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Joas v. Reliance Standard Life Insurance Co.

December 11, 2007

THOMAS A. JOAS, M.D., PLAINTIFF,
v.
RELIANCE STANDARD LIFE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Hayes, Judge

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

Pending before the Court are cross-motions for summary judgment following remand from the Court of Appeal for the Ninth Circuit. (Docs. # 57, 59). On September 24, 2007, the Court heard oral argument on these matters. (Doc. # 67).

PROCEDURAL BACKGROUND

On or about April 4, 2003, Plaintiff Thomas A. Joas, M.D. filed the Complaint in this matter against Defendant Reliance Standard Life Insurance Company in the California State Superior Court in San Diego. (Doc. # 1). Plaintiff alleged that Defendant improperly calculated Plaintiff's disability benefits in violation of various state laws. (Doc. # 1). On May 19, 2003, Defendant Reliance Standard Life Insurance Company removed the case to this Court on the grounds that the dispute was governed by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001, et seq., and presented a federal question. (Doc. # 1). Plaintiff did not challenge the removal.

On March 25, 2004, the parties filed cross-motions for summary judgment. (Docs. # 16-17, 22-23). Thereafter, on April 29, 2004, the Court granted Defendant's motion for summary judgment and denied Plaintiff's motion for summary judgment. (Doc. # 34). On May 21, 2004, Plaintiff filed a notice of appeal. (Doc. # 36).

On January 3, 2007, the Court of Appeal for the Ninth Circuit vacated this Court's Order of April 29, 2004, and remanded the case back to this Court for reconsideration in light of Abatie v. Alta Health & Life Insurance Co., 458 F.3d 955 (9th Cir. 2006) (en banc), an intervening Circuit decision which altered the standard of review for a district court in ERISA cases. (Doc. # 69). On July 25, 2007, the parties filed the pending cross-motions for summary judgment. (Docs. # 57, 59).

FACTS

Plaintiff is a medical doctor licensed to practice medicine in the State of California, with a specialty in anesthesiology. Declaration of Thomas A. Joas (Joas Decl.) (Doc. # 61), ¶ 2. On July 1, 1971, Plaintiff became a shareholder and employee of Anesthesia Service Medical Group, Inc. (ASMG), a California corporation. Joas Decl., ¶ 3. As an employee of ASMG, Plaintiff received monthly compensation which fluctuated depending on (1) "the amount billed and collected by ASMG for the professional service that [Plaintiff] rendered on ASMG's behalf," and (2) the administrative fee charged by ASMG. Joas Decl., ¶¶ 4, 6. Between November, 1999, and November, 2001, Plaintiff received the following monthly compensation:

MonthAmount 11/99$15,126.17 12/99$17,116.13 1/00$21,714.77 2/00$12,203.08 3/00$9,640.12 4/00$21,917.05 5/00$14,039.76 6/00$8,851.30 7/00$20,037.03 8/00$21,575.97 9/00$22,799.05 10/00$8,617.60 11/00$15,109.80 12/00$20,204.94 1/01$8,063.91 2/01$4,915.79 3/01$12,950.39 4/01$12,749.14 5/01$7,266.23 6/01$12,635.32 7/01$11,009.22 8/01$18,715.38 9/01$19,492.20 10/01$10,509.75 11/01$8,578.41

Joas Decl., ¶¶ 6, 10

ASMG contracted with Defendant Reliance Standard Insurance Company to provide disability insurance benefits to ASMG shareholders and employees. Joas Decl., ¶ 8; Declaration of Glen Buberl (Buberl Decl.) (Doc. # 19), ¶¶ 8-11. ASMG employees were required to participate in "the group longterm disability insurance program," and ASMG paid Defendant premiums for long term disability insurance for the years 2000 and 2001. Buberl Decl., ¶ 10. Each ASMG employee and shareholder is an anesthesiologist. Buberl Decl., ¶ 5.

The insurance policy entered into between ASMG and Defendant provided monthly disability benefits to ASMG employees if, among other things, one of the employees "is Totally Disabled as a result of a Sickness or Injury covered by this Policy." Declaration of David B. Sharp (Sharp Decl.) (Doc. # 63), Ex. 1 at 18. To determine the amount of monthly benefits a totally disabled person would be entitled to under the policy, the policy provided in relevant part:

BENEFIT AMOUNT: To figure the benefit amount payable:

(1) multiply an Insured's Covered Monthly Earnings by the benefit percentage(s), as shown on the Schedule of Benefits page;

(2) take the lesser of the amount:

(a) of step (1) above; or

(b) the Maximum Monthly Benefit, as shown on the Schedule of Benefits page; and

(3) subtract Other Income Benefits, as shown below, from step (2) above. Sharp Decl., Ex. 1 at 18. The policy defined "Covered Monthly Earnings" as:

"Covered Monthly Earnings" means the insured's monthly salary received from you on the day just before the date of Total Disability, prior to any deductions to a 401(k) plan. Covered Monthly Earnings do not include commissions, overtime pay, bonuses or any other special compensation not received as Covered Monthly Earnings. However, for a salesperson, "Covered Monthly Earnings" will include commissions received from you averaged over the lesser of:

(1) the number of months worked; or

(2) the 24 months just prior to the date Total Disability began.

If hourly paid employees are insured, the number of hours worked during a regular work week, not to exceed forty (40) hours per week, times 4.333, will be used to determine Covered Monthly Earnings. If an employee is paid on an annual basis, then the Covered Monthly Earnings will be determined by dividing the basis annual salary by 12.

Sharp Decl., Ex.1 at 8. It is undisputed that Defendant was responsible for paying benefits under the insurance policy. Sharp Decl., Ex. 7 at 14. It is further undisputed that the policy granted Defendant "the discretionary authority to interpret the Plan and the insurance policy and to determine eligibility for benefits." Sharp Decl., Ex. 7 at 14.

On November 30, 2001, Plaintiff suffered a major stroke and became totally disabled. Joas Decl., ¶ 5 & Ex. B. Plaintiff filed a claim under the disability insurance policy entered into between ASMG and Defendant, and on May 9, 2002, Defendant approved the claim. Joas Decl., ¶¶ 8-9 & Ex. B. In its letter to Plaintiff approving Plaintiff's insurance claim, Defendant outlined its benefits determination, and noted "[y]our net monthly benefit is $1,523.72 payable in accordance with the terms of the group policy." Joas Decl., Ex. B. In calculating Plaintiff's net monthly benefit, Defendant concluded that Plaintiff was a salaried employee, and thus Plaintiff's net monthly benefit was calculated as 60% of Plaintiff's salary the month before he was disabled, less retirement pension and California state disability payments. Joas Decl., Ex. B. In calculating Plaintiff's benefits, Defendant used Plaintiff's November, 2001, compensation of $8,578.41, as follows:

Monthly Eligible Salary at 60% [60% of $8,578.41]$5,147.05 Less Retirement Pension$1,500.00 Less CA State ...


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