency law “relates to” an ERISA plan within
the meaning of § 514(a) or is barred by field or conflicts-
preemption. Instead, it mechanically applied state agency
law based on a single, outdated, impliedly-overruled case,
Turrill v. Life Ins. Co. of North America, 753 F.2d
1322 (Sth Cir. 1985), which permitted state law to govern
the administration of an insured ERISA plan. The Ninth
Circuit failed to recognize the significance of the point that
Turrill was decided prior to Pilot Life at a time when the
courts consistently but incorrectly believed that ERISA
preemption did not apply to suits alleging improper claims-
handling or failure to pay benefits under insured plans.
Accordingly, it was an anachronistic, direct contravention
of Pilot Life for the Ninth Circuit to hold that ERISA
does not preempt state law doctrines governing claims
filing and benefit payment under an insured ERISA plan.
Four equally valid arguments establish that ERISA
preempts state law agency rules such as the one embodied
in “Elfstrom,” thus barring a multiplicity of federal-state
regulation. First, the state law plainly “relates to” the
Plan under the “ordinary meaning” of that term because
it purports to regulate claims filing and processing and
thereby dictates the payment of plan benefits. Indeed,
Ward is attempting to use state law not only to assert
the timely, oral “filing” of an ERISA claim with his em-
ployer, but also to bind the Plan’s claims review fiduciary
to such “filing” and obtain benefits precluded by the Plan’s
written terms. The state law thus has an obvious “ ‘con-
nection with or reference to such a plan.’” See Pilot Life,
481 U.S. at 47-48; District of Columbia v. The Greater
Washington Bd. of Trade, 506 U.S. 125, 129 (1992).
“ERISA is designed to ensure the proper administra-
tion of pension and welfare plans.” Boggs v. Boggs, 117
20
S.Ct. 1754, 1760 (1997). Acknowledging the need for
uniformity of law, other Circuits have correctly held that
ERISA § 514(a) preempts state agency law in a suit in-
volving a denial of plan benefits. In Jass, supra, which in-
volved a suit to hold a plan responsible for a medical pro-
vider’s conduct in denying plan benefits, the Seventh Circuit
held that the state agency law “related to” an ERISA plan
and was therefore preempted by § 514(a). 88 F.3d at
1494. The court found that the agency argument was based
on the plan’s existence; the plan documents expressly stated
that no agency relationship existed; the agency claim was
a mechanism for seeking benefits not permitted by the
plan documents; and applying state law would conflict
with Supreme Court holdings that ERISA preempted
“ ‘state laws that had the effect of regulating the structure
or administration of ERISA plans or providing avenues
outside of the ERISA framework to vindicate employees’
rights under these plans’” (citation omitted). Both the
holding and reasoning of the Seventh Circuit are in con-
flict with the decision below. See also Perkins v. Time Ins.
Co., 898 F.2d 470 (Sth Cir. 1990) (under ERISA, per-
sonal liability of another party cannot be imputed to in-
surer under agency law theory).
Second, in cases where the direct relationship between
the plan and the state law is not so immediately obvious
as the one here, this Court has held that whether the law
“relates to” the plan within the meaning of ERISA
§ 514(a) should be based on “ ‘the objectives of the
ERISA statute . . . as well as . . . the nature of the effect
of the state law on ERISA plans.’” California Div. of
Labor Standards Enforcement v. Dillingham Const., 117
S.Ct. 832, 838 (1997) (citation omitted). Under this
analysis, ERISA preempts state law that would frustrate
ERISA’s goals by imposing different regulations from state
to state, or by permitting claimants governed by one state
law to obtain “benefits in excess of what plan administra-
tors intended to provide, and in excess of what the plan
provided to employees in other States.” Travelers, 514 U.S.
21
at 656-657, 658. State laws cannot “preclude uniform
administrative practice.” Jd, at 660. The state agency
law adopted by the Ninth Circuit spawns all of these vices
by subjecting plan administration and benefit payment to
a multiplicity of regulation not only between federal law
and state law, but also—for multistate employers—among
the conflicting laws of the 50 states.
Third, the Ninth Circuit’s decision disrupts the uni-
formity of regulation secured by ERISA’s fiduciary | re-
sponsibility provisions. ERISA’s fiduciary and co-fiduciary
liability rules impose personal liability and damages on a
fiduciary for its own acts causing loss to a plan. ERISA
§ 409(a); Russell, 473 U.S. at 139. The court, however,
permitted Ward to proceed on a state law agency theory
that UNUM, as a “principal” and co-fiduciary, was per-
sonally liable for any ERISA violation by the employer
in failing to ensure that he timely filed a written notice
and proof of claim with UNUM. App. at 24a to 25a.
As indicated, Ward was a CEO who admittedly had re-
ceived a certificate of coverage which described the pro-
cedures and deadlines for submitting a claim to UNUM,
and also participated in annual meetings where the Plan
was reviewed. /d. at 29a, 32a to 33a. ERISA did not re-
quire the employer to do still more. ERISA’s reporting
and disclosure rules “may not be a foolproof informational
scheme, although it is quite thorough. Either way, it is
the scheme that Congress devised.” Curtiss-Wright, 514
U.S. at 84 (emphasis added). Even if the employer had
violated ERISA by not seeking Ward out to give him
further, specialized information about claims-filing, the
Ninth Circuit still erred in permitting him to use state
law agency doctrine to impute such a violation to UNUM
as a co-fiduciary. App. at 25a. ERISA explicitly places
the reporting and disclosure obligations personally on the
Plan Administrator, §§ 105(b) (1), 502(c), and no other
party can be held liable for such a violation, see, e.g.,
McKinsey v. Sentry Ins. Co., 986 F.2d 401 (10th Cir.
1993). Further, ERISA’s co-fiduciary liability rules im-
22
pose liability only where the co-fiduciary has actual knowl-
edge of a breach by its co-fiduciary but fails to act.”
Within the Plan’s time limit for filing written notice and
proof of claim, UNUM had no knowledge that Ward
claimed to be “disabled” or had purportedly so advised
his employer.
Fourth, the state law agency rule adopted by the Ninth
Circuit runs afoul of conflicts-preemption and the ex-
clusivity of ERISA’s civil enforcement scheme for dual
reasons. First, it conflicts with ERISA’s fiduciary respon-
sibility rules; second, it seeks to control benefit payment
contrary to the Plan’s written terms. In an attempt to
suggest otherwise, the Ninth Circuit opined: “[NJor does
Elfstrom create an ‘alternative enforcement mechanism’
for ERISA plan obligations beyond those set forth in the
statute.” App. at 2la to 22a. This conclusion is 180 de-
grees off course. The decision below provides the clearest
possible example of an “alternate enforcement mechanism”
triggering ERISA preemption. It would permit a state law
rule to require the payment of plan benefits under circum-
stances where a claim denial is mandated by the Plan
itself, ERISA’s fiduciary responsibility rules and its ex-
clusive civil enforcement scheme.
IV. THE NINTH CIRCUIT’S PREEMPTION DECISION
IS AN ATTEMPT TO CIRCUMVENT THIS COURT'S
CONTROLLING PILOT LIFE DECISION.
The holding and reasoning of this Court’s unanimous
decision in Pilot Life also preclude the Ninth Circuit's
holdings that in a suit to recover plan benefits the “notice-
prejudice” and “Elfstrom” rules escape ERISA preemption.
‘S ERISA § 405(a)(1), (3); H.R.Rep. No. 1280, 98d Cong., 2d
Sess, 304 (1994) (actual knowledge is required; there is no duty
of investigation) ; Davison v. Cook, 564 F.Supp. 225, 237 (E.D. Va.
1983), aff'd. mem., 734 F.2d 10 (4th Cir. 1984), cert. denied sub
nom., Accardi v. Davidson, 469 U.S. 899 (1984); Justice v. Bank-
ers Trust Co,, Inc., 607 F.Supp. 527, 586 (D.C. Ala. 1985).
i Plan does
necessarily invalidate his claim under § 502(a)(1)(B)
the “notice-prejudice” rule. It also permitted
i!
i
:
by Pilot Life: state common law rules purporting to govern
the processing of claims allow a recovery that is both un-
available under the plan and in conflict with ERISA’s sub-
stantive provisions, here its fiduciary responsibility and
The Ninth Circuit's decision on the two state law rules
contravenes not only the Court’s holding in Pilot Life but
on allegedly improper processing of claims and failure to
pay benefits because such actions manifestly “relate to”
an ERISA plan in the sense of having “‘a connection
with or reference to such a plan.’” 481 U.S. at 47-48.
In construing ERISA’s “saving” clause, the Court evalu-
ated Mississippi's “law of bad faith” under the common-
sense and McCarran-Ferguson ve ee ys ruled that
“we are obligated in interpreting the saving clause to con-
sider . . . [its] role . . . in ERISA as a whole.” Because
the plaintiff's “bad faith” claims sought remedies for im-
proper claims processing and failure to pay benefits, a sub-
24
ject already addressed in ERISA’s enforcement scheme,
the Court reasoned that “our understanding of the ‘saving’
clause must be informed by the legislative intent concern-
ing the civil enforcement provisions provided by ERISA
section 502(a).” Pilot Life, 481 U.S. at 52. The Ninth
Circuit completely failed to consider the preemption and
“saving” clauses in this broader context.
To determine legislative intent, this Court evaluated
the structure, language and purposes of the statute. First,
the Court observed that § 502 is one of three statutory
sections aimed at enforcing ERISA; the other two are
§ 503, governing the processing of claims and the fiduciary
review of denied claims, and § 501, which provides crimi-
nal penalties for certain violations. Pilot Life, 481 U.S. at
52-53. Second, the Court noted that the language of the
statute does not provide for the extra-contractual damages
and other remedies that the plaintiff was seeking against
the insurance carrier. Rather,
the detailed provisions of § 502(a) set forth a com-
prehensive civil enforcement scheme that represents a
careful balancing of the need for prompt and fair
claims settlement procedures against the public inter-
est in encouraging the formation of employee benefit
plans. The policy choices reflected in the inclusion of
certain remedies and the exclusion of others .
would be completely undermined if ERISA-plan par-
ticipants . . . were free to obtain remedies . . . that
Congress rejected in ERISA.
Pilot Life, 481 U.S. at 54. Third, the Court determined
that Congress intended to model ERISA’s civil enforce-
ment provisions upon § 301 of the LMRA which “pre-
empts any ‘state-law claim whose resolution is substan-
tially dependent upon the analysis of the terms of an
agreement made between the parties in a labor contract.’ ”
Id. at 55 (citation omitted). Thus, Congress intended
“that all suits . . . asserting improper processing of
[ERISA] claims . . . be treated as federal questions gov-
erned by § 502(a).” Jd. at 56 (emphasis added).
fit plan” to comply with benefit claims regulations issued
by the Secretary of Labor (emphasis added). Those regu-
lations, in turn, specify that a plan’s claims procedure may
provide for the filing of claims with an insurance company,
and that “a claim is filed when the requirements of a rea-
sonable claim filing procedure . . . have been met.” 29
C.F.R. § 2560.503-1(c)(d). Under ERISA’s fiduciary re-
view procedure for denied claims, the “fiduciaries” include
an insurance company, or a Blue Cross/Blue Shield or-
ganization, serving as claims review fiduciary. /d. at
§ 2560.503-1(g)(2). By statute, these fiduciaries must
follow the plan’s written terms. ERISA § 404(a)(1)(D).
Correspondingly, a participant who exhausts those adminis-
trative procedures may only file suit to recover benefits
“due . . . under the terms of [the] plan.” ERISA § 502
(a)(1)(B) (emphasis added). This exclusive structure for
fiduciary responsibility and civil enforcement would be
“completely undermined if ERISA-plan participants” such
as Ward could use state law doctrines to obtain benefits
contrary to the plan’s written terms and ERISA’s civil
enforcement scheme. Pilot Life, 481 U.S. at 54. Accord-
ingly, the Pilot Life analysis precludes the decision below.
26
Vv. THE QUESTIONS PRESENTED BY THIS PETI-
TION HOLD IMPORTANT IMPLICATIONS FOR
ERISA PLANS THAT SHOULD BE ADDRESSED
BY THIS COURT.
The Ninth Circuit's decision adopting the state law “no-
tice-prejudice” and agency rules will impose a multiplicity
of conflicting federal-state regulation on insured ERISA
plans. Additionally, it will surrender significant portions
of ERISA plan administration to the varying laws in the
50 states. All of this runs exactly contrary to ERISA’s
primary goals of ensuring a “uniform body of benefits
law,” Travelers, 514 U.S. at 645, making the administra-
tion of both self-funded and insured plans “ ‘exclusively
a federal concern,”” Pilot Life, 481 U.S. 45-46 (citation
omitted), and “minimiz[ing] the need for interstate em-
ployers to administer their plans differently in each state
in which they have employees,” Shaw, 463 U.S. at 105.
Unless corrected, the Ninth Circuit's decision along with
the Sixth Circuit’s decision in Davies, 128 F.3d at 940—
coupled with the Circuit conflicts over ERISA preemption
—will create enormous confusion and difficulty in the de-
sign and administration of thousands of insured welfare
plans across the country. Exactly the same hardships will
affect pension plans with insurance funding. This confu-
sion and uncertainty will spread into the courts as claim
denials which are clearly proper under ERISA are made
uncertain by the imprecise parameters of the Ninth Cir-
cuit’s new view of the “saving” clause, and its narrow
reading of the scope of ERISA preemption. Additionally,
the adverse effects will not be limited to plan administra-
tion within the Sixth or Ninth Circuits. ERISA provides
for nationwide service of process, and permits a suit to
be filed in any district where the plan is administered,
the breach of fiduciary duty took place, or a defendant
resides or may be found. ERISA § 502(e) (2); see, é.2.,
Varsic v. United States Dist. Ct., 607 F.2d 245, 248
(9th Cir. 1979). Consequently, the vast majority of in-
sured plan sponsors coast to coast now risk not only that
27
the structure of their plans may be overturned, but also
that the plan’s administration and benefit payments may
be subject to conflicting federal and state regulation pur-
suant to the Ninth Circuit's unprecedented decision and
the parallel Sixth Circuit decision.
The practical consequences of the Ninth and Sixth Cir-
cuits’ decisions are ing. Just in terms of major
medical care plans alone, there are an estimated 4.5 mil-
lion employer-sponsored plans “ covering over 161 million
individuals.” Overwhelming percentages of these plans
either are insured, with a large subset being Blue Cross/
Blue Shield plans, or are self-funded plans with stop-loss
insurance." More than 9 out of 10 such plans delegate
some portion of ERISA claims-handling and payment—
and the fiduciary review authority mandated by ERISA
§ 503—to insurance companies, Blue Cross/Blue Shield
organizations or third-party administrators.”
ign will
to establish such plans in the first place. See, €.8-, Heath
v. Varity Corp., 71 F.3d 256, 258 (7th Cir. 1995).
Additionally, the “notice-prejudice” rule has been rejected
by many states and varies considerably across the land;
14 ADMINISTRATION OF THE EMPLOYEE RETIREMENT INCOME SE-
15 STATISTICAL ABSTRACT OF THE UN!Tep StTaTes, p. 120 (117 ed.
1997).
16 Mercer/FosTer HIGGINS NATIONAL SURVEY OF EMPLOYER-
SPONSORED HEALTH PLANS, Report 1997, 17-18.
1 Id. at 18.
18 Many jurisdictions consider a timely claim as a condition pre-
cedent to recovery and thus do r°f follow such a rule. Other states
presume prejudice to the insurer and require the claimant to estab-
28
similarly, state agency law doctrines vary from state to
state.” All of this practical uncertainty coupled with the
differences in state law will create strong financial incen-
tives for employers either to cut back or eliminate insured
benefits altogether, or to use self-funded plans notwith-
standing the greater stability and solvency of insured plans.
The plan administrators and claims review fiduciaries
for these plans, moreover, can be expected to process
literally millions of ERISA claims for disability, pension
and health benefits annually. Unless this Court resolves
the Circuit conflicts, it will be impossible for these ad-
ministrators and fiduciaries to rely on a “ ‘uniform body’ ”
of federal benefits law, or to engage in the “nationally
uniform” plan. administration which was a “basic thrust”
of ERISA. Travelers, 514 U.S. at 656-657. Further, they
will be unable to administer their plans both in compliance
with the plans’ written terms and the Ninth Circuit's deci-
sion. They cannot know whether to deny a claim on the
basis of a clear plan limit, or to accept the claim under
state law regarding “notice-prejudice” or agency without
regard to the terms of their plan and thus breach an
ERISA fiduciary duty. They cannot even know which
opposing sets of federal and state laws to apply to deter-
mine those questions.
lish its absence; still other states—such as California—require the
insurer to prove “actual prejudice.” See 183A George J. Couch et al.
Couch Cyclopedia of Insurance Law § 49.49 at 276-77 (2d ed. 1982).
1” See, e.g., Metropolitan Life Ins. Co. v. Henry, 217 Ind. 33, 24
N.E.2d 918 (1940) (under Indiana law, employer acting as middle-
man between insurer and employees is agent of employees) ; First
National Bank of Anson County v. Gatewood, 308 N.C. 203, 214-15
278 S.E.2d 507 (“case law in this jurisdiction [North Carolina] . . .
establishes that the employer-master policyholder is not ordinarily
the agent of the insurer”); Brezan v. Prudential Insurance Co. of
America, 507 F.Supp. 962, 966 (E.D.Pa. 1981) (under Pennsylvania
law, group policyholder has no obligation to ensure that terms of
group policy are correctly transmitted to employees); Dawes Min-
ing Co. v. Callahan, 246 Ga. 531, 272 S.E.2d 267 (1980) (in Georgia,
employer is agent of insurer, and insurer has imputed knowledge
of information transmitted to employer).
29
The Ninth Circuit acknowledged in Cisneros the direct
~ conflict between California’s “notice-prejudice” rule and
ERISA, stating that the rule made the plan “more difficult
to administer” and caused “a plan’s written terms [to be]
altered.” 134 F.3d at 947 (emphasis added). In the same
manner, the “Elfstrom” rule requires the payment of bene-
fits under circumstances where the Plan itself and ERISA’s
fiduciary responsibility and civil enforcement provisions
require a claim denial. The decision thus presents, in two
important respects, a “direct clash between state law and
the provisions and objectives of ERISA,” one where pre-
emption necessarily arises because “ ‘compliance with both
federal and state regulations is a physical impossibi . -
Boggs v. Boggs, 117 S.Ct. 1754, 1762 (1997) (citation
omitted) (emphasis added). To allow state law rules not
only to encroach on ERISA’s exclusive framework for
fiduciary standards and plan administration—but to “alter”
the plan’s written terms, and to permit a suit for benefits
contrary to those terms—completely undermines a number
of ERISA’s most significant and highly-regulated areas.
It also wreaks havoc on the important principle of uni-
formity of law upon which ERISA is based.
Intervention by the Court is critical to restore the care-
fully-crafted balance between state and federal law struck
by Congress in ERISA and to reestablish the preeminence
of ERISA’s statutory scheme. ERISA plans are not only
“affected with a national public interest,” §2(a), 29
U.S.C. § 1001(a), but the appropriate balance between
competing federal and state law is of paramount concern
to the nation’s employee benefit plan system. Given the
“centrality of pension and welfare plans in the national
economy,” Boggs v. Boggs, 117 S.Ct. at 1760, it is vital
that this Court decide the two significant, far-reaching
ERISA preemption issues presented by this case, and re-
solve the existing Circuit conflicts.
30
CONCLUSION
For the foregoing reasons, petitioner urges the Court to
grant a writ of certiorari in this case.
Of Counsel:
TAMARRA T. RENNICK
Litigation Counsel
UNUM LIFE INSURANCE
COMPANY OF AMERICA
2211 Congress Street
Portland, ME 04122
(207) 770-2211
LESLEY C. GREEN
RUSSELL G. PETTI
BANNAN, GREEN &
FRANK LLP
555 South Flower Street
44th Floor
Los Angeles, CA 90017
(218) 362-1177
May 20, 1998
Respectfully submitted,
Davip L. BACON
Counsel of Record
BENJAMIN J. DELANCY
CHARLES M. DYKE
THELEN, MARRIN, JOHNSON
& Bripces LLP
333 So. Grand Avenue
34th Floor
Los Angeles, CA 90071
(213) 621-9800
Attorneys for Petitioner
UNUM Life Insurance
Company of America
APPENDIX
APPENDIX TABLE OF CONTENTS
Se ee eee &
ee
nee ee
I , ecentepoe
Order of the District Court granting Summary Jude
ment, filed August 8, 1995 2.200 ecceeeeeeeeeeee
Declaration of John A. Houser, III And Portions of
omy © hey gt” japameahnallemeasanalldiaad
ment, filed June 26, 1995 o.0000.0..0ccceecseeon
Exhibit Portions Meitiinaile' sak Wert Sueectien
Excerpts) to Declaration of Jeffrey P. ates
pS RR a aT aT OO
District Court Complaint, filed September 19, 1994.
ERISA § 2(a), (b), 29 U.S.C. § 1001 (a), (b) ................ #
ERISA § 3(1), (16), 29 U.S.C. § 1002(1), (16)
ERISA § 402(a), (b), 29 U.S.C. § 1102(a), (b) —....... a
ERISA § 404(a) (1) (D), 29 U.S.C. § 1104(a) (1) (D)....
ERISA § 502 (a) (1) (B), 29 U.S.C. § 1182 (a) (1) (B)
ERISA § 508, 29 U.S.C. § 1188 2... .-.eececeeeceeneeeeeeoeeees
ERISA § 514(a), (b) (2) (A), (B), 29 U.S.C. § 1144(a)
CR) CR). A) CIB) naire nnenrnennecosononvnncenecnscnncnnosensnrveccorncen
29 C.F.R. § 2560.503-1 (1b), (€), (8) -----neecoeecneennssneesneeenees
Page
la
la
APPENDIX
UNITED STATES COURT OF APPEALS
NINTH CIRCUIT
No. 95-56269
D.C. No. CV-94-1454-MHH
Filed February 3, 1998
JouHN E. Warp,
Plaintiff-A ppellant,
v.
MANAGEMENT ANALYSIS COMPANY EMPLOYEE
DISABILITY BENEFIT PLAN, and
UNUM Lire INSURANCE COMPANY OF AMERICA,
Defendants-A ppellees.
Appeal from the United States District Court
for the Southern District of California
Argued and Submitted January 9, 1997—
Pasadena, California
Before Betty B. Fletcher and Stephen S. Trott,
Circuit Judges, and Bruce S. Jenkins,* District Judge
* Honorable Bruce S. Jenkins, United States Senior District Judge
for the District of Utah, sitting by designation.
2a
OPINION
JENKINS, District Judge:
John E. Ward (“Ward”), former President and CEO of
Management Analysis Company (“MAC”), brought this
action under § 502 of the Employee Retirement Income
Security Act (ERISA), 29 U.S.C. § 1132, seeking to
recover benefits pursuant to his former employer's long-
term disability plan. The United States District Court for
the Southern District of California granted summary
judgment in favor of the Management Analysis Company
Employee Disability Benefit Plan (the “MAC Plan”) and
UNUM Life Insurance Company of America (“UNUM”)
on the ground that Ward’s claim for benefits under
UNUM’s long-term disability policy was timely under
the notice and proof of claim provisions of that policy. In
light of our ruling in a related case, Cisneros v. UNUM
Life Insurance Company of America, ——— F.3d ———
(9th Cir. 1998), that under California law, UNUM must
show actual prejudice resulting from a claimant's untimely
submission of proof of a claim before it may deny benefits
under a plan governed by ERISA, we reverse the judgment
in favor of UNUM and the MAC Plan and remand the
case for further proceedings. We also remand for a deter-
mination of whether MAC received timely notice and
proof of Ward’s claim of disability while acting as a plan
fiduciary and agent of UNUM, should that determination
become decisive of the question of timeliness.
Effective November 1, 1983, UNUM issued a Group
Long Term Disability Policy to MAC as an insured
employee welfare benefit plan governed by ERISA. An
employee certificate booklet summarizing the plan benefits
was prepared and distributed in quantity to MAC em-
ployees, including Ward.
3a
Ward served as President and Chief Executive Officer
of MAC until, after_being asked to resign by the Board of
Directors on May 5, 1992, he resigned on May 8, 1992.
In May of 1992, Ward was already suffering from dia-
betic neuropathy, and avers that prior to his resignation,
he had begun experiencing severe and disabling leg pain
resulting from that condition.
The nature and extent of his illness and resulting
disability were diagnosed by December of 1992. In early
1993, Ward applied for and received state disability
benefits, and contacted the MAC human resources divi-
sion to discuss extension of his continuation insurance
coverage under COBRA. In July 1993 he received a
determination that he was eligible for Social Security dis-
ability benefits, a copy of which he forwarded to the
MAC human resources division.
Ward states that he was actually unaware of the avail-
ability of the MAC Plan long-term disability benefits until
April 1994, when he discovered a booklet describing the
coverage amorg papers in his safety deposit box. Ward
completed an application for long-term disability benefits
and forwarded the same to MAC. MAC completed the
employer information section of the application and for-
warded the same to UNUM.
UNUM received notice and proof of Ward’s claim on
April 11, 1994. By letter dated April 13, 1994, UNUM
informed Ward that his claim for benefits was denied as
untimely under the terms of the policy. Through counsel,
Ward requested that UNUM review the denial of his
claim, and by letter dated July 12, 1994, UNUM in-
formed Ward that it had reviewed his claim and affirmed
its denial because it was “beyond the time frame stipu-
lated in the policy.”
Plaintiff filed his complaint against the MAC Plan to
recover his claimed benefits under ERISA on September
15, 1994. UNUM appeared as a defendant and filed an
4a
answer on behalf of itself and the MAC Plan on Novem-
ber 23, 1994. On August 8, 1995, the district court
granted the defendants’ motion for summary judgment,
concluding that under the terms of UNUM’s policy as
written, “plaintiff's claim was late and therefore defendant
was not obligated to honor plaintiff's claim for long-term
disability benefits.”
The district court entered judgment on August 17,
1995, and Ward filed a timely notice of appeal.
Il
We review the district court’s grant of summary judg-
ment de novo. Bagdadi v. Nazar, 84 F.3d 1194, 1197
(9th Cir. 1996). Whether ERISA preempts state law is a
question of law which we review de novo. Inland Empire
Chapter of Associated General Contractors v. Dear, 77
F.3d 296, 299 (9th Cir. 1996). We also review de novo
the principles of contract interpretation as applied to the
facts, including the district court’s interpretation of insur-
ance policy language. O’Neill v. United States, 50 F.3d
677, 682 (9th Cir.), cert. denied, 116 S. Ct. 672 (1995).
Il
While in his brief Ward lists several issues and makes a
series of assertions concerning agency theory under Elf-
strom v. New York Life Ins. Co., 67 Cal. 2d 503, 432
P.2d 731, 63 Cal. Rptr. 35 (1967), fiduciary duty under
ERISA, and the potential liability of the MAC Plan, the
appellees aptly restate the central issue now before us on
appeal: “Did the District Court correctly hold that the
plaintiff failed to timely submit written notice and proof
of claim to UNUM as required by the express terms of the
MAC Plan and applicable federal law under ERISA?”
UNUM expressly conditions payment of benefits upon
submission of proof of claim within the time limits set
forth in the policy. Section VI.F.2 of UNUM’s policy
Sa
provides that proof “may not be given later than one year
after the time proof is otherwise required,” in this in-
stance, “no later than 90 days after the end yay wei
day] elimination period.” ' Section V1.1 provides that
fits will be paid “[w]hen the company oer A
claim.” Read together, these provisions logically and un-
ambiguously establish that, under the policy, timely sub-
mission of proof is a condition precedent to payment of
benefits.
Under the admitted facts of this case, Ward became
permanently disabled on May 5, 1992. Using Ward's
disability onset date of May 5, 1992, UNUM calculated
that his proof of claim must have been received no later
than November 5, 1993 in order to be deemed timely
under the policy provision.” Ward did not submit notice
or proof of his claim directly to UNUM until April 11,
1994. Ward’s submission of notice and proof of his claim
plainly was untimely under the express terms of the
UNUM policy.
However, in light of our recent opinion in Cisneros v.
UNUM Life Insurance Company of America, ——— F.3d
—— (9th Cir. 1998), untimeliness under the express
terms of the policy does not end the inquiry, at least as to
consequence. Cisneros holds that a claimant’s failure to
submit timely proof of claim does not necessarily result in
the denial of benefits. Cisneros acknowledges that the
California “notice-prejudice” rule remains in force respect-
ing benefit plans governed by ERISA as a state law
“which regulates insurance” under ERISA’s savings clause,
29 U.S.C. § 1142(b)(2)(A). Under the “notice-prejudice”
rule, the insurer of an ERISA benefit plan may not deny
benefits by reason of untimely notice or submission of
1 The MAC Plan documents provide that the “elimination period”
consists of the 90-day period following the date of onset of the
insured’s disabilty.
2 The district court’s reference to a December 5, 1993 cutoff date
appears to be simple mathematical error.
6a
proof of claim unless the insurer proves that it has suf-
fered actual prejudice because of the delay. Id. at 67375.°
Contrary to UNUM’s assertion in its brief, we are not
persuaded that passage of time alone establishes prejudice
as a matter of law. See id. at 673, 675 (citing Shell Oil
Co. v. Winterthur Swiss Ins. Co., 15 Cal. Rptr. 2d 815,
845 (Ct. App. 1993)). Whether UNUM suffered actual
prejudice as a result of Ward’s untimely notice remains a
genuine issue of material fact. See Select Ins. Co. v.
Superior Court, 276 Cal. Rptr. 598, 602 (1990). Thus,
we reverse the district court’s judgment in favor of
UNUM.
Because neither the plan administrator nor the district
court addressed the question of whether the notice-
prejudice rule applied to Ward’s claim, neither the plan
administrator nor the district court determined whether
UNUM suffered actual prejudice flowing from Ward's
untimely notice and proof of claim.‘ Accordingly, we
remand the case to the district court with instructions to
remand to the plan administrator for a factual determina-
tion as to whether UNUM suffered actual prejudice by
virtue of Ward’s untimely submission of proof.
* At the August 3, 1995 hearing on the motion for summary
judgment, the district court inquired :
THE COURT: Is there a body of law that then says that
you have to—the company has to show some prejudice?
MR. SMITH: No, not—not under ERISA. And we have cited
as the Court knows, four cases, . . . all of which interpreted this
plan language, and all of which, in circumstances almost identi-
cal to this, held that the proof of claim had not been timely
provided—
THE COURT: Now—MR. SMITH—really is under ERISA,
and it is those cases that we would submit are controlling.
Among the four cases referred to by UNUM counsel was the
district court disposition in the Cisneros case, now reversed on the
precise issue raised by the court’s question just quoted.
* While the district court noted in passing that “[{t)he delay in
filing precludes UNUM from definitively determining whether plain-
7a
IV
Ward addresses the timeliness of his claim in another
way: he asserts that actual notice of his disability given to
MAC as early as March of 1993 operates as notice to
UNUM as early as March of 1993 because under Cali-
fornia law, an employer who participates in the adminis-
tration of a group insurance policy acts as an agent of the
insurer. He relics on Elfstrom v. New York Life Ins. Co.,
67 Cal. 2d 503, 432 P.2d 731, 63 Cal. Rptr. 35 (1967),
as authority for this proposition. Ward further asserts that
if the Elfstrom rule is somehow preempted by ERISA,
this court should adopt a like rule as a matter of federal
common law. Moreover, Ward asserts that MAC breached
its duties as an ERISA co-fiduciary to inform him of the
availability of long-term disability benefits under the
UNUM pol cy, to receive notice of his claim, and to assist
him in furnishing appropriate proof of his claim to
UNUM, breaches which Ward contends UNUM was
tiff’s disability existed on the date alleged in his claim,” the com-
ment was made in the context of a broader policy discussion con-
cerning time limits on claims rather than as a finding of fact based
upon a specific evidentiary record. There appears to be little evi-
dence in the present record bearing upon the question of actual
prejudice. Paragraph 12 of the Declaration of John A. Houser, III,
dated March 29, 1995, makes the conclusory assertion that “[d]ur-
ing that nearly two year period” between the onset of Ward's dis-
ability and the receipt by UNUM of notice, “UNUM was without
knowledge that plaintiff claimed he was ‘disabled’ and was thereby
deprived of the opportunity to fully evaluate his claim and to de-
termine the extent of his disability at the time he claimed to be
disabled,” but offers no specific evidence showing how that evalua-
tion has been impaired in this case. In fact, the Houser Declaration
indicates that UNUM did not undertake to investigate, evaluate or
determine Ward’s claim on the merits, but assures that “[h]ad
plaintiff timely filed his claim for disability benefits under the
Policy, UNUM would have conducted a thorough claim investiga-
tion.” Id. at Pll (emphasis added). On remand, UNUM has the
burden to prove actual prejudice, that is, that Ward's delay would
have prevented “a thorough claim investigation” in April of 1994
that otherwise would have been possible through November 5, 1993.
obliged to remedy. See 29 U.S.C. § 1105(a) (“a fidu-
ciary with respect to a plan shall be liable for a breach
of fiudciary responsibility of another fiduciary with respect
to the same plan in the following circumstances: .. . (3)
if he has knowledge of a breach by such other fiduciary,
unless he makes reasonable efforts under the circumstances
to remedy the breach.”).°
The Elfstrom Rule
In Elfstrom, the employer, Fullerton Publishing Co.,
had obtained a group life insurance policy for the benefit
of its employees from the defendant, New York Life. The
plaintiff was president and majority shareholder of Fuller-
ton and the father of Brenda, the deceased employee, as
well as the beneficiary under his daughter’s life insurance
certificate. Fullerton’s bookkeeper, Mr. Still, administered
the group policy under the direction of a New York Life
group representative, following the directions set forth in
a manual supplied by New York Life for that purpose.
Mrs. Still mistakenly included Brenda as an insured in
monthly reports to defendant insurer when, in fact,
Brenda was not eligible, because her employment at the
minimum salary required had terminated before expira-
tion of the waiting period necessary for coverage. The
premiums were paid until Brenda’s death, seven months
after expiration of the waiting period. Under these facts,
the California Supreme Court held that the duties of
the employer, discharged by Mrs. Still, in administering
*As Ward noted in his opening brief, whether an individual
plan beneficiary may seek relief in his own behalf for breach of
fiduciary duty under ERISA was raised in Varity Corp. v. Howe,
116 S. Ct. 1065 (1996). Varity answered that question in the affirm-
ative, holding that plan participants and beneficiaries may sue for
individual “appropriate equitable relief” pursuant to § 502(a)(3) of
ERISA, 29 U.S.C. § 1132(a)(3), and are not limited solely to relief
in favor of the plan itself as in Massachusetts Mut. Life Ins. Co. v.
Russell, 473 U.S. 134, 144 (1985), construing ERISA § 502(a)(2).
Id. at 1075-79.
9a
the group life insurance policy, made it the agent of
defendant insurer, and that the insurer was bound by
the mistakes of the employer (per Mrs. Still) acting within
the scope of the agency, provided the plaintiff (bene-
ficiary) was acting in good faith in directing her to effect
coverage for Brenda.
We are convinced that the employer is the agent of the
insurer in performing the duties of administering group
insurance policies. It cannot be said that the employer
acts entirely for its own benefit or for the benefit of its
employees in undertaking administrative functions. While
a reduced premium may result if the employer relieves the
insurer of these tasks . . . the insurer also enjoys signifi-
cant advantages from the arrangement.
67 Cal. 2d at 512-13, 432 P.2d at 737. For the Elf-
strom court, agency depended on the question of control:
The most persuasive rationale for adopting the view
that the employer acts as the agent of the insurer . . . is
that the employee has no knowledge or control over the
employer’s actions in handling the policy or its adminis-
tration. An agency relationship is based upon consent by
one person that another shall act in his behalf and be
subject to his control... . It is clear from the evidence
regarding procedural techniques here that the insurer-
employer relationship meets this agency test with regard
to the administration of the policy, whereas that between
the employer and its employees fails to reflect true agency.
The insurer directs the performance of the employer's
administrative acts, and if these duties are not undertaken
properly the insurer is in a position to exercise more con-
stricted control over the employer’s conduct.
67 Cal. 2d at 513-14, 432 P.2d at 738; see also Pru-
dential Ins. Co. of America v. State Bd. of Equalization,
21 Cal. App. 4th 458, 482, 26 Cal. Rptr. 2d 287, 303
(1993) (“As expressed in Elfstrom, the agency relation-
ship was shown by the insufer’s control over the book-
10a
keeper’s performance of tasks relating to the insurance,
i.e., the bookkeeper/agent performed functions under the
insurer/principal’s direction and for the principai’s bene-
fit.”).
In reaching its conclusions regarding agency, Elfstrom
cited this court’s earlier decision in John Hancock Mut.
Life Ins. Co. of Boston v. Dorman, 108 F.2d 220 (9th
Cir. 1939). In John Hancock, Western Bakeries, the em-
ployer, “handled” the insurance under a group life/
disability insurance master policy obtained for the benefit
of employees; Western Bakeries had accepted insurance
applications, determined employee eligibility, issued cer-
tificates of insurance, and collected premiums, all of which
it then reported to the insurer. We held that the employer
was the insurer’s agent in handling these tasks and that
acceptance of premiums by the insurer through its agent/
employer estc»ped the insurer from claiming that the in-
sured was not an employee within the meaning of the
policy. 108 F.2d at 222-23, 224.
More recent California cases echo the Elfstrom/John
Hancock rule. In McCormick v. Sentinel Life Ins. Co.,
153 Cal. App. 3d 1030, 200 Cal. Rptr. 732 (1984), the
California Court of Appeals explained:
In Elfstrom v. New York Life Ins. Co. (1967) 67
Cal.2d 503, 505, 63 Cal.Rptr. 35, 432 P.2d 731, our high
court considered whether the acts of an employer who
administered a group health insurance policy could be
attributed to the defendant insurer. After reviewing con-
flicting cases from other jurisdictions, the court concluded
the employer was acting as the insurer’s agent and hence
the insurer was liable for the employer’s conduct. (Id., at
p. 508, 63 Cal.Rptr. 35, 432 P.2d 731, citing Rest.2d
Agency, §§ 165, 282(2), and pp. 512-513.) In rejecting
the view the employer acted as the employee’s agent, the
court cited the employer’s assumption of the insurer’s
administ: ative functions and the employee’s lack of con-
lla
trol over the employer’s actions in handling the policy.
(Id., at pp. 513-514, 63 Cal.Rptr. 35, 432 P.2d 731;
accord Bareno v. Employers Life Ins. Co. (1972) 7 Cal.
3d 875, 883, 103 Cal.Rptr. 865, 500 P.2d 889; Pantzalas
v. Superior Court (1969) 272 Cal.App.2d 499, 504, 77
Cal.Rpitr. 354.)
Here, the credit union, like the employer in Elfstrom
performed administrative duties in connection with proc-
essing claims under Sentinel’s disability policy. It is un-
disputed the credit union assumed such responsibilities
as maling the initial claim form to McCormick, notifying
Sentinel of a possible claim from McCormick, and appris-
ing McCormick his claim was incomplete. It also appears
likely McCormick had no control over the credit union’s
actions.. Under these circumstances a triable issue exists
as to whether the credit union was acting as Sentinel’s
agent. If the fact finder determines an agency relation-
ship, as defined in Elfstrom, did exist, the credit union’s
acts can be attributed to Sentinel.
153 Cal. App. 3d at 1040-41, 200 Cal. Rptr. at 737;
see also Metropolitan Life Ins. Co. v. State Bd. of Equal-
ization, 32 Cal. 3d 649, 658-59, 652 P.2d 426, 431, 186
Cal. Rptr. 578, 583 (1982) (Elfstrom is controlling on
issue whether an employer acts as the insurer’s agent in
administering group insurance policies); Bass v. John
Hancock Mutual Life Ins. Co., 10 Cal. 3d 792, 797, 518
P.2d 1147, 1150, 112 Cal. Rptr. 95, 198 (1974) (“[Wle
have held that the employer is the agent of the insurer in
performing the duties of administering group insurance
policies . . . and that accordingly the insurer shares re-
sponsibility for the employer’s mistakes.”); Caldwell v.
United Bus Corp., 77 Cal. App. 3d 381, 383-84, 112 Cal.
Rptr. 7, 8 (1986) (“The general rule in California is that
the employer is merely the agent of the insurer in perform-
ing the duties of administering group health insurance
policies.” ).
12a
Other jurisdictions as well have adopted a similar
approach to the agency question. See, e.g., Middleton v.
The Russell Group, Ltd., 483 S.E.2d 727, 734 (N.C.
1997) (holding that “[a]n employer who performs ad-
ministrative functions [under a group insurance policy],
as in the instant case, is deemed to be the agent of the
insurer,” (citing Elfstrom)), and cases cited therein;
Abiatti v. Buttura & Sons, Inc., 161 Vt. 314, 324, 639
A.2d 988, 993-94 (1994) (agency relationship may be
founded upon the policyholder’s performance of adminis-
trative tasks on behalf of the insurer); Kirkpatrick v.
Boston Mut. Life Ins. Co., 393 Mass. 640, 645-46, 473
N.E.2d 173, 176-77 (1985) (“Whether or not the em-
ployer acts as the insurer’s agent is a factual question to
be resolved on a case by case basis.”); Norby v. Bankers
Life Co. of Des Moines, Iowa, 304 Minn. 464, 471-72,
231 N.W.2d 665, 670 (1975) (“the employer policy-
holder may, in appropriate circumstances, be found to be
the agent of the group insurer of employees”).
In Paulson v. Western Life Ins. Co., 636 P.2d 935 (Or.
1981), the Oregon Supreme Court held that whether an
employer acted as agent for an insurer in administering a
group policy presented a triable issue of fact. The Paulson
court read Elfstrom and other cases as applying a rule
expressed in these terms: “In the performance of a func-
tion delegated by the insurer to the employer, the em-
ployer is Weemed to be the agent of the insurer.” 636
P.2d at 941.°
® Paulson rejected the view that the cases divide into a “majority
rule” and a “minority rule” concerning the employer-agency ques-
tion:
Our analysis of the decisions convinces us that many courts,
even though they purport to apply a “majority rule” or a
“minority rule,” actually base their decision upon the facts
relating to the division of functions between the insurer and
the employer policyholder, and that any “majority” or “minor-
ity” rule is more apparent than real. It is more correct to say
13a
MAC’s Administration of the UNUM Policy
Central to Ward’s agency theory under Elfstrom must
be proof that MAC participated in the administration of
UNUM’s group disability insurance policy and performed
insurance-related tasks delegated by or carried on under
the direction and ultimate control of UNUM. Ward points
to the fact that MAC was designated as plan adminis-
trator by the MAC Plan as well as to specific provisions
of the UNUM policy (Sec. VI, P D) requiring MAC to
furnish information to UNUM concerning employees who
become eligible for coverage, whose coverage changes in
amount, or whose coverage terminates.
Arguing that courts must follow an “absolute and literal
interpretation” * of the language of ERISA plan docu-
that when the plan is exclusively administered by the insurer,
as a matter of law no agency relation exists between the in-
surer and the employer. But if the employer performs all of
the administration of the policy, an agency relationship exists
between the insurer and the employer, as a matter of law. Be-
tween these two extremes, as the division of functions becomes
less separate, or to put it another way, as the employer assumes
responsibility for more administrative or sales functions which
are customarily performed by an insurer, a question of fact
will arise as to the agency relationship between the insurer and
the employer.
636 P.2d at 939.
The Paulson formulation of the Elfstrom rule appears sound. It
also comports with our prior determination of the same issue in
John Hancock.
7 For this proposition, UNUM cites Madden v. ITT Long Term
Disability Plan, 914 F.2d 1279, 1285-86 (9th Cir. 1990), cert. denied,
498 U.S. 1087 (1991). Headnote no. 7 of the Madden opinion recites
that “[fliduciary’s delegate properly gave absolute and literal in-
terpretation to long-term disability plan’s definition of ‘total dis-
ability’, which required that employee was unable to engage in any
occupation,” but this synopsis does not accurately reflect the rele-
vant portion of the Madden opinion. What we said was “Metro-
politan’s use of the Plan definition was clearly proper, because as
an ERISA fiduciary, Metropolitan was required to apply the terms
l4a
ments, UNUM points to Section VI, Paragraph L of its
long-term disability policy, which reads:
L. AGENCY
For all purposes of this policy, the policyholder acts on
its own behalf or as agent of the employee. Under no
circumstances will the policyholder be deemed the agent
of the Company without a written authorization.
Averring that no such written authorization was ever
issued to MAC, and “MAC’s involvement in the LTD
[long-term disability] claims process was, at most, acting
as a conduit between MAC employces and UNUM,”
UNUM urges the conclusion that “MAC is not UNUM’s
agent.”
Of course, the existence of an agency relationship
generally presents a question of fact:
Whether as between the parties their relationship is one
of agency depends on their relations as they in fact exist
under the agreement or acts of the parties, and the ques-
tion is not governed by the stipulations of the parties.
of the Plan. See ERISA, 29 U.S.C. § 1104(a)(1)(D) (1988).” 914
F.2d at 1286 n.6.
While this court has more recently admonished that “[a]n ERISA
plan administrator abuses its discretion if it construes provisions
of plan in a way that ‘conflicts with plain language of plan,’”
Saffle v. Sierra Pacific Power Co. Bargaining Unit Long Term Dis-
ability Income Plan, 85 F.3d 455, 458 (9th Cir. 1996) (quoting Taft
v. Equitable Life Assur. Soc’y, 9 F.3d 1469, 1472 (9th Cir. 1993)),
we have yet to endorse a rule of strict, absolute or literal construc-
tion of ERISA plan documents. Indeed, Saffle appears to reject a
“literal” construction of plan language in favor of a “reasonable”
one, consistent with case law from other circuits. See id. at 458-59
(citing Helms v. Monsanto Co., Inc., 728 F.2d 1416, 1420 (11th Cir.
1984) (rejecting arbitrator’s “absolute and litera!” interpretation
of “totally and permanently disabled” to mean complete helplessness
as unreasonable because it would render the entire plan meaningless
and would contradict policies underlying ERISA); Torix v. Ball
Corp., 862 F.2d 1428 (10th Cir. 1988) (same) ).
15a
Thus, whether a particular relationship is that of agency
does not depend on what the parties call it, and the parties
cannot, where the relationship is in fact one of agency,
change its nature by declaring that it is not an agency, nor
can they, by calling their relations one of agency, make it
so when it is not so in fact. The surrounding facts and
circumstances determine the relationship, regardless of the
understanding of the parties as to the exact nature of the
relationship. . . .
2A C.J.S. Agency §7 (1972) (footnotes omitted);
accord, Wallace v. Sinclair, 114 Cal. App. 2d 220, 250
P.2d 154, 16061 (1953); American Marine Paint Co. v.
Nyno Line, 70 Cal. App. 415, 233 P. 366, 369 (1924)
(“nor does it matter whether or not his employment be
called an agency”); 3 Am. Jur. 2d Agency § 21 (1986)
(“The manner in which the parties designate the relation-
ship is not controlling, and if an act done by one person
in behalf of another is in its essential nature one of
agency, the one is the agent of such other notwithstand-
ing he is not so called.” (footnote omitted)); 2 (pt. 2)
Cal. Jur. 3d Agency § 12, at 170-73 & nn. 77-93 (1997)
(citing Elfstrom). Ordinarily, an agency relationship may
be established through evidence of control and apparent
or applied authority, even where the parties have agreed
to the contrary. See, e.g., Kuchta v. Allied Builders Corp.,
21 Cal. App. 3d 541, 547, 98 Cal. Rptr. 588, 591
(1971) (notwithstanding that “the agreement itself stated
that no such agency relationship was created, the declara-
tions of the parties in the agreement respecting the nature
of the relationship are not controlling.”); Fernander v.
Thigpen, 278 S.C. 140, 293 S.E.2d 424, 426 (1982).
However, UNUM also asserts that ERISA preempts the
Elfstrom rule because Elfstrom imposes respondeat su-
perior liability; according to UNUM, “ERISA’s rule of
personal fiduciary liability not only supersedes, but is
inconsistent with, the doctrines of respondeat superior and
16a
vicarious liability.” Nor could the Elfstrom rule be
adopted as a matter of federal common law because
adoption of respondeat superior and vicarious theories
would impermissibly “revise the text” of ERISA by adding
causes of action or remedies not affirmatively authorized
by the statute. See Mertens v. Hewitt Assoc., 508 U.S.
248, 259 (1993) (“The authority of courts to develop a
‘federal common law’ under ERISA ... is not the au-
thority to revise the text of the statute.”).
No prior Ninth Circuit opinion has addressed the
relationship of ERISA to state agency law,* or more spe-
cifically, whether ERISA preempts the rule of California
State law announced in Elfstrom. Nor has any prior
opinion of this court discussed whether under circum-
stances such as these, federal statutory or common law
creates the agency relationship that Ward suggests.
Looking to case law from other circuits, Turrill v. Life
Ins. Co. of North America, 753 F.2d 1322 (Sth Cir.
1985), informs our inquiry. Turrill, an American Air-
lines facility maintenance mechanic, became disabled after
a fall on a wet floor at the Dallas/Ft. Worth airport. The
insurer had issued a group disability insurance policy to
American Airlines that was in effcct at the time of the
accident. Turrill did not submit notice or proof of his
claim directly to the insurer until more than two years
after the accident. However, soon after the accident, he
did submit an array of documentation concerning his in-
jury to his employer. Reversing summary judgment in
favor of the insurer on grounds of timeliness, the Fifth
Circuit concluded that “a genuine issue of material fact
®We have noted, however, that Nationwide Mut. Ins. Co. v.
Darden, 503 U.S. 318 (1992), “construed the term ‘employee’ in the
Employee Retirement Income Security Act of 1974 (ERISA), 29
U.S.C.8 1002(6), as incorporating ‘judicial agency law criteria for
identifying master-servant relationships.’ Id. at 319... .” Coupar
v. United States Department of Labor, 105 F.3d 1263, 1266-67 (9th
Cir. 1997).
17a
exists regarding the authority of American Airlines to
receive proofs of loss” as an agent of the insurer. Id. at
1324. “Whether such an agency relationship existed bears
heavily on the timeliness of Turrill’s proof of loss... .”
Id.
To resolve the agency question, the Turrill court looked
both to Texas agency law and to ERISA.
Under the Employee Retirement Income Security Act
of 1974 (ERISA), . . ., an employer who, like American
Airlines, provides disability benefits through a group in-
surance policy owes fiduciary duties to the participating
and their beneficiaries. See 29 U.S.C. § 1104
(a)(1) (1982) (“[A] fiduciary shall discharge his duties
with respect to a plan solely in the interest of the par-
ticipants and the beneficiaries.”) The fiduciary obliga-
tions of such an employer easily include responsibility to
take care that the insurance company receives documenta-
tion necessary under the group policy to achieve recovery
on a just benefits claim. This is especially so if the docu-
mentation is already in the agent’s hands.
ERISA thus obliged American Airlines to exercise care
and diligence in assuring compliance with the proof of
loss requirements of the master policy. It also required
the employer to provide to participating employees exten-
sive information regarding the plan. 29 U.S.C. § 1021
(1982).
ERISA compels the employer (or other plan fiduciary)
to act affirmatively in administering and providing infor-
mation on its employee benefits plan. In cases involving
group policies, the requisite employer’s efforts include de-
termining employees’ eligibility for coverage, enrolling
them in the plan and group policy, advising them as to
scope of benefits, collecting and forwarding premiums,
and helping employees file claims. An insurance company
normally performs these functions. But in group insurance
18a
situations where ERISA applies, the employer and group
insurer typically develop a course of dealing in which the
employer substitutes for the insurer in a relationship that
ERISA impliedly may require.
Under these circumstances, courts may properly infer
an agency relationship. The group insurer’s failure to dis-
avow the sufficiency of the employer’s performance of
functions that ERISA requires the employer to perform
can properly lead to a conclusion that the group insurer is
STS LAR POW ree Hence ene
functions. .
Id. at 1325 (footnote & citation omitted). The Turrill
court held that “proof of an employer’s ERISA-based
reporting and fiduciary responsibilities with respect to a
group insurance policy in itself raises an issue under Texas
law as to the existence of an agency relationship between
the employer and the group insurer.” Id. Nothing in
Turrill even hints that state agency law is somehow pre-
empted by ERISA.
MAC’s Fiduciary Duties Under ERISA
In enacting ERISA, Congress did not explicitly enumer-
ate all the duties of an ERISA fiduciary, and did not
describe every instance in which an employer acts in a
fiduciary capacity, but intentionally left many of these
details for the courts to develop in light of the special
nature and purpose of employee benefit plans. Varity
Corp. v. Howe, 116 S. Ct. 1065, 1070 (1996). ERISA
contemplates that an employer often will act as both em-
ployer and plan fiduciary, but not all of the employer's
business activities implicate ERISA’s fiduciary duties. Id.
at 1071.
At minimum, ERISA makes an employer who exercises
“discretionary authority or discretionary responsibility” in
plan administration a fiduciary:
19a
iA) pesven |b 9. Stastery sit omens to 9. Bian. te Oe
extent (i) he exercises any discretionary authority or
discretionary control respecting management of such plan
or exercises any authority or control respecting manage-
ment or disposition of its assets .. . or (iii) he has any
discretionary authority or ya ae responsibility in
the administration of such plan.
29 U.S.C. § 1002(21)(A). An employer who performs
“purely ministerial functions” in administering a plan may
not be a fiduciary, but even so, “[t}he issue is not just how
the duties are characterized, but what they are.” IT Corp.
v. General American Life Ins. Co., 107 F.3d 1415, 1419
(9th Cir. 1997); see also 29 C.F.R. § 2509.75-8, at D-2
(1996) (“[P]ersons who have no power to make any de-
cisions as to plan policy, interpretations, practices or pro-
cedures” are not fiduciaries under ERISA).
In this case, MAC’s activities as plan administrator
included determining employees’ eligibility for coverage,
enrolling them in the plan, issuing certificates of insurance
under the group policy, advising employees as to scope of
benefits, collecting and forwarding premiums to UNUM,
and on occasion, at least, helping employees file claims.
In addition, the certificate of coverage and summary plan
description pamphlet prepared by UNUM and distributed
to MAC employees by MAC advises employees that MAC
is the Plan Administrator, that “[t]he people who operate
your Plan, called ‘fiduciaries’ of the Plan, have a duty to
do so prudently and in the interest of you and other Plan
participants and beneficiaries,” and instructs employees
that “[iJf you have any questions about your Plan, you
should contact the Plan Administrator.” °
Arguably, MAC has assumed fiduciary duties under
ERISA in the administration of the MAC Plan.” Consis-
*UNUM'’s certificate of coverage also counsels employees that
“Ti]f you have any questions about any terms and provisions, please
contact the Insurance Administrator at your work location or write
to our claims paying office.”
—
20a
tent with Turrill, proof of MAC’s fiduciary duties under
ERISA with respect to UNUM’s group insurance policy
raises an issue under California law as to the existence of
an agency relationship between the employer and the
group insurer in light of Elfstrom.
ERISA Preemption
Within its reach, ERISA regulates plans which provide
employees with pension and welfare benefits. “It is a
comprehensive statute designed to promote the interests of
employees and their beneficiaries in employee benefit
plans.” Burgio and Campofelice, Inc. v. New York State
Dep’t of Labor, 107 F.3d 1000, 1007 (2d Cir. 1997).
Section 514(a) of ERISA promotes uniform federal regu-
lation of employee benefit plans by preempting “any and
all State laws insofar as they may now or hereafter relate
to any employee benefit plan” covered by ERISA, subject
to limited exceptions. 29 U.S.C. § 1144(a). Section
514(a)’s purpose “was to minimize the administrative and
financial burden of complying with conflicting directives
among States and between States and the Federal Govern-
ment. Otherwise, the inefficiencies created could work to
the detriment of plan beneficiaries.” Ingersoll-Rand Co.
v. McClendon, 498 U.S. 133, 142 (1990).
While § 514(a)’s language is “deliberately expansive,”
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46 (1987),
ERISA does not preempt “if the state law has only a ‘ten-
uous, remote, or peripheral’ connection with covered plans,
. . . as is the case with many laws of general applicability.
.. .” District of Columbia v. Greater Washington Bd. of
Trade, 506 U.S. 125, 130 n.1 (1992) (quoting Shaw v.
Delta Air Lines, Inc., 463 U.S. 85, 100 n.21 (1983)).
In fields of traditional state regulation, ERISA preempts
‘© The term “fiduciary” has a broader meaning under ERISA than
at common law because ERISA “defines ‘fiduciary’ not in terms of
formal trusteeship, but in functional terms of control and authority
over the plan.” Mertens, 508 U.S. at 262.
2la
state law if that is “‘the clear and manifest purpose of
Congress.” New York State Conf. of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655
(1995) (quoting Rice v. Santa Fe Elevator Corp., 331
U.S. 218, 230 (1947)). The Supreme Court recently
acknowledged the existenc eof “myriad state laws in areas
traditionally subject to local regulation, which Congress
could not possibly have intended to eliminate.” California
Div. of Labor Standards Enforcement v. Dillingham
Constr., 117 S. Ct. 832, 842 (1997).
In each instance, the intent of Congress controls our
analysis of preemption under ERISA. Yet the statute it-
self offers little guidance as to when a state law “relates
to” an ERISA plan within the meaning of § 514(a). In
the Travelers case, the Supreme Court observed that courts
“must simply go beyond the unhelpful text and the frus-
trating difficulty of defining its key term, and look instead
to the objectives of the ERISA statute as a guide to the
scope of the state law that Congress understood would
survive.” 514 U.S. at 656. In light of legislative history
indicating that “the basic thrust of the preemption cause
. . » Was to avoid a multiplicity of regulation in order to
permit the nationally uniform administration of employee
benefit plans,” the Travelers Court concluded that two
types of state laws “relate to” employee benefit plans
within § 514(a): laws that “mandat[e] employee benefit
structures or their administration,” and laws that “pro-
vid{e] alternative enforcement mechanisms.” Id. at 657-58.
ERISA and Elfstrom
ERISA and Elfstrom are not anathema. Elfstrom does
not dictate the benefits to be provided or the manner in
which the plan will be administered. Elfstrom does not
require an employer to participate in the administration
of a group insurance policy or an insurer to delegate its
functions to an employer.” Nor does Elfstrom create an
In this case “California is not telling employers how to write
their ERISA plans. Nor is it conditioning some requirement on
22a
“alternate enforcement mechanism” for ERISA plan obli-
gations beyond those set forth in the statute. Contrast
Pilot Life, 481 U.S. at 55-57. Elfstrom simply describes
in legal terms a relationship that already exists in fact.
As Turrill illustrates, the principle that an employer
who undertakes responsibilities in administering an em-
ployee benefit plan assumes fiduciary duties under ERISA
meshes smoothly with the Elfstrom rule that an employer
who assumes such responsibilities in administering a group
insurance policy acts as the agent of the insurer. Turrill,
753 F.2d at 1324-25; see also Middleton, 483 S.E.2d at
732-35 (on claim for unpaid benefits under ERISA § 502,
Elfstrom rule applies to hold insurer accountable for em-
ployer’s mistake in denying former employee COBRA
continuation coverage; o*".:r state law claims preempted
by ERISA).
Ostensibly, the legislative effort was to ensure that em-
ployee benefits are provided through an ERISA plan over-
seen by plan fiduciaries, including the plan insurer and
those who the insurer may enlist to participate in the
administration of the plan. Nothing in § 514(a) empow-
ers a plan fiduciary to extend ERISA’s preemptive reach
by using policy language that negates agency law prin-
ciples in favor of exonerating itself from the errors of
those who act on its behalf. Cf. IT Corp., 107 F.3d at
1418 (any interpretation of a plan which prevents a plan
fiduciary from being held liable as a fiduciary is void);
29 U.S.C. §1110(a). Plan documents defining or dis-
avowing a relationship do not have the status of the
ERISA statute, particularly when the actions of the signa-
tors belie the document recitals.”
how individual employers write their ERISA plans.” WSB Elec.,
Inc. v. Curry, 88 F.3d 788, 796 (9th Cir. 1996); see Employee
Staffing Services, Inc. v. Aubry, 20 F.3d 1038, 1041 (9th Cir. 1994).
12 Merely reciting that “if the terms of your certificate of cover-
age and the policy differ, the policy will govern” does not resolve the
23a
Even if UNUM could by agreement with MAC exon-
erate itself of its agency relationship as against MAC,
there is no reason to suppose that the agreement would
exonerate UNUM from its duties to participants and bene-
ficiaries of the ERISA plan, or the conduct of those who
act on its behalf with apparent authority. The employee
participants did not sign the agreement bearing the agency
disclaimer and they are entitled to have the plan adminis-
tered in the interest of participants and beneficiaries. See
29 U.S.C. § 1104. Absent the insurer’s over disavowal
of the sufficiency of the employer’s performance of func-
tions under the plan, actually communicated, the partici-
pants and beneficiaries should be able to rely upon the
relationships that exist. Nothing in ERISA suggests that
in availing themselves of plan benefits, employee partici-
pants must sift plan documents for hidden disclaimers that
the designated plan administrator does not act as agent
for the plan or its insurer.“ The statute must do more
than set traps for the unwary.
question. Where the certificate remains silent on the subject of
agency, the existence in fact of an agency relationship does not
constitute a “term” of the certificate.
Whether an agent or not, if an employer/plan administrator exer-
cises sufficient authority over the plan to become an ERISA fidu-
ciary, contractual policy disclaimers could not limit fiduciary and
co-fiduciary liability under ERISA. See IT Corp., 107 F.3d at
1418-19.
18UNUM cites Kennedy v. System One Holdings, Inc., 835 F.
Supp. 947 (S.D. Tex. 1993), as rejecting a participant’s claim that
UNUM was estopped from denying his late claim based upon mis-
representations by the employer/plan administrator because, inter
alia, “the Plan clearly and unambiguously provides that System One
is not UNUM’s agent ....” Id. at 951 (footnote omitted). Kennedy
relies on policy language essentially identical to Section VI, Para-
graph L of the long-term disability policy issued to MAC. See
id. at 951 n.5. However, Kennedy does not discuss Turrill, and
nothing in Kennedy suggests that the plaintiff gave his employer
timely notice of his disability claim, or even that the employer hau
undertaken administrative responsibilities under the insurance pol-
icy in question. In fact, Kennedy identifies UNUM—not the em-
24a
Applied in the context of this case, Elfstrom does not
operate to create a cause of action against UNUM out-
side of the exclusive claim for unpaid benefits pursuant
to §502(a) of ERISA, 29 U.S.C. § 1132(a), pleaded
in Ward’s complaint. Contrast Kanne v. Connecticut Gen.
Life Ins. Co., 867 F.2d 489, 494-95 (9th Cir. 1988)
(state statutory claim for delayed benefits payment pre-
empted by ERISA); Perkins v. Time Ins. Co., 898 F.2d
470, 474 (Sth Cir. 1990) (state law tortious breach of
contract and bad faith claims against insurer for nonpay-
ment of benefits preempted by ERISA). Nor does Elf-
strom alter the facts as between MAC and UNUM, or
create an agency relationship that may or may not exist as
a consequence of the parties’ own course of dealing. The
question ultimately for the district court under Elfstrom
becomes whether MAC acted for UNUM and under
UNUM'’s control in receiving and forwarding long-term
disability claims, and thus whether timely notice to MAC
of Ward’s disability operated as timely notice to UNUM
as well.
In the context of a claim for unpaid benefits under
§$ 502(a), ERISA does not operate to preempt the appli-
cation of the state law embodied in Elfstrom and its prog-
eny to determine the question of timeliness of notice and
proof of claim. We are not persuaded that Congress had
as its clear and manifest purpose the abrogation of state
agency law as it applies to insurers and employers ad-
ministering group insurance policies.
Whether MAC acted as fiduciary and as agent of
UNUM in administering the MAC Plan’s long-term dis-
ability policy, particularly in receiving and forwarding
ployer—‘“as administrator of the long term disability benefits plan
at issue in this case.” Id. at 949; see also id. at 948 (plaintiff sought
benefits under “an employee welfare benefit plan (‘Plan’) adminis-
tered by UNUM”). Thus, Kennedy does not address the Elfstrom
rule because the issue was not raised in that case.
Indeed, we could identify no reported case giving the effect to
this language now urged by UNUM.
DIS fee Poy We wt
25a
claims for benefits,’* cannot be decided as a matter of law
on the existing record. The questions of employer-insurer
agency and employer fiduciary duty instead raise genuine
issues of fact.”
However, these issues become material in this case only
if the question of timeliness of submission of proof of
claim to UNUM, including actual prejudice under Cis-
neros, is ultimately resolved adversely to Ward.
The judgment of the district court is REVERSED and
the case is REMANDED to the district court with in-
structions to remand to the plan administrator for a
determination as to whether UNUM suffered actual preju-
dice by reason of the delay in submission of Ward’s
notice of claim, and if necessary following remand to the
plan administrator, to determine whether MAC acted as
ERISA fiduciary and as agent of UNUM in administering
the MAC Plan’s long-term disability policy, particularly
in receiving and forwarding claims for benefits, and if so,
whether Ward furnished timely notice and proof of his
disability to MAC, and if so, to what remedies Ward may
be entitled.
14 See Norby, 304 Minn. at 472, 231 N.W.2d at 670 (“The focus
. Should be on which specific and relevant administrative func-
tions are performed by the employer on behalf of the insurer, with
respect to the particular ground asserted for . . . nonpayment under
the policy. .. . An employer may be considered an agent of an
insurer for some purposes but not for others.”)
% The extent of UNUM’s liability, if any, for breach by a co-
fiduciary pursuant to 29 U.S.C. §1105(a) depends, inter alia, on
UNUM’s knowledge of the breach, which raises even more issues
of fact. That MAC has not been joined as a party to this litiga-
tion does not impair Ward’s entitlement to_relief under ERISA
§ 502(a)(1), but may raise procedural questions as to any further
relief sought under § 502(a)(3). Cf. Madden, 914 F.2d at 1287
(“*‘ERISA permits suits to recover benefits only against the Plan
as an entity, . . . and suits for breach of fiduciary duty only against
the fiduciary.’” (quoting Gelardi v. Pertec Computer Corp., 761
F.2d 1323, 1324-25 (9th Cir. 1985) (citations omitted) ).
Moreover, to the extent that Ward may be entitled to receive
payment of benefits pursuant to ERISA § 502(a)(1), further equi-
table relief under § 502(a)(3) may not be “appropriate.” Varity
Corp., 116 S. Ct. at 1079.
26a
[Filed Mar. 23, 1998]
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 95-56269
D.C. No. CV-94-01454-MHH
JOHN E. WARD,
Plaintiff-A ppellant,
v.
MANAGEMENT ANALYSIS COMPANY EMPLOYEE DISABIL-
ITY BENEFIT PLAN (proper party name) UNUM Life
Insurance Company of America,
Defendant-Appellee.
Before: FLETCHER and TROTT, Circuit Judges, and
JENKINS,* District Judge
ORDER
_The panel has voted to deny the petition for rehearing.
Judges Fletcher and Trott vote to reject the suggestion
for rehearing en banc and Judge Jenkins so recommends.
The full court has been advised of the suggestion for an
en banc rehearing, and no judge of the court has re-
quested a vote on the suggestion for rehearing en banc.
Fed. R. App. P. 35.
The petition for rehearing is denied and the suggestion
for rehearing en banc is rejected.
* Honorable Bruce S. Jenkins, United States District Judge for
the District of Utah, sitting by designation.
oy ee ee i
27a
[Filed Aug. 8, 1995]
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
Case No. CV 94-1454 H( AJB)
JOHN E. WARD,
Plaintiff,
vs.
MANAGEMENT ANALYSIS COMPANY EMPLOYEE
DISABILITY BENEFIT PLAN,
Defendant.
ORDER GRANTING DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT
Defendant UNUM has filed a motion for summary
judgment. Plaintiff opposes the motion. On August 3,
1$_5, the court held a telephone oral argument in this
matter and both parties assented to having the matter
heard on this date. Brooks Iler appeared on behalf of
plaintiff John Ward and Jeffrey Smith appeared on be-
half of defendant UNUM.
Having reviewed the papers submitted in this matter
and having heard oral argument in the case, the court
grants deiendant’s motion for summary judgment.
BACKGROUND
Plaintiff was the former Chief Executive Officer of
Management Analysis Company (“MAC”). On May 8,
1992, plaintiff resigned from his position upon the request
of the company’s Board of Directors over financial con-
cerns about a particular company project.
28a
Throughout his nine years of employment with MAC,
plaintiff had premiums for long-term disability insurance
deducted from his paycheck. The disability policy is an
insured employee welfare benefit plan called the Manage-
ment Analysis Company Plan (the “Plan”) and is is-
sued by UNUM Life Insurance Company of America
(“UNUM”).
The issue in this case is whether plaintiff made a timely
claim for benefits under the Plan. According to plaintiff's
application for benefits, he first became aware of his dis-
ability on May 5, 1992. In December 1992, plaintiff re-
ceived a diagnosis of diabetic neuropathy.
Following confirmation of his- diagnosis, plaintiff filed
a claim for state disability benefits. In or around late
February or early March 1993, plaintiff received notice
that his state benefits application had been approved.
Plaintiff then contacted the Human Resources division of
MAC to arrange for the continuation of his insurance
coverage under COBRA. The company’s Administrative
Vice-President, Dexana MacQuarrie, forwarded materials
regarding COBRA benefits to plaintiff and explained that
plaintiff needed to get a disability determination from the
Social Security Administration in order to extend his
insurance benefits.
In July 1993, plaintiff received his Social Security
award of disability, a copy of which he forwarded to
MAC’s Human Resources department. At that time,
neither Maria Bonney, the employee handlix¢ plaintiff's
health insurance coverage, nor Dexana MacQuarrie men-
tioned to plaintiff that he might obtain coverage under
the Plan.
In April 1994, while cleaning out a safety deposit box;
plaintiff discovered a booklet entitled “Your Long Term
Disability Income Benefits.” Upon discovering the pam-
phiet, plaintiff contacted Maria Bonney to determine
whether he was covered under the long-term plan. Bon-
ney told plaintiff that he was indeed covered and sent
29a
him an application for long term disability benefits. Under
the terms of the Plan, if plaintiff's claim had been ap-
proved, he would have been entitled to $13,000 per
month for a period of forty-two months which adds up to
a total available benefit of approximatcly $546,000.
Plaintiff completed the application and submitted it to
MAC. MAC completed the employer section and for-
warded the application to UNUM on April 11, 1994.
On April 13, 1994, UNUM advised plaintiff that his
claim would not be reviewed because it was not submitted
in a timely fashion. On June 6, 1994, plaintiff's counsel
requested a review of UNUM’s claim denial. Six days
later, UNUM confirmed its denial of coverage. Plain-
tiff then filed this suit in federal court.
On May 8, 1995, the court denied without prejudice
defendant's motion for summary judgment noting that
there were unresolved material issues of fact in regards
to the agency issue.
DISCUSSION
A. Standard
A motion for summary judgment shall be granted where
“there is no genuine issue as to any material fact and...
the moving party is entitled to judgment as a matter of
law.” Fep R. Civ P. 56(c); British Airways Bd. v. Boe-
ing Co., 585 F.2d 946, 951 (9th Cir. 1978). Any doubt
as to the existence of any issue of material fact requires
denial of the motion. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 255 (1986). The opposing party cannot
rest on the mere allegations or denials of his pleading,
but must “go beyond the pleadings and by her own affi-
davits, or by the ‘depositions, answers to interrogatories,
and admissions on file’ designate ‘specific facts showing
that there is a genuine issue for trial.’” Celotex Corp.
v. Catrett, 477 U.S. 317, 324 (1986) (citation omitted).
30a
B. Application of Standard
1. Application of Agency Standard
Defendant argues that as a matter of law it was not
required to entertain plaintiffs application for long-term
disability benefits because the application was untimely.
Plaintiff argues that he provided timely notice to his em-
ployer, MAC, and that under agency law, timely notice to-
MAC was tantamount to timely notice to UNUM.
First, the court considers the issue of whether agency
law is applicable to this case. The MAC plan admin-
istered by UNUM is governed by ERISA and ERISA
preempts all state law claims “relating to” an ERISA
plan. 29 U.S.C. § 1144(a); Pilot Life Ins. Co. v. De-
deaux, 481 U.S. 41, 44 (1987). Plaintiff argues how-
ever, that in this instance, state agency law applies. Spe-
cifically, plaintiff relies upon Elfstrom v. New York Life
Ins. Co., 67 Cal.2d 503 (1967). In Elfstrom, the Cali-
fornia Supreme Court concluded that where an employer
is the named insured under a group insurance policy, the
employer acts as an agent of the insured. /d. at 513. In
reaching this conclusion, the court noted that in perform-
ing administrative duties related to the group insurance
benefits, the employer was not acting entirely for its own
benefit, but for the benefit of both the insurance com-
pany and itself. Jd. at 511. Administrative duties in-
cluded determination of employee’s eligibility for insur-
ance and completing the certificate of insurance. /d. at
513-14.
Plaintiff contends that his employer furnished UNUM
with information regarding MAC’s employees, determined
which employees were eligible for coverage and arranged
for payments to be made to UNUM. By performing
these duties, plaintiff suggests that MAC acted as an
agent for UNUM. As such, plaintiff argues that provid-
ing notice to the human resources division of MAC con-
stituted timely notice to UNUM.
not applicable
field. Plaintiff argues that under
ERISA does not preempt “any law of any State which
regulates insurance, banking, or securities.” 29 U.S.C.
§ 1144(b)(2)(A). To determine whether a state provi-
sion falls under the “savings clause,” the court must de-
termine if the state provision is specifically directed to
the insurance industry. Pilot Life, 481 U.S. at 48.
Whether the law affects the “business of insurance” is
further determined by a three-prong test: (!) whether the
practice has the effect of spreading a policyholder’s risk;
(2) whether it is an integral part of the_policy relation-
ship between insurer and insured; and (3) whether it is
limited to entities within the insurafce industry. Metro-
politan Life Ins. Co. v. Mass., 471 U.S. 724, 739 (1985).
Here, the court notes that Elfstrom does not meet all
the necessary criteria. First, the mere fact that an em-
ployer acts as an agent for the insurer does not transfer
the policyholder’s risk. The assumption of administrative
duties by the employer does not transfer risk of ‘oss from
the insurer to the employer.
Second, the rule in Elfstrom is not an integral part of
the policy relationship between insurer and insured. As
defendant correctly points out, California Jaw allows for
limitations to be placed on an agency relationship between
employer and insured. Specifically, California Insurance
Code § 10209(d) states that “[t]he contract of insurance
and individual certificate may contain provisions defining
the extent to which the employer acts as the agent of the
employee or may act as the agent of the insurer.” /d.
The policy in question here states that MAC “acts on its
own behalf or as agent of the employee.” It further states
that “[uJnder no circumstances will [MAC] be deemed the
agent of [UNUM] without a written authorization.”
32a
2. Was Plaintiff's Application for Benefits Timely
Because Eljstrom does not fall under the savings clause
exception, the court finds that ERISA controls this case.
Under ERISA, the district court reviews de novo a deter-
mination of non-eligibility for ERISA benefits. Patterson
v. Hughes Aircraft Co., 11 F.3d 948 (9th Cir. 1993).
Terms in an ERISA insurance policy are interpreted in
“an ordinary and popular sense as would a [person] of
average intelligence and experience.” Evans v. Safeco Life
Ins., 916 F.2d 1437, 1441 (9th Cir. 1991) (per curiam).
Courts should not “artificially create ambiguity where
none exists.” /d. Finally, “[i}f a reasonable interpretation
favors the insurer and any other interpretation would be
strained, no compulsion exists to torture or twist the lan-
guage of the policy.” /d.
Under the terms of the Plan, plaintiff had 180 days
from the discovery of his disability to file for long-term
disability benefits. If it was not reasonable for him to
give proof of disability within those 180 days, plaintiff was
required to file his claim within one year plus 180 days
from the onset of his disability. The policy regarding
proof of claim was included in the booklet summarizing
benefits which plaintiff found in his safe deposit box.
In his application for benefits, plaintiff states that his
disability began on or about May 5, 1992. As such, the
latest day for plaintiff to file his claim was December 5,
1993. However, plaintiff did not file his claim until April
11, 1994. Pursuant to the policy, plaintiff's claim was late
and therefore defendant was not obligated to honor plain-
tiff's claim for long-term disability benefits.
Plaintiff claims he relied on MAC’s human resources
division to provide him with information regarding his
benefits. The court notes, however, that plaintiff was not
a mere employee of MAC, but served as CEO of the
company. As CEO of the company, plaintiff met annually
with the company’s Human Resources department to re-
33a
view MAC's insurance plan, including the one at issue.
Plaintiff states that five months before his termination, he
attended a company-wide meeting relating to MAC’s bene-
fits. A UNUM representative provided information at that
meeting. Thus, the court finds that plaintiff had adequate
notice of the types of insurance coverage offered by his
company.
Finally, as a point of policy, UNUM aptly notes that
the reason for placing a time limit on filing proof of
claims is to avoid the prejudicial effect of delay. The
Plan extends only to a disability which occurred while
plaintiff was working for the company. The delay in
filing precludes UNUM from definitively determining
whether plaintiff's disability existed on the date alleged in
his claim.
CONCLUSION
The court certainly finds the facts of this case to be
sympathetic. Nonetheless, having carefully reviewed the
matter, the court finds that plaintiff did not file a timely
application for benefits. Accordingly, defendant’s motion
for summary judgment is granted.
IT IS SO ORDERED.
Dated: 8-7-95
/s/ Marilyn L. Huff
MARILYN L. HuFFr
Judge
United States District Court
34a
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
Case No. 94-1454 H(AJB)
JouHN E. WARD,
vs.
MANAGEMENT ANALYSIS COMPANY EMPLOYEE
DISABILITY BENEFIT PLAN,
Defendant.
Date: July 24, 1995
Courtroom of the Honorable Marilyn L. Huff
Plaintiff,
DECLARATION OF JOHN A. HOUSER, III
Attached hereto for the Court's convenience is a true
and correct copy of the Declaration of John A. Houser
III, and the exhibits attached thereto. The original Dec-
laration of Mr. Houser was filed in connection with De-
fendants’ prior Motion for Summary Judgment and is
contained in the Court's file.
DATED: June 26, 1995
Respectfully submitted,
JerrrRey P. SMITH
Davip RIBAKOFF
Apams, Duque & HAZELTINE
By /s/ Jeffrey P. Smith
Jerrrey P. SMITH
Attorneys for Defendants
UNUM Life Insurance
Company of America and
Management Analysis
Company Plan
nS ee Ry Sveti
35a
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
Case No. 94-1454 H( AJB)
JoHN E. WARD,
Plaintiff,
vs.
MANAGEMENT ANALYSIS COMPANY EMPLOYEE
DISABILITY BENEFIT PLAN,
Defendant.
Date: May 8, 1995
Courtroom of the Honorable Marilyn L. Huff
DECLARATION OF JOHN A. HOUSER, III
I, John A. Houser, III, declare as follows:
1. I am the Director-Technical Services in the Quality
Review Section of UNUM Life Insurance Company of
America (“UNUM”). The Quality Review Section is
responsible for performing ERISA reviews of disability
benefits claims such as that of John E. Ward, the plaintiff
in this case.
2. The facts set forth herein are based upon my own
personal knowledge. My personal knowledge is in part
derived from my review of and familiarity with UNUM’s
records relating to this claim and the subject Group Policy
No. 310727 (the “Policy”). Those records are business
records of UNUM which were prepared by or received
by employees of UNUM in the course of its business at
or near the time of the acts, conditions or events described
in the records. The records are prepared by persons with
36a
knowledge or from information given by a person with
knowledge of the acts, conditions, or events described in
the records. The records are kept by UNUM in the course
of its regularly conducted business activities, in accord-
ance with its regular practices, and are trustworthy. If
called as a witness in this matter, | could and would
testify competently thereto.
3. Attached hereto as Exhibit | is a true and correct
copy of the Group Long Term Disability Policy issued by
UNUM Life Insurance Company of America to Manage-
ment Analysis Corporation (“MAC”) under which eligible
employees of MAC were covered, including Mr. Ward.
This is the Policy which was in effect on May 8, 1992,
the date of Mr. Ward’s alleged disability. The original
effective date of the Policy was November 1, 1993.
4. Attached as Exhibit 2 is a true and correct copy of
the employee certificate booklet which summarizes and
describes the coverage under the Policy. This is the
booklet which was in effect at the time of Mr. Ward’s
alleged disability. A quantity of these booklets were sent
by UNUM to MAC for distribution to MAC’s employees.
5. In accordance with terms the Policy, the policy-
holder (MAC) acts on its own behalf or as agent of the
employee. Under no circumstances will the policyholder
(MAC) be deemed the agent of the Company (UNUM)
without a written authorization. [See, Policy at L-GPP-4]
No such written authorization was ever issued by UNUM
to MAC,
6. The Policy requires insureds to submit proof of
their claims no later than 90 days after the end of the
elimination period [Policy at L-GPP-2-L-GPP-3]. “Proof
of claim” requires completion of a three part claim form.
The first part, to be completed by the insured, is entitled
“Application for Long Term Disability Benefits.” The
second part, to be completed by the employer/policy-
holder, is entitled “Employer’s Report of Claim,” and the
37a
third part, entitled “Attending Physician's Statement” is
to be completed by the insured’s treating physicians.
7. On April 11, 1994, UNUM, through its Western
Regional Benefits Office located in Glendale, California,
first received notice of Mr. Ward’s claim for long term
disability benefits under the Policy. UNUM received the
following documents pertaining to Mr. Waru’s claim, true
and correct copies of which are attached hereto:
a. A Long Term Disability Claim Employer's State-
ment, dated April 6, 1994 [Exhibit 3];
b. A Long Term Disability Claim Job Analysis dated
April 6, 1994 [Exhibit 4];
c. Long Term Disability Claim Employee’s Authoriza-
tion dated March 29, 1994 [Exhibit 5];
d. Long Term Disability Claim Employee’s Statement
dated March 29, 1994 [Exhibit 6];
e. Letter from Maria Bonney dated April 6, 1994
{Exhibit 7];
f. W-2 Wage and Tax Statements 1991 and 1992 for
John E. Ward [Exhibit 8];
g. Group Enrollment Request Card of John E. Ward
[Exhibit 9];
h. Memorandum from MAC to John E. Ward dated
April 5, 1983 Re: Statement of Insurance Coverage Ef-
fective Date: 3/21/83 [Exhibit 10];
i. Resume of John E. Ward [Exhibit 11];
j. Award Certificate Letter from Social Security Ad-
ministration to John E. Ward, dated July 30, 1993 ({Ex-
hibit 12);
k. Long Term Disability Claim Physicians Statement
of Robert A. Smith dated March 23, 1994 [Exhibit 13];
38a
1. Letter from Christian W. Mende, M.D., F.A.C.P. to
Whom it May Concern, dated March 28, 1994 [Exhibit
14};
m. Letter from N.A. Nabavi M.D., F.A.C.S. to Whom
it May Concern, dated May 7, 1993 [Exhibit 15];
n. Letter from George A. Curry, II, M.D. to Robert
A. Smith, M.D., dated March 24, 1994 entitled Supple-
mental Report [Exhibit 16];
0. Letter of John E. Ward to Western Regional Bene-
fits, dated March 25, 1994, and accompanying list of
attachments [Exhibit 17];
p. Letter of Robert A. Smith, M.D. to Department of
Health and Human Services dated April 22, 1993 [Exhibit
18);
q. Radiology Report of David Rabinov, M.D., dated
October 29, 1992 [Exhibit 19];
r. Letter of Magid Molaire, M.D. to Nicholas A.
Nabari, M.D., dated November 16, 1992 [Exhibit 20];
s. Letter of Magid Molaire, M.D. to Nicholas A.
Nabari, M.D., dated November 20, 1992 [Exhibit 21];
t. Letter of N.A. Nabavi, M.D. F.A.C.S. to Robert
Smith, M.D. dated November 9, 1992, and enclosures
[Exhibit 22};
u. Letter of Donald J. Sage, M.D., F.A.C.S. to Robert
Smith, M.D., dated November 30, 1992 [Exhibit 23};
v. Letter of George A. Carey, II, M.D. to Robert A.
Smith, M.D., dated April 15, 1993 [Exhibit 24].
8. Prior to the receipt of the aforementioned docu-
ments on April 11, 1994, UNUM had no notice or knowl-
edge that Mr. Ward was disabled or that he intended to
make a claim under the Policy. UNUM first became
aware of Mr. Ward’s potential claim on April 11, 1994.
Mr. Ward did not submit a claim to UNUM for long term
39a
disability benefits at the time of his alleged disability,
which he claimed occurred on May 8, 1992, or at any
time prior to April 11, 1994. Accordingly, by letter dated
April 13, 1994, UNUM advised Mr. Ward that it was
unable to review his application for benefits on the ground
that proof of claim had not been submitted within the
time frame specified under the Policy. A true and correct
copy of UNUM'’s letter of April 13, 1994 is attached
hereto as Exhibit 26.
9. Mr. Ward, through his attorney Brooks L. Iler,
requested review of UNUM'’s claim denial by letter dated
June 6, 1994. A true and correct copy of Mr. Iler’s letter
of June 6, 1994 is attached hereto as Exhibit 27.
10. By letter dated July 12, 1994, UNUM advised Mr.
Ward and Mr. Iler that it had completed its review and
that its initial determination had been upheld. The ground
for UNUM’s denial of benefits was that Mr. Ward had
not submitted proof of claim within the time limit speci-
fied in the Policy in which he was a participant. A true
and correct copy of UNUM’s July 12, 1994 letter is at-
tached hereto as Exhibit 28.
11. Had plaintiff timely filed his claim for disability
benefits under the Policy, UNUM would have conducted
a thorough claim investigation. In handling claims for
long term disability benefits, it is UNUM’s usual and
customary practice to request from each of its insured’s
treating physicians copies of all office/treatment notes,
basic laboratory data, test results and consultations for
the patient's treatment period to evaluate a claim and to
better understand a claimant's medical condition. Addi-
tionally, treating physicians are requested to provide
UNUM with the patient’s current restrictions and limita-
tions, a detailed physical capacity evaluation, prognosis
for return to work and the current course of treatment.
Depending upon the information received, UNUM may
schedule an independent medical examination of the
claimant in order to obtain a second opinion regarding
40a
the nature of the claimant’s medical condition and dis-
ability and may conduct a vocational analysis.
12. Plaintiff submitted his claim to UNUM nearly two
years after the onset of his disability. During that nearly
two year period, UNUM was without knowledge that
plaintiff claimed he was “disabled” and was thereby de-
prived of the opportunity to fully evaluate his claim and
to determine the extent of his disability at the time he
claimed to be disabled.
I declare under penalty of perjury under the laws of
the United States that the foregoing is true and correct.
Executed on March 29, 1995, at Portland, Maine.
/s/ John A. Houser, Ill
Joun A. Houser, Ill
ret etn a A i i tga nme cad” ald pay wicca
/s/ [Illegible}
4la
EXHIBIT 1
[Logo] Unionmutual
Policyholder:
MANAGEMENT ANALYSIS COMPANY
Policy Number: 310727
Policy Effective Date: November 1, 1983 *
* Revised by Amendment No. 05
Premium Due Dates:
January 1 and the first day of each following month.
Governing Jurisdiction: CALIFORNIA
Policy Anniversary:
November 1, 1986, and each following November |
Unionmutual Stock Life Insurance Co. of America (re-
ferred to as the Company) will pay the benefits provided
in this policy. The Company makes this promise subject
to all of this policy’s provisions.
The policyholder should read the policy specifications
carefully and contact the Company promptly with any
questions.
This policy is delivered in and governed by the laws of
the governing jurisdiction.
Signed for the Company at Portland, Maine on the policy
effective date.
/s/ [Illegible]
Secretary President
Unionmutual Stock Life Insurance Co. of America
A Stock Life Insurance Company
42a
SECTION VI—GENERAL POLICY PROVISIONS
a * ” a
a. information relative to employees:
i. who qualify to become insured;
ii. whose amounts of insurance change; and/
or
iii. whose insurance terminates.
b. any other information about this policy that
may be reasonably required.
The employer's records which, in the opinion of
the Company, have a bearing on the insurance
will be opened for inspection by the Company at
any reasonable time.
2. Clerical error or omission will not:
a. deprive an employee of insurance;
b. affect an employee’s amount of insurance; or
c. effect or continue an employee’s insurance
which otherwise would not be in force.
E. MISSTATEMENT OF FACTS
If relevant facts about any employee were not ac-
curate:
1. a fair adjustment of premium will be made; and
2. the true facts will decide if and in what amount
insurance is valid under this policy.
F. NOTICE AND PROOF OF CLAIM
1. Notice
a. Written notice of claim must be given to the
Company within 30 days of the date disability
starts, if that is possible. If that is not pos-
:
7
:
f
:
b.
43a
sible, the Company must be notified as soon
as it is reasonably possible to do so.
When the Company has the written notice of
claim, the Company will send the insured its
claim forms. If the forms are not received
within 15 days after written notice of claim
is sent, the insured can send the Company
written proof of claim without waiting for the
form.
2. Proof
Proof of claim must be given to the Company.
This must be done no later than 90 days after
the end of the elimina‘ion period.
If it is not possible to give proof within these
time limits, it must be given as soon as rea-
sonably possible. But proof of claim may not
be given later than one year after the time
proof is otherwise required.
Proof of continued disability and regular at-
tendance of a physician must be given to the
Company within 30 days of the request for
the proof.
The prof must cover:
i. the date disability started;
ii. the cause of disability; and
iii, how serious the disability is.
G. EXAMINATION
The Company, at its own expense, will have the right
and opportunity to have an employee, whose injury
or sickness is the basis of a claim, examined by a
physician or vocational expert of its choice. This
right may be used as often as reasonably required.
44a
LEGAL PROCEEDINGS
A claimant or the claimant's authorized representa-
tive cannot start any legal action:
1. until 60 days after proof of claim has been given;
nor
2. more than 3 years after the time proof of claim is
required.
TIME OF PAYMENT OF CLAIMS
When the Company receives proof of claim, benefits
payable under this policy will be paid monthly during
any period for which the Company is liable.
PAYMENT OF CLAIMS
All benefits are payable to the employee. But if a
benefit is payable to an employee’s estate, an em-
ployee who is a minor, or an employee who is not
competent, the Company has the right to pay up to
$1,000 to any of the employee’s relatives whom the
Company considers entitled. If the Company pays
benefits in good faith to a relative, the Company will
not have to pay such benefits again.
WORKERS’ OR WORKMEN’S COMPENSATION
This policy is not in lieu of, and does not affect, any
requirement for coverage by workers’ or workmen’s
compensation insurance.
AGENCY
For all purposes of this policy, the policyholder acts
on its own behalf or as agent of the employee. Under
no circumstances will the policyholder be deemed the
agent of the Company without a written authoriza-
tion.
l.
45a
SECTION I— POLICY SPECIFICATIONS
Description of Eligible Classes
Class | President, Vice Chairman, Senior Vice
President, Division Manager and Vice Pres-
ident
Class 2 All other employees
Amounts of Insurance
a. The lesser of:
i. 60% of basic monthly earnings less other in-
come benefits, except family Social Security
benefits; or
ii. 70% of basic monthly earnings, less all other
income benefits; or
iii. the maximum monthly benefit.
Note: This benefit is subject to reductions
for earnings as provided in the Monthly
Benefit section of this policy.
b. The maximum monthly benefit is $13,000.
c. The minimum monthly benefit is the greater of:
i. $100.; or
ii. 10% of the monthly benefit before deduc-
tions for other income benefits.
Maximum Benefit Period
Age at Disability Maximum Benefit Period
Less than age 60 To age 65 but not
less than 60 months
60 60 months
61 48 months
62 42 months
63 36 months
64 30 months
65 24 months
66 21 months
67 18 months
68 15 months
69 and Over 12 months
46a
4. Elimination Period: 90 days
5. Minimum Requirement for Active Employment:
For Daily Salaried Consultants, 114 hours per month
based on an average of paid hours from the previous
12 months.
For Daily Salaried Consultants who have been paid a
minimum of 2 months but less than 12 months,
average will be based on hours paid for months
paid.
For all others: 30 hours per week
. Definition of Basic Monthly Earnings
For Daily Salaried Consultants
“Basic monthly earnings” means 1/12th of salary
only from November Ist through October 31st of the
year prior to the date salary changes are made.
Salary changes will be made January Ist of each
year.
For Daily Salaried Consultants with less than one
year of service:
“Basic monthly earnings” means 1/12th of 171 work
days times the employees individual contractual daily
work rate.
For all other employees
"Basic monthly earnings” means the insured’s monthly
rate of earnings from the employer in effect just prior
to the 12 month period ending on November 1 of
each year, actual changes will take effect January 1.
It includes earnings from commissions, bonuses and
overtime pay, but not other extra compensation.
Commissions, bonuses and overtime pay will be aver-
aged for the lesser of:
a. the 12 month period of employment just prior to
November 1; or
47a
b. the period of employment.
7. Waiting Period:
10.
ll.
a. Employees in an eligible class on or before the
policy effective date: None
b. Employees entering an eligible class after the
policy effective date: First of the month follow-
ing date of employment
The employee must be in continuous active employ-
ment in an eligible class during the specified waiting
period.
Employee Contributions Required: Yes
Note: Coverage for which contributions are re-
quired applies only if proper enrollment is
made and the required contributions are
made.
Divisions, Subsidiaries or Affiliated Companies in-
cluded
Name Location (City and State)
Pacific Atlantic Atlanta, GA
Technical Services, Inc.
MACTEC San Diego, CA
Changes Effective
Subject to the Delayed Effective Date subsections,
changes in insurance take effect each November 1.
Continuation of Employee Insurance During Ab-
sences
Type of Absence Time Limit
Temporary Layoff or To the end of the 3 month
Leave of Absence period following the policy
month in which the layoff or
leave of absence begins.
48a
SECTION II—DEFINITIONS
For the purposes of this policy:
“Active employment” means the employee must be
working:
1. for the employer on a permanent full-time
basis and paid regular earnings;
2. at least the minimum number of hours shown
in the policy specifications; and either
3. at the employer's usual place of business; or
4. at a location to which the employer's busi-
ness requires the employee to travel.
“Basic monthly earnings”—As defined in the polis
specifications.
“Certificate” means a written statement prepared by
the Company including all riders and supplements,
if any, setting forth a summary of:
1. the insurance benefits to which an employee
is entitled;
2. to whom the benefits are payable; and
3. limitations or requirements that may apply.
“Complications of pregnancy” means pregnancy com-
plicated by concurrent disease or abnormal condi-
tions significantly affecting usual medical manage-
ment.
“Disability” or “disabled”"—see last page of Section
Ul.
“Disability benefits,” when used with the term retire-
ment plan, means money which:
1. is payable under a retirement plan due to
disability as defined in that plan; and
49a
2. does not reduce the amount of money which
would have been paid as retirement benefits
at the normal retirement age under the plan
if the disability had not occurred. (If the
payment does cause such a reduction, it will
be deemed a retirement benefit as defined in
this policy.)
“Eligibility date” means the date an employee be-
comes cligible for insurance under this policy.
Classes eligible are shown in the policy specifications.
“Elimination period” means a period of consecutive
days of disability for which no benefit is payable.
The elimination period is shown in the policy specifi-
cations and begins on the first day of disability.
Note: If disability stops during the elimination
period for any 7 (or less) days, then the dis-
ability will be treated as continuous. But days
that the insured is not disabled will not count
toward the elimination period.
“Employee” means a person in active employment
with the employer.
“Employer” means the policyholder and includes any
division, any subsidiary or any affiliated company
named in the policy specifications.
“Evidence of insurability” means a statement or proof
of an employee’s medical history upon which accept-
ance for insurance will be determined by the Com-
pany.
“Grace period” is the 31 days folowing a premium
due date during which premium payment may be
made.
“Gross monthly benefit” means the insured’s benefit
amount before any reduction for other income bene-
fits and earnings.
50a
“Home office’ means the Unionmutual Stock Life
Insurance Co. of America, 2211 Congress Street,
Portland, Maine 04122.
“Indexed pre-disability earnings” means the insured’s
basic monthly earnings in effect just prior to the date
his disability began adjusted by 7% on the first an-
niversary of benefit payments and each following
anniversary to a maximum of 5 adjustments.
“Injury” means bodily injury resulting directly from
an accident and independently of all other causes.
The injury must occur and disability must begin
while the employee is insured under this policy.
“Insured” means an employee insured under this
policy.
“Male pronoun” whenever used includes the female.
“Monthly Benefit” means the amount payable by the
Company to the disabled insured.
“Partial disability” or “partiaHy disabled”—see last
page of Section II.
“Physician” means a person who is:
1. operating within the scope of his license;
and either
2. licensed to practice medicine and prescribe
and administer drugs or to perform surgery;
or
3. legally qualified as a medical practitioner
and required to be recognized, under this
policy for insurance purposes, according to
the insurance statutes or the insurance regu-
lations of the governing jurisdiction.
It will not include an employee or his spouse,
daughter, son, father, mother, sister or brother.
S5la
“Policy Specifications” is the document showing the
eligible classes, the amounts of insurance and other
relevant information pertaining to the plan of insur-
ance applied for by the policyholder. This document,
designated Section I, is attached to and is part of this
policy.
* * * *
52a
MANAGEMENT ANALYSIS COMPANY
Your Long Term Disability Income Benefits
53a
TABLE OF CONTENTS
Page
CERTIFICATE OF COVERAGE ooo.o......cccccccccceecceseee 1
SS REE ONO WEN G5 2
TERMS YOU SHOULD KNOW 000.0.......cccccccccccccceeceeeeeee 6
ENROLLMENT AND DATE INSURANCE STARTS.. 11
NE releerinicipescettuaenontenstetresseeuimnipameniopecenemansienes 12
M,N 15
SURVIVOR BENEFIT .....0...............-cc00-000.
GENERAL EXCLUSIONS .... - dion 16
PRE-EXISTING CONDITION EXCLUSION .............. 17
PRE-EXISTING CONDITION EXCLUSION ............. 17
MENTAL ILLNESS LIMITATION |W... 17
CONTINUITY OF COVERAGE UPON TRANSFER
OF INSURANCE CARRIERS ..000..000..2.......ccccceeseeeee 18
IN shiitesenecipidatinscnntantewitlipscintinniarscanenbanscnunen 20
CONVERSION PRIVILEGE un.......0.....ccscccccsceseoseceeees 21
SOME GENERAL INFORMATION TO KNOW ..... 22
54a
CERTIFICATE OF COVERAGE
This certificate does not apply unless
this space is covered by sticker form
100-77
UNUM Life Insurance Company of America (referred
to as “we,” “our” and “us”) welcomes your employer as
a client.
This is your certificate of coverage as long as you are
eligible for insurance and you become and remain insured.
Keep it in a safe place.
A few words about this certificate of coverage. . . .
We have written it in plain English. But a few terms and
provisions are written as required by insurance law. You
will want to read it carefully. If you have any questions
about any terms and provisions, please contact the Insur-
ance Administrator at your work location or write to our
claims paying office. We will assist you in any way we
can to help you understand your benefits.
Also, if the terms of your certificate of coverage and the
policy differ, the policy will govern. Your coverage may
be terminated or modified in whole or in part under the
terms and provisions of the policy.
/s/ Jerry F. Orr, Il
President
55a
PLAN OUTLINE
Description of Eligible Classes
President, Vice Chairman, Senior Vice President,
Division Manager and Vice President
Amount of Insurance
* The lesser of:
1. 60% of basic monthly earnings less other income
benefits, except family Social Security benefits; or
2. 70% of basic monthly earnings, less all other in-
come benefits; or
3. the maximum monthly benefit.
Note: This benefit is subject to reductions and
earnings as provided in the section titled “How is
the benefit figured?”
* The maximum monthly benefit is $13,000.
* The minimum monthly benefit is the greater of:
1. $100.00; or
2. 10% of the monthly benefit before deductions for
other income benefits.
CONVERSION PRIVILEGE
Under what conditions can you convert?
When your insurance under this plan terminates because
you end employment with the policyholder, you may ob-
tain converted disability income coverage without medical
evidence of insurability. But you must have been insured
for at least twelve consecutive months just before your
insurance under this plan terminated. These twelve
months will be considered to include the time you were
56a
insured for group long term disability under both this
plan and the one it replaced, if any.
Who may not convert?
The conversion privilege is not available to you if:
1. your insurance under this plan terminates for any of
the following reasons:
a. this plan terminates;
b. this plan is amended to exclude from coverage the
class of employees to which you belong;
c. you no longer belong to a class of employees
eligible for coverage under this plan;
d. you retire;
e. you failed to pay any required premium;
2. you are or become insured for long term disability
insurance under another group plan within 31 days
after termination; or
3. you are disabled under the terms of this plan.
When must you apply for the conversion coverage?
You must apply for and pay the first quarterly premium
for the conversion coverage within 31 days after your
insurance terminates under this plan.
Is the conversion coverage the same as that provided
under this plan?
The Company governs the form of coverage, the benefits
and the amounts. The benefit and amounts may differ
from those under this plan.
SOME GENERAL INFORMATION TO KNOW
When must we be notified of a claim?
57a
You must give us written notice of claim within 30 days
date disability starts. If that is not possible, you
you our claim forms. If you do not receive the forms
15 days after you sent the notice, you can send
written proof of claim without waiting for the form.
When does proof of claim have to be given?
You must give us proof of claim no later than 90 days
after the end of the elimination period.
If it is
not possible for you to give proof within these
limits, it must be given as soon as reasonably pos-
of the
must
When we receive your written notice of claim, we will
send
within
lar attendance of a physician within 30 days of the date
we request the proof.
The proof must cover:
1. the date disability started;
2. the cause of disability; and
3. how serious the disability is.
When are claims paid?
When we receive proof of claim, benefits payable under
the policy will be paid monthly during any period for
which we are liable.
Who are claims paid to?
All benefits are payable to you. But if a benefit is payable
to your estate, or if you are a minor, or you are not com-
petent, we have the right to pay up to $1,000 to any of
your relatives whom we consider entitled. If we pay bene-
58a .
fits in good faith to a relative, we will not have to pay
such benefits again.
What are our examination rights?
We, at our expense, have the right and opportunity to
have you examined by a physician or vocational expert of
our choice to determine the extent of any sickness or in-
jury for which you have made a claim. This right may be
used as often as reasonably required.
How can statements made in any application for this in-
surance be used?
In the absence of fraud, all statements you made when
applying for this insurance and providing evidence of in-
surability are considered representations and not wa
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.