The opinion of the court was delivered by: Honorable Ronald S.W. Lew Senior, U.S. District Court Judge
In this action, Robin Lesser ("Plaintiff") challenges the determination by Defendants Metropolitan Life Insurance Company ("MetLife") and The Northrop Grumman Health Plan (the "Plan") that she was not entitled to her husband's life insurance benefits.
Plaintiff and Defendants MetLife and the Plan have stipulated that this matter will be decided on the basis of the administrative record on file with the Court, the trial briefs submitted by the Parties, and the oral arguments at Trial. Having considered all the documents and oral arguments submitted in this matter, the Court now FINDS AND RULES AS FOLLOWS:
Northrop Grumman Corporation ("Northrop") offers life insurance for its employees through the Plan. The Plan is maintained and sponsored by Northrop, and Northrop is listed as the Plan Administrator. MetLife administers the claims for benefits under this Plan, and issues the group insurance policy to Northrop that funds the benefits. Employees scheduled to work twenty or more hours per week at Northrop automatically qualify for basic life insurance coverage, with the option to purchase additional life insurance coverage through the Optional Employee Life Insurance Program.
Plaintiff's husband, Barry Lesser ("Decedent"), was employed by Northrop from 1979 until his death on May 21, 2008. Decedent qualified for basic life insurance coverage in 1979, but did not request additional life insurance until 2007, when Decedent applied online for optional life insurance coverage in the amount of $600,000, listed as "Option 9" under the Plan. According to a section of the Plan entitled "Eligibility Provisions: Insurance for You," when a participant seeks to increase his or her life insurance coverage more than thirty-one days after the initial eligibility period, which Decedent sought to do, the participant must first submit Evidence of Insurability ("EOI"). If EOI is not provided or is found unsatisfactory, the amount of optional life insurance will not be increased and the participant will not be covered. The Court finds that Decedent did not submit any EOI when he applied for the Option 9 policy, but neither MetLife nor his employer informed him that his application was invalid or not accepted due to the fact he had not submitted EOI.
Moreover, after Decedent applied for this coverage, Northrop began deducting premiums from Decedent's paycheck for the Option 9 coverage, and this continued for ten months until his death. MetLife accepted these premium payments. Northrop also provided Decedent and Plaintiff with a "Health and Welfare Beneficiary Confirmation Notice," dated January 7, 2008, indicating Plaintiff was the sole beneficiary of the Option 9 policy and was therefore entitled to 100% of the benefits under this policy. Furthermore, Northrop also sent Decedent a "Health and Welfare Annual Enrollment Worksheet," dated April 7, 2008, stating Decedent was covered by the Option 9 plan, with $600,000 provided in coverage. Decedent also received a document called "Paying for your Benefits" which reported the amount that was being deducted from his paycheck for the Option 9 Benefits. As a result of the aforementioned actions, neither Decedent nor Plaintiff were aware that the Option 9 policy was not in effect.
On June 16, 2008, following Decedent's death, Plaintiff sent Defendants a claim for $688,000 in benefits under the Plan: $88,000 for the basic life insurance, and $600,000 for the Option 9 benefits. Plaintiff was subsequently paid $88,000 for the basic insurance, and $88,000 for optional benefits, totaling $176,000.*fn1
On September 29, 2008, MetLife sent a letter to Plaintiff ("September Letter") denying her claim for the Option 9 benefits on the grounds that Decedent had never submitted EOI. In this letter, MetLife explained that the terms of the Plan required a participant submit EOI before he or she could be approved for the additional coverage, and because neither the employer nor MetLife had any record of this EOI, Decedent's attempt to add this coverage did not take effect.
MetLife further detailed in this letter the procedures Plaintiff could take in order to administratively appeal this decision within 60 days under ERISA:
Under ERISA, you have the right to appeal this decision within sixty (60) days after the receipt of this letter. To do so, you must submit a written request for appeal to MetLife at the address above. Please include in your appeal letter the reason(s) you believe the claim was improperly denied, and submit any additional comments, documents, records or other information relating to your claim that you deem appropriate to enable MetLife to give your appeal proper consideration. Plaintiff then sent a letter to MetLife responding to this denial of benefits to the address MetLife had provided in its September Letter, dated October 24, 2008 ("October Letter"). In this letter, Plaintiff requested that Defendants review several documents relating to Decedent's life insurance benefits, including those that Northrop had sent to Plaintiff and Decedent that confirmed his coverage under the Option 9 policy: the "Paying for your Benefits" document and the Northrop Grumman Benefits and Welfare Annual Enrollment Worksheet statement. Plaintiff included these documents in her letter, thanked MetLife for allowing "the opportunity to present these documents for review," asked for a speedy resolution to her claim, and informed MetLife to contact her in case further assistance was needed.
Plaintiff then lodged a complaint with the California Department of Insurance ("DOI"), which led the DOI to inquire with MetLife regarding Plaintiff's complaint.
On November 20, 2008, Defendants sent Plaintiff a letter ("November Letter") that stated that the letter was in response to Plaintiff's inquiry "concerning the Group Life Insurance benefit due on the life of [Decedent] that you filed with the State of CA Insurance Commissioner," and denied the Option 9 benefits again on the basis that Decedent had failed to provide MetLife with EOI. On December 16, 2008, Defendants processed a refund to Plaintiff of the amount of money in premiums that had been deducted from Decedent's paychecks.
Plaintiff then subsequently filed this present action against Defendants, claiming wrongful denial of the Option 9 benefits. Defendants counter that Plaintiff has failed to exhaust the Plan's internal administrative remedies and that even if Plaintiff did exhaust these remedies, ...