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Price v. Life Insurance Company of North America

United States District Court, S.D. Texas, Houston Division

July 3, 2019

Beverly Price and Dale Price, Plaintiffs,
Life Insurance Company of North America, et al., Defendants.



         Pending before the court is a motion to dismiss plaintiffs Beverly Price and Dale Price's amended complaint against defendant Northgate Benefits and Insurance, LLC (“Northgate”). Dkt. 17. Having considered the motion, response, reply, and applicable law, the court is of the opinion that the motion should be GRANTED.

         I. Background

         This case relates to the alleged wrongful denial of life insurance benefits under a plan governed by the Employee Retirement Income Security Act (“ERISA”). The plaintiffs' decedent, Lonnie Price Jr. (“Decedent”), worked as an IT professional for ARES Corporation (“ARES”).[1]Dkt. 1 ¶ 11. While employed, Decedent participated in the ARES Holding Corporation Benefits Plan (the “Plan”). Id. ¶ 12. The Plan is a group employee benefits plan which offered group life insurance as well as other insurance coverage to participating ARES Holding Corporation (“AHC”) employees under Life Insurance Company of North America (“LINA”) Group Policy FLX-964559 (the “Policy”). Id. ¶ 6, 13, 17. The Decedent participated in the Plan while employed by ARES. Id. The Policy identifies defendant AHC as the Plan Sponsor and Plan Administrator.[2] Dkt. 17, Ex. 1 at 22. AHC appointed defendant LINA, the Plan's underwriter, as the named fiduciary and claims administrator of the Policy. Id. at 23. The Policy provided the Decedent with a life insurance benefit of $135, 000 and $200, 000 in supplemental coverage. Dkt. 1 ¶ 17. Beverly Price and Dale Price, Decedent's wife and son respectively, were named as Decedent's beneficiaries under the Plan and Policy issued by LINA. Id. ¶ 19. In addition, ARES maintained an administrative services agreement (the “Agreement”) with Northgate to act as a third-party administrator of the Plan. Id. ¶ 16; Dkt. 17, Ex. 2. The Agreement required that Northgate use its “best efforts and professional judgment” in carrying out the services agreed upon. Id. at 4. The Agreement also maintained that “[ARES] remains the Plan Administrator and named fiduciary for purposes of the Plan” and retained “full authority and control over the management” of the Plan. Id. at 5, 8.

         In February 2016, Decedent was diagnosed with terminal cancer. Dkt. 1 ¶ 21. Decedent, however, continued working for ARES on a part-time basis with varied hours until his death in September 2017. Id. During this period, Decedent took ARES-approved intermittent Family Medical Leave Act leave, and ARES continued to deduct group life insurance premiums from Decedent's pay and provide them to LINA on his behalf. Id.

         In July 2016, Decedent was informed that he had less than one year to live, and he subsequently filed a claim for the maximum allowable terminal illness benefit of $67, 500 under the Policy. Id. ¶ 22. As a prerequisite for this benefit, Decedent informed AHC, Northgate, LINA, and the Plan of his terminal condition. Id. ¶ 23. In accordance with the terms of the Policy, LINA deposited the requested terminal illness benefit into a CignaAssurance account maintained by LINA for use by the Decedent. Id. ¶ 24. Following Decedent's death, LINA transferred the remaining balance of the CignaAssurance account to plaintiff Beverly Price. Id.

         In August 2016, a Northgate representative emailed two LINA representatives concerning the appropriate steps for the Decedent to convert or port his remaining life insurance coverage to an individual policy or otherwise maintain Decedent's life insurance coverage. Id. ¶ 27. A LINA representative responded to Northgate, claiming, “Since [Decedent] is out on disability and was 60 when the claim started (from what I can tell), the life insurance coverage can stay in effect for up to 12 months as long as premiums are paid. . . . Normally once the employment terminates, the employee should be offered conversion.” Id. ¶ 28. Following this exchange, no representatives of Northgate or AHC followed-up with LINA nor did any representatives of LINA follow-up with Northgate or AHC. Id. ¶ 30.

         Following Decedent's death in September 2017, the Prices filed timely claims for Decedent's remaining life insurance proceeds. Id. ¶ 31. However, neither the Decedent nor the plaintiffs converted or attempted to covert Decedent's group life insurance coverage before filing their claims. Dkt. 17 at 6. As part of the Prices' application, both AHC and Northgate submitted claim forms to LINA representing that the they were entitled to Decedent's remaining life insurance proceeds under the Plan and Policy and Decedent's coverage was in effect through the date of his death. Dkt. 1 ¶¶ 32-33.

         LINA denied the plaintiffs' claim for life insurance benefits and further denied the plaintiffs' administrative appeal seeking review of LINA's denial of their claim. Id. ¶ 34. LINA determined that Decedent had lost his eligible class status by working less than thirty hours per week and should have converted his group life insurance coverage but failed to do so within twelve months of losing coverage. Id.

         The plaintiffs filed the instant lawsuit in October 2018. Dkt. 1. Following the dismissal of improperly named defendants ARES and ARES Corporation Benefits Plan, the plaintiffs amended their complaint to include AHC and the Plan. Dkt. 26. The Prices allege that AHC, Northgate, LINA, and the Plan:

failed to sufficiently, accurately, comprehensively, clearly or reasonably apprise Decedent or Plaintiffs of their rights and obligations under the Plan and the [LINA] Policies with regard to circumstances which may result in disqualification, ineligibility or denial or loss of life insurance benefits from the Plan or The LINA Policies as LINA claims to be the case in its denial letters, nor available steps, and how and when they should take those steps to maintain those benefits, including conversion, and in fact misled them regarding the same.

Dkt. 1 ¶¶ 45-47. The Prices further allege that “[AHC] and/or LINA and/or Northgate” took part in preparing a Summary Plan Description (“SPD”) which failed to adequately inform the Decedent or the Prices of their rights and obligations to maintain eligibility under the Plan and Policy. Id. ¶¶ 43-44.

         The Prices claim entitlement to life insurance policy proceeds under the terms and provisions of both the Plan and Policy pursuant to § 502(a)(1)(B) of ERISA (29 U.S.C. § 1132(a)(1)(B)), alleging that they satisfy all qualifications for benefits. Dkt. 1 ¶ 51. The Prices alternatively assert a claim for breach of fiduciary duty against AHC, Northgate, LINA, and the Plan, and they claim entitlement to equitable relief under § 502(a)(3) of ERISA (29 U.S.C. § 1132(a)(3)). Id. ¶¶ 52-54, 58. The Prices further allege that both LINA and the Plan have been unjustly enriched by the retention of premiums and life insurance benefits allegedly owed to the plaintiffs. Id. ¶ 62. The Prices seek disgorgement of any profits AHC, Northgate, LINA, and the Plan realized by the retention of benefits allegedly owed to the them and also seek an equitable surcharge. Id. at 13-14.

         Northgate filed the instant motion to dismiss the plaintiffs' § 502(a)(3) claim against Northgate pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. 17. Northgate argues that the Prices' § 502(a)(3) claim is precluded by the plaintiffs' § 502(a)(1)(B) claim against LINA and the Plan for recovery of benefits or, alternatively, that the plaintiffs have not alleged sufficient facts showing Northgate ...

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