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Sloan v. Life Insurance Company of North America

United States District Court, D. Maryland

September 30, 2019

DOUGLAS SLOAN, Individually, and as Personal Representative of the Estate of Susan Sloan Plaintiff,
LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant/Cross-Claim Defendant and PRA HEALTH SCIENCES, INC., Defendant/Cross-Claim Plaintiff


          Beth P. Gesner Chief United States Magistrate Judge.

         Currently pending before the court are defendant/cross-claim defendant Life Insurance Company of North America’s (“LINA”) Motion to Dismiss Cross-Claim (“Motion to Dismiss”) (ECF No. 27), defendant/cross-claim plaintiff PRA Health Sciences, Inc.’s (“PRA”) Opposition to Motion to Dismiss (ECF No. 28), and LINA’s Response to PRA’s Opposition to Motion to Dismiss (ECF No. 30). The issues are fully briefed, and no hearing is necessary. Loc. R. 105.6. For the reasons stated below, LINA’s Motion to Dismiss (ECF No. 27) is denied.

         I. BACKGROUND

         In this Employee Retirement Income Security Act of 1974 (“ERISA”) case, plaintiff asserts a claim against PRA and LINA for benefits from a life insurance policy (LINA and PRA hereinafter referred to collectively as “defendants”). (ECF No. 19 at ¶¶ 36–39). Plaintiff filed this lawsuit individually and as personal representative of the estate of his deceased wife, Susan Sloan. According to the Amended Complaint, Ms. Sloan was employed by PRA and participated in Group Life Insurance Policy No. FLX 963879 (the “Policy”) which provided life insurance benefits under an employee benefit plan (the “Plan”) established by PRA for its employees. (Id. at ¶ 14). LINA issued the Policy and PRA served as the Plan administrator. (Id. at ¶¶ 14, 20).

         Under the Policy, Ms. Sloan elected life insurance coverage in the amount of $360, 000 and named Plaintiff as the beneficiary. (Id. at ¶ 14). The Policy provided a conversion privilege wherein Ms. Sloan had the right to convert coverage under the Policy into an individual life insurance policy if coverage under the Policy was terminated. (Id. at ¶ 24). To obtain conversion insurance, the Policy required Ms. Sloan to submit an application within 31 days of termination of coverage under the Policy, which would be extended by 15 days, up to a maximum of 90 days, if Ms. Sloan was not notified of this right at least 15 days prior to the end of the conversion period. (Id.)

         Ms. Sloan’s life insurance coverage under the Policy continued through September 30, 2016. (Id. at ¶ 20). After this date, however, PRA stopped its payment of Policy premiums and coverage terminated on October 1, 2016. (Id.) Ms. Sloan died on December 1, 2016. (Id. at ¶ 16). In January 2017, Plaintiff submitted a claim for life insurance benefits under the Policy. (Id. at ¶ 17). LINA denied plaintiff’s claim and plaintiff’s subsequent appeal on the grounds that PRA had stopped payment of premiums, and because Ms. Sloan had not converted coverage into an individual policy, her participation in the Policy terminated prior to her death. (Id. at ¶¶ 5, 17). Plaintiff alleges that either or both defendants were required to provide Ms. Sloan with written notice of PRA’s intention to stop payment of premiums and of Ms. Sloan’s right to convert the Policy into an individual life insurance policy with LINA. (Id. at ¶ 4). Plaintiff further alleges that neither of these notices were provided by defendants, which resulted in Plaintiff’s loss of $360, 000 in life insurance benefits. (Id. at ¶¶ 25, 31, 40).

         PRA filed a cross-claim against LINA seeking indemnification and contribution from LINA under ERISA federal common law. (ECF No. 22). PRA asserts that it was the Plan Sponsor and Plan Administrator of the Plan in which Ms. Sloan participated. (Id. at ¶¶ 5, 9). PRA contends that in this role, it appointed LINA as the named fiduciary for adjudicating claims for benefits under the Plan and for deciding any appeals of denied claims. (Id. at ¶ 7). As such, should PRA be found liable for any of the remedies requested by plaintiff, PRA seeks indemnification from LINA, alleging that the acts of LINA resulted in the alleged damages to plaintiff. (Id. at ¶ 22). Further, PRA seeks contribution from LINA to the extent LINA is found liable to plaintiff. (Id. at ¶ 27). LINA has filed the instant Motion to Dismiss PRA’s cross-claim. (ECF No. 27).


         The purpose of a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is to test the legal sufficiency of a complaint. Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). When ruling on such a motion, the court must “accept[] all well-pleaded allegations in the plaintiff’s complaint as true” and “draw[] all reasonable factual inferences from those facts in the plaintiff’s favor.” Id. at 244. Nonetheless, “[t]he mere recital of elements of a cause of action, supported only by conclusory statements, is not sufficient to survive a motion made pursuant to Rule 12(b)(6).” Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Rather, “a complaint must contain sufficient factual matter . . . to state a claim to relief that is plausible on its face.” Ashcroft, 556 U.S. at 678 (internal citation and quotation marks omitted). A plaintiff satisfies this standard not by forecasting evidence sufficient to prove the elements of the claim, but by alleging sufficient facts to establish those elements. Walters, 684 F.3d at 439. Accordingly, “while a plaintiff does not need to demonstrate in a complaint that the right to relief is ‘probable, ’ the complaint must advance the plaintiff’s claim ‘across the line from conceivable to plausible.’” Id. (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).


         LINA asserts two grounds for dismissal of PRA’s cross-claim for indemnification and contribution under ERISA federal common law. (ECF No. 27 at 1). First, LINA argues there is no right of indemnification or contribution among ERISA fiduciaries. (Id.) Second, LINA argues that, even if there is a right to indemnification or contribution, LINA is not a co-fiduciary with respect to the notification duties at issue in the Amended Complaint or proposed Second Amended Complaint. (Id.)

         A. Right of Indemnification or Contribution Under ERISA

         PRA’s cross-claim asserts claims for indemnification and contribution against LINA under federal common law. (ECF No. 22 at 10–11). LINA urges the Court to dismiss this claim, arguing that the “Fourth Circuit . . . has never recognized a federal common law right of indemnification or contribution among ERISA fiduciaries.” (ECF No. 27-1 at 5). Although the Fourth Circuit has not yet decided this issue, there is a split among the Circuit Courts on this issue. The Second and Seventh Circuits have found a right of indemnification or contribution exists under federal common law, while the Eighth and Ninth Circuits have not. Compare Chemung Canal Tr. Co. v. Sovran Bank/Maryland, 939 F.2d 12, 18 (2d Cir. 1991) (holding that it is “appropriate” to “incorporat[e] traditional trust law’s doctrine of contribution and indemnity into the law of ERISA”), and Chesemore v. Fenkell, 829 F.3d 803, 813 (7th Cir. 2016) (finding that “indemnification and contribution are available equitable remedies under [ERISA]”), with Travelers Cas. & Sur. Co. of Am. v. IADA Servs., Inc., 497 F.3d 862, 867 (8th Cir. 2007) (concluding that “ERISA does not create a right of contribution for [ERISA fiduciary] against . . . another fiduciary”), and Kim v. Fujikawa, 871 F.2d 1427, 1432 (9th Cir. 1989) (rejecting the “contention that Congress implicitly intended to allow a cause of action for contribution under ERISA”).

         Most recently, Chief Judge Bredar of this Court has recognized a right of contribution and indemnification among ERISA fiduciaries, noting that the Court found “more persuasive the rationale of courts that allow a claim for contribution.” Perez v. Silva, No. 15-CV-3484-JKB, 2017 WL 713759, at *3 (D. Md. Feb. 23, 2017). I am persuaded by the reasoning of the Perez court, as well as the analysis of the other courts which have recognized a federal common law right of indemnification or contribution among ERISA fiduciaries. ...

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