Blogging Employee Benefits

February 10, 2006

Denial of Death Benefits Upheld

Filed under: Litigation — Fuguerre @ 8:13 pm

A plan’s insurer reasonably exercised its discretion under a welfare plan’s terms to deny life insurance benefits that could not legally be provided under state law, according to a 6th Circuit Court of Appeals decision affirming a district court ruling dismissing a survivor’s claim. [Morrison v. Marsh & McLennan, CA6, 04-2011, 2/10/06]

Upon his resignation, Mr. Morrison was granted the right to convert his life insurance under Marsh’s Employee Welfare Plan to a group policy, contingent upon residence in a state that approved such continuation of insurance. Mr. Morrison’s conversion application was denied by MetLife, the plan’s insurer, since he resided in Michigan, a state that at that time prohibited portable term life insurance coverage. About 3 years later, Mr. Morrison died, and over a year later his widow submitted a request for (1) death benefits that would have payable if the original life insurance conversion application had not been rejected; and (2) various documents relating to the Employee Welfare Plan. When the plan documents were not provided and her request for death benefits was denied, Mrs. Morrison filed suit, claiming entitlement to life insurance benefits and statutory penalties for failure to provide plan documents. The district court granted Marsh’s motion to dismiss and denied Mrs. Morrison’s cross-motion for summary judgment on the grounds that her claim was time-barred and she lacked standing to bring an action for statutory penalties.

As claims fiduciary, MetLife was granted express authority and discretion under the plan to interpret the plan and administer claims and benefits. Accordingly, the court reviewed the denial of benefits under the “arbitrary and capricious” standard. Since it would have been illegal at the time of Mr. Morrison’s policy conversion application for MetLife to provide him with such coverage under Michigan state law, the court confirmed the denial of benefits as not only “evidence of a deliberate and principled reasoning process,” but indeed “the only decision available to the insurer consistent with state law at the time.”

The appellate court further agreed with the district court that Mrs. Morrison’s benefit claim was not made within the applicable 3-year statute of limitations, ruling that claim for benefits accrued from the date that MetLife first denied Mr. Morrison’s conversion application, not from the date when Mrs. Morrison requested benefits over 3-1/2 years later. Finally, since Mrs. Morrison did not qualify as a participant or beneficiary since the date of MetLife’s original denial of the conversion application, the court ruled that she was not entitled to statutory penalties for the plan administrator’s failure to provide her with plan documents.

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