The estate’s claims against the life insurance company failed, but the Ninth Circuit remanded for further review claims against the decedent’s employer. Estate of Foster v. Am .Marine Sys. Group Ben. Plan, 2021 U.S. App. LEXIS 3555 (9th Cir. Feb. 9, 2021).
The estate filed suit under the civil enforcement provision of ERISA against American Marine Corporation (American Marine) and United Omaha Life Insurance Company (United) alleging defendants wrongfully denied a claim for life insurance benefits after the decedent died of oesophageal cancer on June 24, 2016. The district court dismissed some claims and granted summary judgment to defendants on remaining claims.
The decedent worked for American Marine as a Health, Safety, Environmental & Security Manager. He became terminally ill in March 2015. On February 1, 2016, American Marine laid him off, but assisted him in filing a claim with United for long-term disability (LTD) benefits. The application for LTD was approved on February 15. American Marine also allowed the decedent to exhaust twenty accrued vacation days and thirty-five accrued sick days before he stopped receiving a salary. Therefore, he was on the payroll until April 15. LTD benefits continued until the decedent’s death on June 24.
The estate filed a claim with United for life insurance benefits. The claim was denied because American Marine had stopped paying life insurance policy premiums on his behalf as of April 30. This appeal addressed whether the decedent received sufficient notice that his life insurance coverage would end on that date unless he converted the policy to an individual policy and started paying the premiums himself.
American Marine employees were entitled to group life insurance benefits under a policy issued by United and administered by American Marine. The decedent had been given a life insurance handbook explaining how to convert the policy when an individual terminated work at American Marine. If any employee’s life insurance ended because his employment ended, he was entitled to a “conversion privilege,” meaning that he could apply for an individual policy within thirty-one days. If the employee died during the conversion period, United would pay the amount of group life insurance the employee was entitled to convert.
United concluded that the decedent was ineligible for life insurance benefits when he died because American Marine stopped paying premiums on April 30 and the decedent failed to exercise his conversion privilege within thirty-one days, or by May 31.
On appeal, the Ninth Circuit noted that as a fiduciary, American Marine had an obligation to convey complete and accurate information material to the beneficiary’s circumstance, even when a beneficiary did not specifically ask for the information. American Marine argued that the handbook apprised the decedent of his conversion rights. But the Ninth Circuit held that American Marine was required to provide further explanation under the circumstances.
Although the decedent had the handbook, it was ambiguous as to the exact date that the thirty-one day conversion clock started. It could have been February 29, or the last day of the month in which he was laid off. It could have been April 30, the last day of the month when the decedent was no longer being paid. Or it could have been a later date, so long as American Marine continued paying premiums and the decedent remained totally disabled.
Therefore, a genuine issue of material fact existed as to whether the decedent knew when his coverage would expire. While summary judgment in favor of United was upheld, the district court decision that American Marine had no duty to notify the decedent that his life insurance would end on April 30, 2016, other than sending him the handbook, was in error.