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HORN v. PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY

September 22, 2005.

LAWRENCE HORN, Plaintiff,
v.
PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY; UNUMPROVIDENT CORPORATION; CALIFORNIA TEACHERS ASSOCIATION GROUP SALARY PROTECTION INSURANCE PLAN, Defendants.



The opinion of the court was delivered by: MARILYN PATEL, District Judge

OPINION

Re: Cross-Motions for Summary Judgment

Plaintiff Lawrence Horn filed this action under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., seeking review of defendants' calculation of his disability benefits. On December 14, 2004 this court issued an order granting defendant's motion for partial summary judgment and establishing that the standard of review to be used in evaluating defendant's calculation of plaintiff's benefits would be an abuse of discretion standard. Now before the court are the parties' cross-motions for summary adjudication as to whether de novo review is still appropriate, despite the court's prior ruling on the issue of review. Having considered the arguments presented and for the reasons stated below, the court enters the following memorandum and order.

  BACKGROUND

  The court refers the parties to the December 14, 2004 order which sets forth in greater detail the facts pertinent to this case. Plaintiff has participated in an employee welfare benefit plan sponsored by defendant California Teachers Association Group Salary Protection Insurance Plan ("the Plan") since April 1999. Kawasaki Dec., Exh. B at U/A 2-3. On September 13, 2000, plaintiff filed with the Plan a claim for short-term disability benefits and began receiving benefits on September 26, 2000. Kawasaki Dec., Exh. B at U/A 472-74. Plaintiff was already receiving monthly disability pension benefits available through the California State Teachers Retirement System ("STRS") in the amount of $2,308.04. Id. at U/A 441. Plaintiff subsequently applied for long-term disability benefits from the Plan and has received such benefits in the amount of $500 per month since September 2002. Id. at U/A 1, 116-17.

  On February 23, 2003, plaintiff wrote to the Plan and asserted that his long-term disability benefits had been improperly calculated. Id. at U/A 79. Plaintiff argued that rather than subtracting plaintiff's "Other Income" from his long-term disability benefit after applying the fifty percent factor to plaintiff's monthly contract salary, Provident should have subtracted "Other Income" from his salary before multiplying by fifty percent. Id. at U/A 37. Under plaintiff's interpretation, his monthly benefits under the Plan would total $1,456.85 per month. Id. Provident responded by contacting plaintiff via telephone to discuss how it arrived at the $500 per month figure. Id. at U/A 90-92. In addition, Provident provided plaintiff with a "Disability Benefit Calculation" dated January 28, 2003. Id. at U/A 87-89. Over the ensuing months, the parties exchanged a number of letters with respect to the recalculation of plaintiff's benefits. Id., Exh. B at U/A 29-30. On November 21, 2003, plaintiff's counsel again wrote to Provident and requested that it recalculate plaintiff's benefits. Id. at U/A 5-6.

  On February 11, 2004, plaintiff filed this action seeking review of Provident's calculation of his disability benefits. It was not until after this action was filed, on April 20, 2004, that Provident sent plaintiff a letter denying his November 2003 request for reconsideration and reaffirming its original interpretation of the policy's "Other Income" provision. Id., Exh. 15 at H0118-19. Here, Provident provided additional information from the Plan's supplementary notes and admission package materials to support its interpretation of the Plan language.

  Plaintiff's complaint seeks a declaration that Provident incorrectly interpreted the "Other Income" provision of the CTA's group disability policy, as well as disgorgement of all profits from the improper interpretation of the Plan and unspecified equitable relief under section 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3). On October 12, 2004, the parties filed cross-motions for summary adjudication on the issue of the standard of review that this court should apply in evaluating Provident's calculation. Plaintiff advanced the following theories to support the adoption of a de novo review standard: 1) as a result of a February 26, 2004 opinion letter by the California Insurance Commissioner, the discretionary clause in the disability policy which gave Provident the sole right to construe the terms governing the calculation of benefits was invalid, 2) Provident failed to respond to plaintiff's request for review within the applicable time limits and 3) defendant had a conflict of interest mandating a more stringent level of review. On December 14, 2004 this court rejected these contentions and issued an order granting defendant's motion for partial summary judgment and establishing that the standard of review to be used in evaluating defendant's calculation of plaintiff's benefits would be an abuse of discretion standard. Horn v. Provident Life and Accident Ins. Co., 351 F.Supp. 2d 954 (N.D. Cal. 2004) (Patel, J.).

  Now, before the court are the parties' cross-motions for summary adjudication on the issue of the standard of review that this court should apply in evaluating Provident's calculation, despite the court's prior holding. While plaintiff argues that Provident's grant of discretion is ambiguous rendering it subject to de novo review under ERISA, defendants continue to contend that the court must review Provident's decision under an abuse of discretion standard. The court considers the parties' arguments below.

  LEGAL STANDARD

  I. Summary Judgment

  Summary judgment is proper when the pleadings, discovery, and affidavits show 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). Material facts are those which may affect the outcome of the proceedings. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. The party moving for summary judgment bears the burden of identifying those portions of the pleadings, discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). On an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out "that there is an absence of evidence to support the nonmoving party's case." Id.

  Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Mere allegations or denials do not defeat a moving party's allegations. Id.; see also Gasaway v. Northwestern Mut. Life Ins. Co., 26 F.3d 957, 960 (9th Cir. 1994). The court may not make credibility determinations, Anderson, 477 U.S. at 249, and inferences drawn from the facts must be viewed in the light most favorable to the party opposing the motion. Masson v. New Yorker Magazine, 501 U.S. 496, 520 (1991). Nonetheless, even if summary adjudication of an entire claim is not warranted, Federal Rule of Civil Procedure 56(d) allows a court to ...


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