Recently the Court of Appeal Fifth circuit rendered their opinion in the case of Mary Ann LETTER, Individually and as Executrix Administratrix of the Estate of Timothy D. Letter vs. UNUM PROVIDENT CORPORATION; Unum Life Insurance Company of America. They ruled that the plaintiff Mary Ann Letter, individually and as acting as the estate of her husband Timothy D. Letter was not entitled to recover Accidental Death And Dismemberment (AD & D) benefits from her deceased husband’s group insurance plan due to non payment of premium.
The Fact Of The Case: Disability Attorney Appealed District Court’s Ruling Regarding Waiver Of Premium Disability Benefit Case.
The deceased Timothy Letter was a former employee of PepsiAmericas, Inc. (Pepsi). He participated in a group insurance plan issued by the Unum Life Insurance Company of America (Unum) that included coverage for life insurance and AD & D. Prior to his death; he became disabled and stopped paying premium.
The Claim for Life Insurance Benefits: – Entitled under “Wavier of Premium” Clause
After his death, the plaintiff and wife of the deceased Mary Ann Letter filed a life insurance claim under the group insurance plan. Unum determined that the plaintiff was entitled life insurance benefits under a “waiver of premium” term in the Plan’s life insurance provisions. Under the “Waiver of Premium” Clause, if the insured becomes disabled while covered under the plan, Unum will waive the premiums during the duration that the insured was disabled. In Timothy Letter’s case, Unum accordingly paid out life insurance benefits to the plaintiff even though the deceased Timothy Letter did not pay any premiums during the period that he was disabled.
The Claim for AD&D benefits: – Policy did not provide For a Waiver of Premiums
The plaintiff later provided medical evidence to Unum that the deceased Timothy Letter’s death was accidental and sought to recover AD & D benefits under the plan. Unum refused to pay out AD & D benefits to the plaintiff arguing on the ground, among other things, that AD & D section of the life insurance policy did not provide for a waiver of premiums. In other words, Unum was claiming that when the deceased Timothy Letter stopped paying premiums under the plan, he was no longer covered for AD & D even though his coverage for life insurance benefits was still in effect.
District Court Ruling: – No abuse of discretion on Unum’s Part
The plaintiff sought to compel Unum to pay the AD & D claim at the district Court level and was unsuccessful as the District Court ruled that Unum did not abuse its discretion in concluding that the waiver of premium provision applied only to the life insurance portion of the Plan.
Appeal made to the Court of Appeal: – Ambiguity in the Language of the Plan
In the appeal, the plaintiff argued that the ruling of the District Court was wrong with its conclusion that Unum had acted within its discretion in denying the plaintiff’s claim for AD & D benefits. The basis of their argument was that the language of the plan did not clearly establish that the waiver of premium provision applied only to the life insurance coverage and because of that, the ambiguity should be construed against Unum as the drafter of the plan.
Unum on the other hand, argued that life insurance and AD & D sections of the Plan were clearly delineated and that the waiver of premium provision applied only to the life insurance coverage. It further argued that it had not abused its discretion in construing the Plan and as such is entitled to the summary judgment.
Court of Appeal Review of the District Court’s Ruling: – the Summary of Benefits Interpretation
The summary of benefits contained in the policy, used by the plaintiff and Unum to establish the terms of the plan, contain several sections, including the sections that set forth the specific terms of the life insurance and AD & D coverage. The waiver of premium provision, referred to as a “life insurance premium waiver”, appeared only in the life insurance section and not the in the AD & D section. The Court Of Appeal ruled that this obviously meant that the waiver was available for the life insurance coverage and not for AD & D coverage. Hence, the Court of Appeal was of the opinion that Unum’s interpretation of the plan was correct.
Terms of the Plan Are Inconsistent with Summary Plan Description: – Two Distinct Documents
Under the Employee Retirement Income Security Act (ERISA):
(A) Summary plan description of any employee benefit plan shall be furnished to participants and beneficiaries as provided in section 1024(b) of this title. The summary plan description include the information described in subsection
(B) Of this section, shall be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan.
The plaintiff argued that the terms of the Plan are inconsistent with what they have identified as the summary plan description. Under the provisions of ERISA 29 U.S.C. § 1022(a), a policy and a summary plan description is regarded as “two distinct documents.”
The Court of Appeal had ruled in Hansen v. Cont’l Ins. Co., “that the summary plan description is binding and that if there is a conflict between the summary plan description and the terms of the policy, the summary plan description shall govern.”
The Plaintiffs argued that the summary plan description they have identified does not adequately inform a policyholder that coverage can be lost when the covered employee becomes disabled.
In response, Unum argued that the pages that the plaintiff relied on does not constitute the whole of the summary plan description for the Plan but rather just a few pages of the much longer Summary of Benefits. Unum further argues that the plaintiff had misidentified a section that was intended to provide certain ERISA-required information, but not to serve as a stand-alone summary plan description.
To support Unum’s argument, Unum pointed out that the plaintiff provided no evidence that pages identified by the plaintiff were distributed to the deceased Timothy Letter or any other Pepsi employees as a summary plan description. Unum, on the other hand, provided an affidavit by a Unum senior contract specialist explaining that the section was not intended as a stand-alone description of all the terms and provisions of applicable coverage.
Unum argued that the plaintiff had particularly relied on the “heading” of the few pages in question which read as “ERISA – SUMMARY PLAN DESCRIPTION”. The plaintiff had omitted the fact that the table of contents identified the disputed section not as a summary plan description, but merely as “ERISA”, a denomination consistent with Unum’s reading of the section as merely conveying certain ERISA-required information. In addition, Unum stated that the disputed section omitted key information, such as basic eligibility criteria, that must be included in a summary plan description.
Court of Appeal’s Opinion Regarding the Disputed Section
The court of Appeal rendered its opinion that in the face of Unum’s affidavit establishing that the section was not intended to stand alone and the fact that the content of the section seems to confirm that characterization, the heading does not by itself create a disputed issue of material fact with regard to whether that section was the summary plan description and hence did not need not consider the argument that the disputed pages was inconsistent with the policy. Accordingly, the Plaintiff was not entitled to waiver of premium and the estate will not receive any payments under the Accidental Death and Dismemberment Unum Policy.