Opinion
8:01CV624
February 26, 2004
MEMORANDUM AND ORDER
This matter is before the court on the motion for summary judgment, Filing No. 32, of the defendant, Principal Financial Group (Principal). This is an action to recover health insurance benefits under the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (ERISA).
I. BACKGROUND
In her amended complaint, plaintiff Jennifer K. Nakazawa, personal representative of the estate of Jeane R. Jensen (Nakazawa), alleges that her decedent, Jeane Jensen, was formerly employed by Paulsen Development Company, doing business as Valentino's Restaurant in Kearney, Nebraska. Filing No. 10, Amended Complaint. Paulsen Development had provided group health coverage for its employees through a policy of insurance issued by Principal. Id. During the time that the policy was in force, Ms. Jensen was diagnosed with breast cancer. Id. Ms. Jensen submitted certain claims to Principal for payment and the claims were paid. Id. Ms. Jensen later submitted additional claims and the claims were denied because of policy lapse. Id. Ms. Jensen thereafter discovered that Paulsen Development Company had failed to pay its premiums. Id. Nazakawa alleges that no notice of policy termination was provided to Jensen until after all her medical expenses had been incurred. Id.
The health insurance policy at issue provides that Principal was the "Participating Unit" and that Jensen and other employees were "Members." Filing No. 33, Ex. 2, pt. I. The policy further provides: "If this Group Policy terminates for any reason, the Participating Unit must: (a) notify each Member of the effective date of the termination." Id., pt. II, § C, art. 5. See also id., pt. V, § E ("The Participating Unit must advise all members of the date of termination"). Under the policy, Principal has "complete discretion to construe or interpret the provisions of this group insurance policy, to determine eligibility for benefits, and to determine the type or extent of benefits, if any, to be provided" and "Principal's decisions in such matters shall be controlling, binding, and final." Id., pt. II, § A, art. 11. Nakazawa alleges that Principal breached its fiduciary duties to Jensen under ERISA in denying the claims and in failing to notify her of the cancellation of coverage.
II. DISCUSSION
Ona motion for summary judgment. The question before the court is whether the record, when viewed in the light most favorable to the nonmoving party, shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(C); Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1326 (8th Cir. 1995). Where unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate. Id.
The insurance policy at issue qualifies as an "employee welfare benefit plan," which is defined as "any plan, fund, or program . . . maintained by an employer . . . established . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits. . . ." 29 U.S.C. § 1102(A); Robinson v. Linomaz, 58 F.3d 365, 367 (8th Cir. 1995) (holding that an employer's purchase of an insurance policy to provide health care benefits for its employees can constitute an employee welfare benefit plan under ERISA). The term "plan sponsor" means "the employer in the case of an employee benefit plan established or maintained by a single employer." 29 U.S.C. § 1002(16)(B). The term plan "administrator" means "the person specifically so designated by the terms of the instrument under which the plan is operated" or "if an administrator is not so designated, the plan sponsor." 29 U.S.C. § 1002(16)(A). An entity is "a fiduciary with respect to a plan" if it is either named or designated as a fiduciary, or if it "exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets," or "has any discretionary authority or discretionary responsibility in the administration of such plan." 29 U.S.C. § 1105 (c)(1); 1002(21)(A)(i) (ii).
In order to recover the health insurance benefits herdecedent lost because of the policy lapse, Nakazawa must thus establish that Principal was a fiduciary under ERISA. See Kerns v. Benefit Trust Life Ins. Co., 992 F.2d 214, 216 (8th Cir. 1993). There is no written instrument other than the policy at issue. The undisputed evidence shows that Principal was neither the plan sponsor nor a person or entity identified in the policy as a plan administrator or a fiduciary. Thus, Nakazawa must show that Principal was a fiduciary as defined under 29 U.S.C. § 1002(21)(A), that is, Nakazawa must show that Principal exercised discretionary authority or control with regard to management and disposition of the plan's assets or had discretionary authority or responsibility in the administration of the plan. Kerns, 992 F.2d at 216. Such a fiduciary is liable only to the extent of its exercise of discretion. Id. When insurance is purchased to fund all or part of an employer's ERISA plan, either the plan or the policy may create fiduciary obligations for the insurer, such as the role of plan administrator. Id. An insurance company does not become an ERISA fiduciary merely because it handles claims under an employer's group policy. Id. at 216. When an insurance company does nothing more than perform its normal claims handling function under a group policy, it is not a "fiduciary with respect to a plan" as that term is defined in 29 U.S.C. § 1002(21)(A). Id.
Fiduciary status under § 1002(21)(A) is not "an all-or-nothing concept. . . .[A] court must ask whether a person is a fiduciary with respect to the particular activity in question." Molasky v. Principal Life Ins. Co., 149 F.3d 881, 884 (8th Cir. 1998) (quoting Kerns, 992 F.2d at 217.) The court must determine whether Principal was acting in a fiduciary capacity when it denied claims by reason of lapse and failed to notify Jensen that the policy had lapsed. Because the policy at issue provides that Principal handles the review function, it could be regarded as a fiduciary with respect to its decisions on policy coverage or exclusions and review of those decisions. See, e.g., Molasky, 149 F.3d at 883 (finding insurer a fiduciary with respect to review function); Prudential Ins. Co. of America v. Doe, 140 F.3d 785, 789 (8th Cir. 1998) (noting policy gave insurer "substantial discretion" to interpret the policy and to decide and review claims and finding insurer a fiduciary with respect to denial of claims). Discretion regarding claims administration does not equate to discretion on policy coverage or premium payment. See Canada Life Assur. Co. v. Estate of Lebowitz, 185 F.3d 231, 237 (4th Cir. 1991) (explaining the distinction between "claims administrator," who has been delegated "exclusive and absolute discretion" over the handling and adjudication of claims, and "plan administrator," who retains "exclusive and absolute discretion" over the determination of employee coverage and premium payments).
Although ERISA imposes substantial disclosure requirements on plan administrators, "[i]t is well established that insurers who are not plan administrators have `no ERISA fiduciary duty to notify plan participants and beneficiaries, unless the policy documents or the insurer's past practices have created an obligation to communicate directly with them.'" Molasky, 149 F.3d at 884 ( quoting Kerns, 992 F.2d at 217). Principal has not been shown to be the plan administrator and, absent designation of a plan administrator in the plan documents, the role of plan administrator falls to the plan sponsor, Paulsen. 29 U.S.C. § 1002 (16)(A)(ii). The uncontroverted evidence shows that the policy clearly imposes the duty to notify beneficiaries of the policy's termination on Paulsen. There has been no showing that Principal had previously undertaken to perform any notification functions.
Nakazawa argues thata fiduciary relationship has been established because Principal exercised discretion in paying claims submitted during the coverage period. This argument is flawed. Principal acted not as an ERISA fiduciary, but as an insurance vendor making a business decision to pay a legitimate claim for treatment that occurred during the time the policy was in force. See Kerns, 992 F.2d at 217. There was no discretion involved in Principal's decision to deny benefits by reason of a lapse in premium payments. The mere fact of Jensen's reliance on Principal's continued payment of claims cannot create a fiduciary obligation to pay claims under a policy that had lapsed. Principal had no contractual obligation in this regard. There is no logical or legal support for such a proposition. Principal's actions in administering and paying Jensen's initial claims during the covered time period do not involve the kind of discretionary authority to grant, deny and review denied claims found in Kyle Railways, Inc. v. Pacific Administration Serv., Inc., 990 F.2d 513, 517 (9th Cir. 1993). There is no evidence that Principal had any discretionary authority or responsibility in connection with denial of claims for nonpayment of premiums.
The court in this case finds no ERISA fiduciary obligations to either pay claims under the lapsed policy or to notify beneficiaries of the lapse of the policy. Accordingly,
IT IS HEREBY ORDERED that defendant Principal's motion for summary judgment is granted. This action is dismissed and a separate order of judgment will issue.