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Gross v. St. Agnes Health Care, Inc.

United States District Court, Fourth Circuit

September 12, 2013

JEANE GROSS, Plaintiff,
ST. AGNES HEALTH CARE, INC., , Defendants.



This case arises from the denial of life insurance benefits under an employee welfare benefit plan. Through her employer, plaintiff Jeane Gross continued to pay for a life insurance policy on her former husband, David Gross, from whom she was divorced. Following the death of Mr. Gross, plaintiff sought to recover the life insurance proceeds. Benefits were denied, however, because at the time of Mr. Gross’s death, Ms. Gross was not married to Mr. Gross.

Plaintiff subsequently filed suit against her employer, St. Agnes Health Care, Inc. (“St. Agnes”), and Ascension Health, the “Plan Administrator, ” defendants, asserting that benefits were wrongfully denied and that defendants misrepresented plaintiff’s eligibility for life insurance benefits, despite her divorce.[1] In particular, she lodged claims for breach of contract (Count I); fraudulent misrepresentation (Count II); negligent misrepresentation (Count III); promissory estoppel (Count IV); waiver (Count V); “Breach of Fiduciary Duties” under § 504 of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1104 (Count VI); and “Interference with Protected Rights” under §§ 510 & 511 of ERISA, 29 U.S.C. §§ 1140 & 1141 (Count VII). In addition to recovery of the benefits allegedly due under the policy, plaintiff seeks punitive damages and attorney’s fees.

Defendants have moved to dismiss for failure to state a claim, pursuant to Fed.R.Civ.P. 12(b)(6) (“Motion to Dismiss, ” ECF 22), and filed a supporting memorandum (ECF 22-1), along with numerous documents. See ECF 22-3; 22-4; 22-5; 22-6; 22-7. Plaintiff opposed the Motion (“Opposition, ” ECF 25), and defendants replied. ECF 27.

In addition, Ms. Gross has moved to file a Second Amended Complaint (“Motion to Amend, ” ECF 26), seeking to add ING Employee Benefits ReliaStar Life Insurance Company (“ING” or “ING ReliaStar”), the “Claims Administrator, ” as a defendant with respect to Counts I through VII, and to add two claims against defendants Ascension Health and ING ReliaStar: “Wrongful Denial of Benefit Rights Under ERISA 29 U.S.C. § 1104 for violation of 29 U.S.C. § 1132(a)(1)(B)” (Count VIII), and equitable estoppel (Count IX). See Second Amended Complaint (“S.A.C., ” ECF 26-1). Defendants opposed the Motion to Amend, ECF 28, to which plaintiff replied. ECF 29.

The motions have been fully briefed, and no hearing is necessary to decide them. See Local Rule 105.6. For the reasons that follow, I will grant the Motion to Dismiss, in part, and deny it, in part. I will also grant the Motion to Amend, in part, and deny it, in part.

I. Factual Background

Plaintiff began her employment with St. Agnes in December 1999. Am. Compl. ¶ 8. On August 27, 2001, she enrolled in a “Supplemental Term Life Insurance Policy” (the “Policy”) through St. Agnes for herself, her then-husband, David Gross, and their four children, for which she paid through payroll deductions. Id. ¶ 9.[2] Upon enrolling, plaintiff received a document titled “Supplemental Term Life Insurance Plan – Summary Plan Description” (“SPD”). According to plaintiff, it “was the only documentation ever provided . . . in regards to any explanation of benefits.” Id. ¶ 10. In the Amended Complaint, plaintiff does not specify any of the terms of her Policy.

Defendants attached a copy of the SPD to their Motion to Dismiss. See Exhibit B, ECF 22-4.[3] It provided: “Through your Employer and the Ascension Health Supplemental Term Life Insurance Plan (the Plan), you can purchase additional life insurance coverage for yourself or for your Eligible Dependents . . . .” SPD at 2. The SPD’s definition of “Eligible Dependent” included, inter alia, “eligible spouse.” Id. at 3.[4] However, the SPD did not define “eligible spouse” and was “silent as to whether separation or divorce are grounds for termination of benefits.” Am. Compl. ¶ 14.

In Section 2, titled “Plan Benefits, ” the SPD provided a cursory summary of the available coverage. See SPD at 9-11. As to “Dependent Coverage, ” Section 2 stated, in part: “Since you are the beneficiary for your dependents’ coverage, the benefit amount for the death of a covered dependent is payable to you.” Id. at 9. It also said: “[I]f your dependent dies while covered under the Plan, you will receive the elected benefit amount. Payment will be made after the carrier receives proof of death.” Id. However, the SPD advised that dependent coverage ends when “[a] dependent ceases to be eligible as a dependent.” Id. at 5.

Notably, the SPD cautioned: “The information in this Summary Plan Description (SPD) is intended to serve as a summary of the Ascension Health Supplemental Term Life Insurance Plan.” Id. at 2. Further, it advised: “If there are any discrepancies between the information in this SPD and the official Plan documents or certificates of insurance, the terms of the Plan documents and insurance certificates will prevail.” Id.

Defendants appended a copy of the Plan to their Motion to Dismiss. See Exhibit A, ECF 22-3.[5] It stated that the Plan is an “employee welfare benefit plan subject to the Employee Retirement Income Security Act of 1974 (‘ERISA’).” Plan at 4. Section 5 of the SPD, titled “Your ERISA Rights, ” summarized the rights and protections available to Plan participants under ERISA. See SPD at 18-19. For example, it stated that Plan participants have the right to “[e]xamine” and “[o]btain, upon written request to the Plan administrator, copies of documents governing the operation of the Plan” and the right to “appeal any denial” of a claim for benefits. Id. at 18. The SPD also outlined the obligations imposed on “fiduciaries” under ERISA to “operate [the] Plan . . . prudently and in the interest of . . . Plan participants and beneficiaries.” Id. And, the SPD advised: “If you have any questions about your Plan, you should contact your Employer.” Id. at 19.

In addition, defendants attached to their Motion to Dismiss a copy of the Policy. See Exhibit D, ECF 22-6. It defined “Dependent” as, inter alia, “your lawful spouse.” Id. at 29.

In January 2004, plaintiff and her then husband, David Gross, contemplated a divorce. Am. Compl. ¶¶ 11-12. According to plaintiff, they were both concerned about the security of their four children, id. ¶ 12, and based their decision “primarily . . . on whether Plaintiff would be entitled to the life insurance benefits if Mr. Gross’s health deteriorated completely.” Id. To determine “what rights and benefits she would be entitled [to] if divorced, ” plaintiff “referred to the SPD.” Id. ¶ 13. Because it did not define “eligible spouse, ” id. ¶ 14, plaintiff met with the Benefits Coordinator for St. Agnes, Donna Lippo, to “inquire[] into how the separation and/or divorce would affect her potential benefits.” Id. ¶¶ 15-16. Ms. Lippo was “fully aware of Plaintiff’s circumstances” and “assured” plaintiff that she could maintain the life insurance coverage on her husband even if they were divorced. Id. ¶ 17.

Plaintiff “relied” on Ms. Lippo’s representations, and she and Mr. Gross were divorced in September 2006. Id. ¶ 18. In November 2006, plaintiff submitted a “St. Agnes Healthcare Change Form” to “disenroll” Mr. Gross from medical, dental, and vision insurance, expressly indicating her divorce as the reason for the change. Id. ¶ 19. However, she did not “disenroll” him from the Policy. Id. Moreover, for about six years, Ms. Gross continued to pay “contributions” for the life insurance coverage for her ex-husband, which were deducted from her paycheck on a bi-weekly basis. Id.

In August 2010, Mr. Gross was hospitalized due to an “ongoing illness.” Id. ¶ 20. Fearing that Mr. Gross’s death was “imminent, ” plaintiff met with Ms. Lippo, who provided plaintiff with information about how to file a claim for life insurance benefits. Id. ¶ 21. On or about September 3, 2010, Ms. Lippo informed plaintiff that, “following clarification from Defendant Ascension Health, Plaintiff would not be entitled to the life insurance benefits for her ex-husband.” Id. ¶ 22. According to plaintiff, a “representative” of defendants “admitted that [Ms. Lippo] communicated the wrong information” to plaintiff regarding the supplemental life insurance policy. Id. ¶ 23.

As a result of Mr. Gross’s death, [6] plaintiff filed a claim for life insurance benefits in late 2010 or early 2011. In a letter dated February 2, 2011, Kelly Brown, Senior Life Claims Examiner for ING, notified plaintiff that her claim for benefits had been denied. Id. ¶ 24.

Defendants attached to the Motion to Dismiss, the letter to which plaintiff referred in her Amended Complaint. See Exhibit E, ECF 22-7. It stated, inter alia, id.:

Dear Ms. Gross:
We have received notice of the death of Mr. Gross. Please accept our sympathy for your loss.
We have completed our review of the claim for the Dependent Spouse Life Insurance benefit under the above policy and have determined that no benefit is payable. In making our determination we reviewed the death claim form, the death certificate, enrollment form, and the group insurance policy.
Under the terms of this policy, you may choose Dependent Spouse Life Insurance for your spouse. The policy definition of a dependent includes “your lawful spouse.” The policy also states that your dependent’s insurance stops on the date your dependent is no longer a dependent as defined.
The death certificate we received with this claim states that Mr. Gross was divorced at the time of his death. Because it does not appear that Mr. Gross was your lawful spouse at the time of his death, he was not an eligible dependent as defined in this policy. Therefore, there is no benefit payable and your claim for the Dependent Spouse Life Insurance benefit is denied.
You should present your divorce decree to your Human Resources department to arrange for a refund of all premiums that were paid by you after Mr. Gross was no longer an eligible dependent as defined by the policy.

The letter also informed Ms. Gross of her rights under ERISA to appeal the denial of her claim. See id. Then, in February 2011, plaintiff received a check for $1, 716, which was “offered to help reimburse some of the payroll deductions toward her life insurance benefits.” Am. Compl. ¶ 24.[7] Plaintiff “has not cashed” the check. Id.

II. Standard of Review

St. Agnes and Ascension Health have moved to dismiss plaintiff’s Amended Complaint, pursuant to Fed.R.Civ.P. 12(b)(6). To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain facts sufficient to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2008); see Aschroft v. Iqbal, 556 U.S. 662, 684 (2009) (“Our decision in Twombly expounded the pleading standard for ‘all civil actions’ . . . .” (Citation omitted)); see, e.g., Simmons v. United Mortg. & Loan Inv., LLC, 634 F.3d 754, 768 (4th Cir. 2011) (applying Twombly plausibility standard).

Whether a complaint adequately states a claim for relief is judged by reference to the pleading requirements of Fed.R.Civ.P. 8(a)(2). See Twombly, 550 U.S. at 554-55. Rule 8(a)(2) provides that a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Although a plaintiff need not include “detailed factual allegations, ” the rule demands more than bald and conclusory accusations or mere speculation. Twombly, 550 U.S. at 555; see Painter’s Mill Grille, LLC v. Brown, 716 F.3d 342, 350 (4th Cir. 2013). To satisfy the minimal requirements of the rule, the complaint must set forth “enough factual matter (taken as true) to suggest” a cognizable cause of action, “even if . . . [the] actual proof of those facts is improbable and . . . recovery is very remote and unlikely.” Twombly, 550 U.S. at 556 (brackets in original) (internal quotation marks omitted). A complaint that provides no more than “labels and conclusions, ” or “a formulaic recitation of the elements of a cause of action, ” is insufficient. Id. at 555.

When deciding a motion to dismiss pursuant to Rule 12(b)(6), a court “must accept as true all of the factual allegations contained in the complaint, ” and “draw all reasonable inferences [from those facts] in favor of the plaintiff.” E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011) (citations omitted). However, the court is not required to accept legal conclusions drawn from the facts. See Papasan v. Allain, 478 U.S. 265, 286 (1986); Monroe v. City of Charlottesville, Va., 579 F.3d 380, 385-86 (4th Cir. 2009). And, if the “well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, ” the complaint has not shown that “the pleader is entitled to relief.” Iqbal, 556 U.S. at 679 (citation omitted).

In resolving a motion under Rule 12(b)(6), a court “is not to consider matters outside the pleadings or resolve factual disputes when ruling on a motion to dismiss.” Bosiger v. U.S. Airways, Inc., 510 F.3d 442, 450 (4th Cir. 2007). But, under Fed.R.Civ.P. 12(d), a district court has “complete discretion to determine whether or not to accept the submission of any material beyond the pleadings that is offered in conjunction with a Rule 12(b)(6) motion and rely on it, thereby converting the motion, or to reject it or simply not consider it.” 5C Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1366, at 159 (3d ed. 2004, 2011 Supp.); see Kensington Vol. Fire Dep’t, Inc. v. Montgomery Cnty., 788 F.Supp.2d 431, 436-37 (D. Md. 2011), aff’d, 684 F.3d 462 (4th Cir. 2012). Generally, if a court considers material outside the pleadings, “the motion must be treated as one for summary judgment under Rule 56, ” in which case “[a]ll parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.” Fed.R.Civ.P. 12(d).

However, there are limited circumstances in which the court may consider extrinsic documents in the context of a motion to dismiss. For instance, the court may properly consider documents “attached to the complaint, as well those attached to the motion to dismiss, so long as they are integral to the complaint and authentic.” Philips v. Pitt Cnty. Mem. Hosp., 572 F.3d 176, 180 (4th Cir. 2009) (citations omitted); see also Am. Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004); e.g., Darcangelo v. Verizon Commc’ns, Inc., 292 F.3d 181, 195 n.5 (4th Cir. 2002) (stating that district court correctly considered ERISA plan agreement because plaintiff referred to and relied on the existence of “an agreement for medical-related services” between herself and defendants).

As indicated, in support of their Motion to Dismiss, defendants submitted various documents pertaining to the Policy, which were either referenced in the Amended Complaint or central to it. These documents include a copy of the Plan (ECF 22-3); a copy of the SPD (ECF 22-4); a copy of the Policy (ECF 22-6); and a copy of the letter denying plaintiffs’ claim for benefits (ECF 22-7).

Plaintiff’s claims are predicated on her alleged entitlement to benefits under the Policy and her rights under ERISA, and therefore the Plan, the Policy, and the SPD are all integral to the Amended Complaint. Additionally, in her suit she expressly referred to the SPD and the letter denying her claim for benefits. Nor does plaintiff dispute the authenticity of any of the documents submitted by defendants. Therefore, I may consider most of them without converting the Motion to Dismiss to a summary judgment motion. However, I will not consider the “Memorandum” notifying Plan participants of the selection of “ING” as the insurance company providing benefits under the Plan, which was submitted with defendants’ Motion to Dismiss. See Exhibit C, ECF 22-5. It was not mentioned in plaintiff’s pleadings, does not form the basis of her claims, and consideration of it is not necessary to resolve the Motion to Dismiss.

Rule 15 of the Federal Rules of Civil Procedure governs amendments to pleadings. Rule 15(a)(1), titled “Amendment as a Matter of Course, ” grants a party the right to “amend its pleading once as a matter of course within . . . 21 days after serving it, or . . . if the pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or a motion under Rule 12(b), (e) or (f), whichever is earlier.” Because plaintiff has previously filed an amended complaint, she must rely on Rule 15(a)(2), which states: “In all other cases, a party may amend its pleadings only with the opposing party’s written consent or the court’s leave.” See Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006). However, Rule 15(a)(2) also provides: “The court should freely give leave [to amend] when justice so requires.” Rule 15 is “a liberal rule” that enshrines “the federal policy in favor of resolving cases on their merits instead of disposing of them on technicalities.” Laber, 438 F.3d at 426; see Ostrzenski v. Seigel, 177 F.3d 245, 252-53 (4th Cir. 1999). Indeed, the Fourth Circuit has said that “leave to amend a pleading should be denied ‘only when the amendment would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would [be] futile.’” Laber, 438 F.3d at 426 (quoting Johnson v. Oroweat Foods Co, 785 F.2d 503, 509 (4th Cir. 1986)).

Defendants oppose the amendment on the grounds of futility. See ECF 28 at 2. An amendment is considered futile “when the proposed amendment is clearly insufficient or frivolous on its face.” Johnson, 785 F.2d at 510. Of relevance here, an amendment is also futile if it would fail to withstand a motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). Perkins v. United States, 55 F.3d 910, 917 (4th Cir. 1995). In evaluating plaintiff’s Motion to Amend, I will apply the 12(b)(6) standard of review, discussed supra.

III. Discussion

Defendants’ arguments in support of the Motion to Dismiss are essentially two-fold. First, defendants contend that plaintiff’s state law claims are preempted by ERISA. Second, as to plaintiff’s claims under ERISA, defendants argue that plaintiff fails to state a claim. They offer the same arguments in opposing the Motion to Amend. Plaintiff’s proposed Second Amended Complaint seeks to add ING as a defendant as to all claims and to include an additional claim, Count IX, for equitable estoppel, lodged against Ascension Health and ING. Accordingly, I will first discuss the state law claims for which defendants assert the defense of preemption, i.e., Counts I through V and IX. I will then discuss the claims lodged under ERISA, i.e., Counts VI through VIII, which defendants have opposed on the merits.[8] For convenience, I will address the counts as if they were lodged against all defendants (except as to Count IX, which is not lodged against St. Agnes), and Count IX as if it were included in the Amended Complaint.

A. State Law Claims

Plaintiff’s claims are all based on the same underlying factual premise: Defendants failed to provide life insurance benefits under the Policy in connection with the death of plaintiff’s ex-husband, despite Ms. Lippo’s representations that plaintiff’s divorce would not affect her eligibility to recover the death benefit. These allegations have spawned five state law claims: breach of contract, fraudulent misrepresentation, negligent misrepresentation, promissory estoppel, and waiver. See Am. Compl. ¶¶ 25-70. I agree with defendants that all of these claims are preempted under ERISA.

1. ERISA Preemption Generally

ERISA was “enacted to protect the interests of participants in employee benefit plans and their beneficiaries….” Marks v. Watters, 322 F.3d 316, 322 (4th Cir. 2003); see 29 U.S.C. § 1001(b). It does so, inter alia, by setting “various uniform standards [for employee benefit plans], including rules concerning reporting, disclosure, and fiduciary responsibility.” Retail Industry Leaders Assoc. v. Fielder, 475 F.3d 180, 190 (4th Cir. 2007) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91 (1983)). In Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004), the Supreme Court said: “The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans. To this end, ERISA includes expansive pre-emption provisions, which are intended to ensure that employee plan benefit regulation would be ‘exclusively a federal concern.’” (Citations omitted). See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 646 (1995) (explaining that “[t]he basic thrust of the pre-emption clause was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans”); Pilot Life Ins. v. Dedeaux, 481 U.S. 41, 46 (1987) (recognizing “the reservation to Federal authority [of] the sole power to regulate the field of employee benefit plans as ERISA’s crowning achievement, ” and noting that the legislation’s sponsors “emphasized both the breadth and importance of the preemption provision” to “establish pension plan regulation as exclusively a federal concern.”) (internal quotation marks and citations omitted); Singer v. Black & Decker Corp., 964 F.2d 1449, 1452–53 (4th Cir. 1992) (“The preemption of state laws relating to employee benefits guarantees that plans and plan sponsors are subject to only a single, federal set of requirements.”).

Preemption under ERISA takes two forms: “Ordinary” or “conflict” preemption, and the jurisdictional doctrine of “complete” preemption. See Sonoco Prods. Co. v. Physicians Health Plan, Inc., 338 F.3d 366, 370-71 (4th Cir. 2004). In Sonoco, the Fourth Circuit observed: “In the ERISA context, the doctrines of [ordinary] ...

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