ROSS A. WALTERS, United States Magistrate Judge.
This matter is before the Court on the motions for summary judgment [64][66] filed by the claimants to life insurance proceeds deposited in this Court by the original plaintiff/stakeholder Sun Life Assurance Company ("Sun Life"). In a Petition
Shana Wasko and Joshua Wasko ("the children") filed a cross-claim against Bonnie Wasko and a counterclaim against Sun Life, seeking a declaratory judgment they were the sole and equal beneficiaries of the life insurance proceeds. Bonnie Wasko filed a cross-claim against the children and a counterclaim against Sun Life, seeking, effectively, a judgment that all policy proceeds belonged to her. She also brought a third-party complaint against Dr. Pepper Snapple Group, Inc. ("DPSG"), Mr. Wasko's former employer, for negligent administration of the employee welfare benefit plan which included the group life insurance policy. That claim is not involved in the present cross-motions.
Sun Life filed a motion for leave to deposit funds and for entry of final decree of interpleader, which upon deposit sought discharge and dismissal [9]. Ultimately this was unresisted and by order entered April 8, 2010, Sun Life was directed to deposit the contested proceeds with the Court and was dismissed as a party. (Text Order [29]). Court records indicate a total of $183,376.58 has been received from Sun Life.
The Court has subject matter jurisdiction of the claims as the policy under which benefits are payable is part of an employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974 ("ERISA"). 29 U.S.C. § 1132(e) and 28 § 1331, 1335.
A party is entitled to summary judgment only if, after viewing the evidence in the light most favorable to the opposing party and affording that party all reasonable inferences, see Heartland Community Church v. Waddle, 595 F.3d 798, 805 (8th Cir.2010); EEOC v. Liberal R-II Sch. Dist., 314 F.3d 920, 922 (8th Cir.2002), the depositions, answers to interrogatories, admissions, affidavits, or other materials presented to the court, show that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Preston v. City of Pleasant Hill, 642 F.3d 646, 651 (8th Cir. 2011); Fed.R.Civ.P. 56(a), (c)(1)(A). Bonnie Wasko and the children agree that there are no disputed issues of material fact and that the cross-motions may be decided as a matter of law on the motion papers.
Daniel Wasko was an employee of DPSG. DPSG had an employee benefits plan which included a Sun Life group life insurance policy, Policy No. 28938-001,
In August 2008 Mr. Wasko married Bonnie Wasko. (App. [64-3] at 69).
DPSG's annual enrollment period for changes in employee benefits ran from November 10, 2008 and ended November 21, 2008. (App. [64-3] at 52). Enrollment changes could be made through DPSG's on-line website. (Id. at 53, 59). On November 19, 2008, Mr. Wasko attempted to log on to make changes. Unable to do so, the same date he contacted Hewitt Associates,
Destiny and Mr. Wasko then had the following conversation concerning his life and accidental death and dismemberment insurance coverage:
(App. [69-3] at 71-73, 75).
DPSG followed up with a "Welfare Plan Beneficiary Confirmation Notice" dated November 19, 2008 showing Bonnie S. Wasko as primary beneficiary on "Employee Optional AD & D" and "Employee Optional Life" policies. (App. [69-3] at 79). The notice said nothing about the basic life coverage. The notice also stated:
(Id.) In addition, a "Dr. Pepper Snapple Group Inc. Confirmation of Password Reset" dated November 19, 2008 was forwarded to Mr. Wasko by DPSG providing him with a temporary password so he could access the system and create a new permanent password. (Id. at 80-81). The statement notified Mr. Wasko:
(Id. at 81).
Mr. Wasko died December 24, 2008. (App. [69-3] at 82). On December 31, 2008 Joshua Wasko submitted a beneficiary claim form to Sun Life. (Id. at 89-91). On January 9, 2009 Shana Wasko submitted a beneficiary claim form to Sun Life. (Id. at 86-88). On January 12, 2009 Bonnie Wasko submitted a beneficiary claim form to Sun Life. (Id. at 83-85).
By letter dated January 29, 2009 Sun Life notified the claimants in pertinent part:
(App. [64-3] at 92). There is no evidence in the record of a signed November 19, 2008 Enrollment Card. As evidenced by the present lawsuit, the parties did not come to an agreement.
To change a beneficiary, the Sun Life policy provides: "Any request for a change of Beneficiary must be in a written form and will take effect as of the date the Employee signs and files the change with the Employer." (App. [64-3] at 49). A "beneficiary" is defined as
(Id. at 18). The "Claim Provisions" of the Sun Life policy include an "Insurer's Authority" clause which states:
(App. [64-3] at 48).
In March 2008 Hewitt, in coordination with DPSG and Sun Life, was moving toward a system in which an employee could make a beneficiary enrollment or change on-line or by phone call to a Hewitt benefits representative followed by a paper confirmation to the employee and without the necessity of a signed document. (App. [64-3] at 98; see id. at 52, 94 (Aff. of Goodwin)). Later in the year an "Annual Enrollment Highlights" brochure was made available to employees. It explained the six "simple, easy steps" to enroll on-line during the November 2008 enrollment period. (Id. at 52-59). "There aren't any paper forms to return." (Id. at 59). The brochure gave a Hewitt phone number to call if an employee needed help enrolling. (Id.)
Scott Beliveau, Vice President of Underwriting and Claims in Sun Life's Employee Benefits Group, in a letter dated April 1, 2010,
(App. [64-3] at 93).
Sigismund L. Sapinski, Jr., Senior Counsel for Sun Life's Employee Benefits Group, wrote in a January 18, 2012 letter, with apparent reference to Mr. Beliveau's letter above, that Mr. Beliveau's comments were intended "to be prospective in nature" and concerned procedures to avoid designation disputes in the future. He continued that at the time of the events in this case
(App. [64-3] at 99). In an affidavit a Sun Life claims analyst similarly characterized Mr. Beliveau's letter. (Id. at 95).
The Sun Life policy provided that any change to the policy was to be in writing, approved by a Sun Life officer, and endorsed or attached to the policy. (App. [64-3] at 93). There was no relevant change to the policy under this procedure.
DPSG's employee benefits plan is governed by ERISA, 29 U.S.C. § 1001, et seq. ERISA requires "[e]very employee benefit plan ... be established and maintained pursuant to a written instrument," id. § 1102(a)(1), "specify[ing] the basis on which payments are to be made to and from the plan." Id. § 1102(b)(4). A participant or beneficiary of a plan may bring a civil lawsuit "to recover benefits due to him under the terms of [the] plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan...." Id. § 1132(a)(1)(B).
The ultimate issue here is who is the beneficiary(s) of Mr. Wasko's life insurance death benefit proceeds "under the terms of [the] plan." Bonnie argues she is the sole beneficiary as a result of Mr. Wasko's November 19, 2008 telephone directions and the enrollment changes made by Sun Life on the basis of those directions. The Wasko children argue the beneficiary change was invalid because it did not conform to the policy requirements that the change be in writing and signed in some fashion, if not by hand, by electronic or telephone means under suitable protocol.
At the outset the Court must ascertain the ERISA standard which will guide its review. The standard is de novo "unless the benefit plan gives the administrator or fiduciary discretionary authority to
The children maintain the "plan documents rule" applied by the U.S. Supreme Court in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285, 129 S.Ct. 865, 172 L.Ed.2d 662 (2009), and discussed in the Eighth Circuit's follow-up decision in Matschiner v. Hartford Life and Acc. Ins. Co., 622 F.3d 885 (8th Cir.2010), "requires strict compliance with the terms of the ERISA based [insurance] policy," (Children's Brief [65-3] at 4), and supplants the substantial compliance doctrine which would otherwise govern.
In Kennedy, plaintiff's decedent was a participant in his employer DuPont's savings and investment plan (SIP). He named his wife as beneficiary of the plan benefits. Nearly twenty years later the couple divorced and the resultant divorce decree "divested [the wife] of all right, title, interest, and claim in and to" the proceeds of any retirement, pension or other employment benefit plan owned by plaintiff's decedent. 555 U.S. at 289, 129 S.Ct. 865. Plaintiff's decedent never executed documents removing his ex-wife as a beneficiary of the SIP, although he did execute a new form in favor of his daughter with respect to DuPont's Pension and Retirement Plan. When plaintiff's decedent died, the daughter, as executrix of his estate, asked DuPont to disburse the SIP funds to the estate. Relying on the decedent's beneficiary designation form, Du-Pont paid the SIP balance to the ex-wife. Id. at 290, 129 S.Ct. 865. The estate sued DuPont and its plan administrator on the theory "the divorce decree amounted to a waiver of the SIP benefits on [the ex-wife's] part," and payment to her violated ERISA. Id.
Although the argument between the Kennedy parties focused on whether the ex-wife's waiver in the divorce decree acted to assign or alienate her interest back to her ex-husband or his estate in violation of the anti-alienation provision of ERISA, or was otherwise a waiver barred by ERISA, the Supreme Court found the waiver issue was not the determining factor in deciding the case. Rather, the Estate's claim was determined by the "'terms of the plan,' [29 U.S.C] § 1132(a)(1)(B), a straightforward rule of hewing to the directives of the plan documents that lets employers `"`establish a uniform administrative scheme, [with] a set of standard procedures to guide processing of claims and disbursement of benefits.'"'" Kennedy, 555 U.S. at 300, 129 S.Ct. 865
Matschiner v. Hartford Life and Acc. Ins. Co., 622 F.3d 885 (8th Cir.2010), involved similar facts, but, as here, concerned a group life insurance plan. Plaintiff's decedent originally designated sixty percent of her death benefits to her husband and twenty percent each to her daughters in a 1991 beneficiary designation form. In a 2000 divorce decree, the former spouses were each awarded their own life insurance policies and the cash proceeds of the policies. Plaintiff's decedent died in 2005 and the insurance company had to search for the designated beneficiaries, finding them in 2007. Id. at 886. One of the daughters advised a more recent beneficiary designation existed and that her father would disclaim his share. When contacted, the father stated he wished to collect his share and submitted a claim form. Id. In response the daughters submitted their competing claim forms and provided a copy of the 2000 divorce decree to the insurance company. Id. The daughters did not, however, submit the claimed more recent beneficiary designation form. Id.
Hartford paid out the policy benefits as directed in the 1991 beneficiary designation form. The daughters sued Hartford and their father to recover the benefit share paid to him. Id. The district court found the insurance company had abused its discretion in paying the death benefit to the father. In response to Hartford's motion to reconsider in light of the Kennedy decision, the district court distinguished Kennedy because the plan at issue did not contain a provision allowing for disclaimer of an interest. In a footnote the Kennedy court had said it did not address that situation. 555 U.S. at 303 n. 13, 129 S.Ct. 865. The district court ordered Hartford to pay the contested benefit to the daughters. The Eighth Circuit concluded the absence of a disclaimer provision in the policy did not avoid the "plan documents rule," believing it unlikely the Supreme Court intended to exempt welfare benefit plans which did not contain waiver-of-benefits provisions from the plan documents rule. The circuit held that as in Kennedy, "the plan documents, not the divorce decree, are controlling." Id. at 888, 129 S.Ct. 865. The insurance proceeds had been properly paid.
Kennedy and Matschiner stand for the proposition that the plan documents control ERISA-governed beneficiary changes, not that the plan documents must be strictly complied with by a participant who attempts to change a beneficiary or a plan administrator in implementing a beneficiary change. The cases are also factually distinguishable. In both the plan participant did not change, or attempt to change, a beneficiary. In both cases payments were made to who was shown as the beneficiary on the employer/insurer's records. Neither case necessarily supplants the substantial compliance doctrine which many courts, including Iowa's federal courts, have applied as federal common law in circumstances where an insured attempts to change the beneficiary of an ERISA-governed life insurance policy but fails to completely or technically comply
In Phoenix Mutual the Fourth Circuit articulated the substantial compliance doctrine:
30 F.3d at 564 (quotation omitted). The purpose of the doctrine is to "give effect to the insured's intent to comply when that intent is evident" thus furthering "the purposes of ERISA without compromising the integrity of the policies issued by plan sponsors." Id. at 565.
In this case Mr. Wasko complied with the procedure to change a beneficiary which he had been told he could use: by telephone directions to a benefits representative. Sun Life made the change based on what Mr. Wasko told the Hewitt benefits representative over the telephone. The children's complaint is that the policy procedures to change a beneficiary were not strictly followed. Though the context is different, the Court believes the substantial compliance doctrine is nonetheless an appropriate basis to resolve the competing claims here. If the law will enforce substantial compliance with change of beneficiary requirements when the insured's intended change fails for the lack of strict compliance with those requirements, it certainly ought to do so when the intended change is made notwithstanding the lack of strict compliance.
Evidently for the 2008 enrollment period Hewitt, with the agreement of DPSG and Sun Life, adopted an electronic beneficiary selection process Hewitt had proposed. (App. [64-3] at 98). Sun Life agreed to accept beneficiary changes based on a voice recording of an employee making a change over the telephone to a Hewitt representative followed by confirmation sent to the employee. (Id. at 93). While Mr. Beliveau's April 1, 2010 letter describing this protocol also referred to a returned, signed acknowledgment by the employee, it is clear a signed acknowledgment was not part of the process. (Id. at 98-99). The "Annual Enrollment Highlights" brochure explained the six "easy steps" of on-line enrollment. (Id. at 52, 59). A phone number for HR Solutions was given for employees needing help. Employees were told there were no paper forms to return, (id. at 59), and the confirmation
Mr. Wasko had difficulty enrolling on-line and called a Hewitt benefits representative to enroll. The representative reviewed Mr. Wasko's coverages with him in the course of which Mr. Wasko added his new wife, Bonnie, to his health, dental and vision insurance plans. The subject then turned to life insurance. The benefits representative, Destiny, first reminded Mr. Wasko of the $40,000 basic life insurance provided to him at no cost. Mr. Wasko responded simply "ok." Destiny next told him he was currently enrolled in the employee optional life plan at six times salary, $138,000 in coverage. She asked: "[D]id you want to remain in that one?" Mr. Wasko responded: "Yes." Destiny again asked: "Did you want to designate Bonnie as your primary beneficiary for that?" Mr. Wasko again responded: "Yes." Destiny said she would "take care of that," adding "okay, I've got Bonnie designated." (App. [64-3] at 71-72) (emphasis added). A confirmation notice was sent to Mr. Wasko noting Mrs. Wasko was now the primary beneficiary of Mr. Wasko's optional life insurance coverage. (Id. at 79).
The recorded conversation with Destiny and the follow-up confirmation notice clearly evince Mr. Wasko's intent to make his wife the primary beneficiary of the optional life coverage. It is true, as the children point out, that Mr. Wasko said nothing about eliminating the children as beneficiaries, but by designating Mrs. Wasko as the primary beneficiary for the optional life coverage, he must have known the optional life death benefit would go to his wife. At the outset of Mr. Wasko's conversation with Destiny he indicated that he had gone over his elections and knew what he wanted to enroll in. (App. [64-3] at 68-69).
The Court agrees with the children, however, that what passed between Destiny and Mr. Wasko is ambiguous with respect to the beneficiary of Mr. Wasko's basic life coverage, an ambiguity not cleared up by the subsequent confirmation which said nothing about the basic life coverage. The basic life and optional life insurance are two separate coverages. As Mr. Wasko's written 2007 beneficiary designation form indicates, an employee could select different beneficiaries for each, indeed the employee was required to signify on the form if the employee wanted the optional (supplemental) life beneficiary(ies) to be the same as the basic life beneficiary(ies). (Supp. App. [66-2] at 100).
Destiny first reminded Mr. Wasko of the basic life coverage provided to him at no cost, which he simply acknowledged. Destiny then addressed the subject of the optional life coverage. Mr. Wasko's responses to Destiny's questions about "that one" or "the primary beneficiary for that" can reasonably be taken as referring only to the $138,000 in optional life coverage. Mr. Wasko may have understood Destiny's latter inquiry to refer to both the basic life and optional life coverages. As Mr. Wasko added Bonnie as insured or beneficiary on all his other insurance, the Court can speculate that if asked who he wanted the beneficiary to be for his basic life coverage he would have responded similarly. But the conversation is unclear on the subject of the basic life coverage. The subsequent confirmation notice "confirm[ing] your beneficiary designation[s] on file" listing Bonnie as primary beneficiary only on the accidental death and dismemberment and optional life coverages, in response to which Mr. Wasko made no corrections or additional beneficiary designations as the confirmation notice invited him to do (Destiny had told him to go over the confirmation and call if not correct) is arguably consistent with the lack of intent to change the basic life beneficiaries. (App. [64-3] at 75, 79). Because Mr. Wasko's intent to
It remains to assess the second prong of the substantial compliance doctrine with respect to the beneficiary change for the optional life coverage which Mr. Wasko clearly intended-whether the process used was "for all practical purposes similar to the action required by the change of beneficiary provisions of the policy." Phoenix Mutual, 30 F.3d at 564. The Sun Life policy states three requirements for a change of beneficiary: (1) the request must be in writing; (2) signed by the employee and (3) file[d] with the employer. (App. [64-3] at 49). Under the 2008 enrollment procedure put in place by Hewitt, Sun Life and DPSG agreed to accept recorded verbal change of beneficiary directions given by telephone to a Hewitt benefits representative so long as safeguards were in place to ensure the employee was in fact the one giving the verbal directions. There is no question but that Destiny was speaking with Mr. Wasko. He had to verify his identity at the outset of the telephone call. The conversation was recorded and has been preserved in a written transcript. In the Court's judgment recorded verbal beneficiary changes capable of being reduced to writing are for all practical purposes the same as a written change of beneficiary. Verification that the benefits representative is speaking to the employee and the employee's voice together are as reliable as any signature, perhaps more so. Finally, the employee's spoken beneficiary designations received by a benefits representative and the representative's indication that those designations have been made followed by written confirmation is the functional equivalent of "fil[ing]" a beneficiary change with the employer. The telephone means by which Mr. Wasko designated Bonnie as the primary beneficiary of his optional life coverage was for all practical purposes equivalent to the requirements of the policy beneficiary change provision. The plan documents were substantially complied with. It follows Bonnie Wasko is the primary beneficiary of the optional life coverage.
The cross-motions for summary judgment [64][66] are
IT IS SO ORDERED.
