District Court in 11th Circuit Applies Presumption against Suicide When Interpreting AD&D Policy.

In Acree v. Hartford Life & Accident Ins. Co., 2013 WL 140097 (M.D. Ga. 2013), Mr. Gwinette was found dead on his porch, with a gunshot wound to his chest.  When Mr. Gwinette’s beneficiaries submitted a claim for life insurance and AD&D benefits under the employee benefit plan provided by Mr. Gwinette’s employer, Defendant paid the life insurance benefits, but denied the AD&D benefits.  In finding coverage excluded, Defendant relied upon “official” reports from the investigation, including: (1) the Death Certificate, which listed the manner of death as “Undetermined”; (2) the Autopsy, which listed the manner of death as “suicide (self-inflicted)”; and (3) the Incident Report, which provided a narrative of the first responder, who listed the incident type as “suicide.”  In their administrative appeal, the claimants alleged Mr. Gwinnett accidently shot himself while cleaning his shotgun.  They submitted testimony regarding Mr. Gwinette’s character, state of mind, relative inexperience with guns, and the tendency for the gun to “jam.”  They also presented evidence that gun-cleaning materials were beside Mr. Gwinette’s chair on the porch where he was found.  Nevertheless, Defendant upheld its determination on appeal, relying on the original “official” reports.

In reviewing Defendant’s determination, the Court held that federal common law “firmly established a negative presumption against suicide.” Under this rule, “the presumption[] never drop[s] out of the case until the fact finder, [i.e., the Court] becomes convinced, given all the evidence, that it is more likely than not that the insured committed suicide.”  Id. at *19, quoting, Horton v. Reliance Standard Life Ins. Co., 141 F. 3d 1038, 1042 (11^th Cir. 1998).  Here, the Court was not so convinced, and remanded the case for Defendant to investigate further into whether Mr. Gwinette’s “self-inflicted” shooting was simply an accident while he was cleaning his gun.  Implicit in the Court’s ruling was its sense that the “official” reports did nothing more than rule out a homicide.

The Court also foreclosed any argument that, even if Mr. Gwinnett had been cleaning his gun, he should have known that serious injury would be a probable outcome in cleaning a gun that tended to jam, thus failing the Wickman test.  (Wickman v. Northwestern Nat’l Ins. Co., 908 F. 2d 1077 (1^st Cir. 1990) was a landmark case inserting an objective test into evaluating whether a loss was due to an “accident” as a result of risky behavior.)  Here, the Court found:  “[Mr.] “Gwinette made no more than a fatal mistake,” and that AD&D insurance is “purchased … ‘for the very purpose of obtaining protection from one’s own miscalculations and misjudgments.’”  Id. at *28, quoting Padfield v. AIG Life Ins. Co., 290 F. 3d 1121, 1130 (9^th Cir. 2002).

ERISA Does Not Preempt State Court Order Requiring Beneficiary to Renounce Right to Employee’s Plan Benefits, Fourth Circuit Rules.

The scenario is not difficult to imagine:  An employee designates her spouse as the primary beneficiary under her employer’s life insurance and retirement benefit plans.  Years later, the couple divorces, and in the marital  settlement agreement, the ex-spouse waives his right to the employee’s life insurance and retirement benefits.   However, the employee forgets to change the beneficiary designation on her employer’s form. The employee then dies.

Under ERISA, the plan administrator must distribute the proceeds under the terms of beneficiary designation form.  Unless the marital settlement agreement qualifies as a QDRO, it does not enter the picture.   Consequently, in this scenario, the plan administrator must distribute the benefits to the ex-spouse as the named beneficiary.  Kennedy v. DuPont Savings and Investment Plan, 555 U.S. 285, 129 S. Ct. 865 (2009). 

However, this outcome does not prevent the employee’s estate from seeking the proceeds from the ex-spouse.  This was the scenario in Andochick v. Byrd, slip opinion 12-1728 (March 4, 2013), in which the Fourth Circuit Court of Appeals acknowledged that it was answering a question left open by the Supreme Court in the Kennedy decision.  In Andochick, the employee’s estate sought an injunction in state court, asking the Court to find the ex-spouse in contempt of the marital settlement agreement and ordering him to renounce his rights to the life insurance and retirement benefits under the employee benefit plan.  Meanwhile, the ex-spouse filed an action in federal court, seeking a declaratory judgment that the plan administrator must distribute the plan benefits to him, under Kennedy.   The United States District Court for the Eastern District of Virginia held that, while the plan administrator would be required to adhere to the beneficiary designation, the employee’s estate could enforce the marital settlement agreement in state court against the ex-spouse.  Andochick v. Byrd, 2012 U.S. Dist. Lexis 65903 (E.D. Va. 2012).  The Fourth Circuit Court of Appeals affirmed the District Court, finding that the state court’s injunction affected the parties’ rights post-distribution, even if the court entered the injunction prior to the plan’s distribution.  In this way, the state court’s order did not interfere with ERISA’s goals in efficient plan administration recognized by the Supreme Court in Kennedy, the Court held.  

The lesson:  An estate can sue the employee benefit plan beneficiary before the plan distribution is made, putting in place the threat of a court’s contempt powers by the time the distribution is made.  

The Fourth Circuit Opens the Door to Extrinsic Evidence in Considering a Claim for Employee Benefits.

The very first principle applied in a lawsuit for benefits from an ERISA-governed employee benefit plan is as follows:  When the plan bestows the administrator with discretionary authority to determine whether the claimant is entitled to benefits under the plan, the Court reviews the administrator’s decision for abuse of discretion.   Firestone Tire  & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). 

From there, the second main principle follows:  When the Court reviews the administrator’s decision for abuse of discretion, the scope of admissible evidence is limited to the Administrative Record, i.e., all the documents and information “known to the administrator at that time of its decision.”  Sheppard & Enoch Pratt Hosp. v. Travelers Ins. Co., 32 F. 3d 120, 125 (4^th Cir. 1994).

In the Fourth Circuit’s brand new decision, Helton v. AT& T, Inc. Pension Benefit Plan, 2013 U.S. App. LEXIS 4575 (4^th Cir. March 6, 2013), the Court examined under the microscope what an administrator may have “known at the time,” and interpreted that phrase to include anything that the administrator would have, could have, or should have known when it reviewed the claimant’s benefit claim.   Otherwise, the plan administrator “could simply omit any evidence from the administrative record that would suggest their decisions were unreasonable.” 

This particular comment by the Court was not earth-shattering; of course, an administrator has a duty to review what is before it.  However, the Court went further.  Relying upon Booth v. Wal-Mart Stores Inc. Assoc. Health and Welfare Plan, 201 F. 3d 335 (4^th Circ. 2000) and its long-standing factor test for evaluating whether an administrator abused its discretion, the Court held that “a district court may consider evidence outside of the administrative record … when such evidence is necessary to adequately assess the Booth factors and the evidence was known to the plan administrator when it rendered its benefits determination.”  

The Helton Court went on to interpret what is “known” when the administrator is a corporation (the most common situation):  Basically, any records the corporation has are imputed upon the corporation’s knowledge.  Thus, the Helton Court explained, the Court should be able to review the plan administrator’s prior coverage determinations to assess whether its decision in the subject case was consistent with earlier interpretations of the plan (the fourth Booth factor).  While this appears facially logical, the Helton Court suggested a dramatically increased discovery burden, requiring the administrator to make exhaustive searches into past decisions – something for which the administrator would not necessarily have had any reason to search in reviewing the claimant’s benefit claim, as every claimant’s case is based upon its own unique facts.  The Court also discussed the eighth factor, conflict of interest, which was recently addressed by the Supreme Court in MetLife v. Glenn, 554 U.S. 105 (2008), and declared: “One can envision many circumstances in which a Court would need to look to extrinsic evidence to evaluate … the impact of a plan fiduciary’s conflict of interest.” 

Arguably, the Helton Court’s application of its holding to the fourth and eighth Booth factors was dicta, as it was not necessary for reaching its decision, which involved the fiduciary’s alleged failure to examine its own records to determine whether it gave proper notice of a plan change to the Plaintiff.   Nevertheless, Plaintiffs’ counsel in the Fourth Circuit now have increased leverage in arguing for expanded discovery and the admissibility of extrinsic evidence in ERISA benefit cases.