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Reliance Standard Life Insurance Co. v. Smith

October 18, 2006

RELIANCE STANDARD LIFE INSURANCE COMPANY, PLAINTIFF,
v.
CHRISTIN SMITH, DEFENDANT.



The opinion of the court was delivered by: Phillips

MEMORANDUM OPINION

This action was filed by Reliance Standard Life Insurance Company to recover an overpayment to Christen Smith under policies issued by Reliance. The Reliance insurance policies are an employee benefit plan governed by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq. Reliance has moved for an equitable lien on the overpayment, while Smith has moved for payment of additional sums she claims are due under the policies at issue. For the reasons that follow, plaintiff's motion for summary judgment will be granted; defendant's motion for summary judgment will be denied; and this action will be dismissed.

Administrative Record

The administrative record reveals that Reliance issued a group life insurance policy and a group accident policy to Denso. Both policies are part of Denso's employee welfare benefit plan and are therefore governed by the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. The decedent Michael Smith was insured under both policies at the time of his death on October 24, 2004. Defendant Christin Smith, wife of the deceased, was designated as beneficiary of the policies. The decedent had coverage under the life policy totaling $281,000.

Because the decedent had not been insured for a full two years before his death, Reliance initially paid defendant $211,000 in the guaranteed amount under the life policy but held the remaining $70,000 pending a medical history investigation in connection with the contestability clause. The accident policy provided additional coverage totaling $131,000, consisting of $100,000 accidental death benefits, a $25,000 seatbelt and airbag benefit, and a $6,000 survivor benefit.

Reliance issued a single check to Smith totaling $131,000 for the benefits due under the accident policy. Shortly after the accident policy check was issued to Smith, Reliance erroneously issued three additional checks to Smith totaling another $131,000, resulting in an overpayment of $131,000 to Smith. All checks issued to Smith by Reliance have been negotiated by her. According to Smith, the overpaid funds can be traced to stocks that she purchased.

After Reliance realized that an overpayment had occurred, Reliance completed its contestability investigation and concluded that the additional $70,000 benefit under the life policy was payable. The $70,000 benefit and interest of $1,160.28 were subtracted from the overpayment, reducing the balance claimed by Reliance from Smith to $59,839.72. To date, Reliance has not been reimbursed the $59,839.72.

Analysis

Summary judgment is proper if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In ruling on a motion for summary judgment, the court views the evidence, all facts, and any inferences that may be drawn from the facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). To withstand summary judgment, the non-movant must show sufficient evidence to create a genuine issue of material fact. Klepper v. First Am. Bank, 916 F.2d 337, 342 (6th Cir. 1990). A mere scintilla of evidence is insufficient; there must be evidence on which the jury could reasonably find for the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Entry of summary judgment is appropriate "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

The facts in this case are not disputed. Reliance has moved for summary judgment asserting that it is entitled to an equitable lien on the $59,839.72 overpayment made to Smith plus interest, costs, and attorney's fees.

Smith has filed a cross-motion for summary judgment on the grounds that:

(1) Reliance failed to exhaust administrative remedies and the Administrative Record fails to support Reliance's claim; (2) Reliance seeks to recover money damages under 29 U.S.C. § 1132(a)(3) which section provides only for equitable relief and does not authorize the payment of money damages; and (3) Reliance's complaint fails to set forth a claim upon which relief can be granted because Smith is entitled to supplemental death benefits as the designated beneficiary under the plan for such benefits and that the payments were not made.

The parties agree that the arbitrary and capricious standard of review should be applied in this case because the plan gives the administrator discretionary authority to determine eligibility for benefits or to construe the terms of the plan. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the United States Supreme Court held that "a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. at 115. If the plan grants the administrator or fiduciary the appropriate discretionary authority, the court must review the decision at issue under the "highly deferential arbitrary and capricious standard of review . . . ." Yeager v. Reliance Standard Life Ins. Co., 88 F.3d 376, 380 (6th Cir. 1996).

Smith argues that Reliance is seeking an award of money damages, which is prohibited under ERISA. To the contrary, Reliance seeks an equitable lien on the remaining balance of the overpayment issued to Smith, and such relief is permitted under ERISA and the applicable law. Pursuant to Section 502(a)(3), as a fiduciary, Reliance is "empowered to bring a civil action . . . to obtain . . . appropriate relief." Although Reliance has identified the relief sought in monetary terms, it is clear that ...


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