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Echague v. Metropolitan Life Insurance Co.

United States District Court, N.D. California

May 19, 2014

ERNIE ECHAGUE, Plaintiff,
v.
METROPOLITAN LIFE INSURANCE COMPANY, et al., Defendants

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Re: Dkt. Nos. 92, 103, 104, 107.

For Ernie Echague, Plaintiff: Rebecca Grey, LEAD ATTORNEY, The Grey Law Firm, PC, San Francisco, CA.

For Metropolitan Life Insurance Company, Defendant: Rebecca A. Hull, LEAD ATTORNEY, Erin A. Cornell, Mark J. Hancock, Sedgwick LLP, San Francisco, CA.

For Trinet Group, Inc., The Trinet Group, Inc. Group Supplemental Life Insurance Plan, Defendants: Eric C Bellafronto, LEAD ATTORNEY, Isela Perez, Littler Medelson, A Professional Corporation, San Jose, CA; Stephen Crane Tedesco, LEAD ATTORNEY, Littler Mendelson, P.C., San Francisco, CA.

For Pacific Coast Bankers' Bank, Defendant, 3rd party plaintiff: Stephen Crane Tedesco, LEAD ATTORNEY, Littler Mendelson, P.C., San Francisco, CA; Isela Perez, Littler Medelson, A Professional Corporation, San Jose, CA.

For The Trinet Group, Inc. Group Basic Life Insurance Plan, Defendant: Eric C Bellafronto, LEAD ATTORNEY, Isela Perez, Littler Medelson, A Professional Corporation, San Jose, CA.

For TriNet HR Corporation, 3rd party defendant: Isela Perez, Littler Medelson, A Professional Corporation, San Jose, CA.

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ORDER GRANTING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT; GRANTING DEFENDANT'S MOTION FOR JUDGMENT AS A MATTER OF LAW; DENYING PLAINTIFF'S MOTION FOR LEAVE TO AMEND

WILLIAM H. ORRICK, United States District Judge.

After being diagnosed with cancer and going on medical leave, Carol Echague sent defendant TriNet Group, Inc. a specific inquiry about her insurance coverage, stating that she did not want any of it to lapse. TriNet responded by referring her to confusing form letters it had already provided that did not specifically address the policies that were in danger of lapsing. Ms. Echague died four months later, and her husband, the plaintiff here, then learned that her insurance policies had lapsed. Among several issues, I have to determine whether TriNet breached its fiduciary duty to the Echagues and whether it or any other defendant is liable as a result. I find that TriNet's insufficient response violated its fiduciary duties under ERISA and GRANT plaintiff's motion on that ground. In all other respects, I GRANT defendants' motions for summary judgment and judgment on the pleadings.

BACKGROUND

Mr. Echague sues defendants Metropolitan Life Insurance Company (MetLife), TriNet Group, Inc., (TriNet),[1] and Pacific Coast Bankers' Bank (PCBB) for Recovery of Employee Benefits under 29 U.S.C. § 1132(a)(1)(B) and for equitable relief and breach of fiduciary duty under 29 U.S.C. § 1132(a)(3). His wife, Carol Echague, was employed by PCBB.[2] PCBB outsourced its payroll and benefits administration to TriNet. TriNet sponsored and made available to PCBB employees two life insurance policies that are relevant to this case: the TriNet Basic Life Insurance Policy and the TriNet Supplemental Life Insurance Policy (Policies). The premiums for the Basic Policy were paid by PCBB. Carol Echague paid the premiums for the Supplemental Policy. As of January 2011, Ms. Echague's coverage amount was $440,000. Both policies were issued by MetLife.

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Carol Echague was diagnosed with breast cancer and went on a leave of absence as of January 1, 2011. Declaration of Sheryl Southwick, Exhibit G. PCBB offered to pay Ms. Echague's " portion of her benefits premiums until the point in time she would need to go onto COBRA." Declaration of Ernie Echague (Docket No. 109), Ex. 4 at E614. PCBB paid for Ms. Echague's portions of her health care and life insurance benefits payments through March 31, 2011.

On January 24, 2011, TriNet sent two letters to Ms. Echague. The first letter " RE: Request for Leave of Absence" identified Ms. Echague's leave as starting on January 1, 2011 and her COBRA effective date as April 1, 2011. Ex. G.[3] The letter explained that it was important for Ms. Echague to understand her rights and responsibilities and referred her to " the addendum to the Employee Handbook" or the " TriNet Employee Handbook" for specific information on PCBB's leave policies and benefits while on leave. Id. The letter noted that the " addendum" could be viewed on TriNet's " HR passport" website under My Company-> Company Addendum. Id. The letter did not address Ms. Echague's Basic or Supplemental Life Insurance Policies and did not mention MetLife, but did address COBRA, disability and other topics.[4] For more information Ms. Echague was referred to the " TriNet Employee Handbook" and the " TriNet Signature Benefits Guidebook," which " could be" found on HR passport, and to the TriNet solutions center's 800 number. Id.

The second letter was a " FMLA/CFRA Notice" informing Ms. Echague about her rights under the federal Family and Medical Leave Act (FMLA) and the California Family Rights Act (CFRA). Southwick Decl., Ex. H. The letter explained how the FMLA/CFRA leave would work and discussed the payment of health benefits during the leave. Id. The letter also stated that if " a portion of your paycheck normally goes to pay for certain voluntary expenses, such as additional GVUL life or AFLAC, you will need to make payment directly to the providers of these benefits during your leave. If you need contact information, refer to www.hrpassport.com or call the TriNet Solution Center at 1-800-638-0461." Id. The letter did not mention MetLife or the Basic or Supplemental Insurance Policies.

On February 22, 2011, Ms. Echague sent an email to TriNet employee Nisha Berrios and PCBB HR representative Kerianne Hohener.[5] The email read, " I don't want any insurance to lapse so can you please let me know which ones I need to continue to pay right after March on my own. These might include any supplemental insurance. Also, I would like some information on where to send these payments. If you are not the right individual who can assist me, kindly direct me to the right individual." Echague Decl., Ex. 6 at E00624. In response, Ms. Berrios, simply resent Ms. Echague copies of the two January 24, 2011 letters. Id. at E00623. Ms. Berrios did not provide Ms. Echague with any details regarding which benefit payments she would need to take over as of

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March 31st, and did not provide any information on where to send those benefit payments.

The only further communications between the Echagues and TriNet prior to Ms. Echague's death, were April 1st and April 4th emails between plaintiff and Ms. Berrios from TriNet regarding whether the Echague's could secure COBRA coverage for a week, while the Echagues' health care coverage was transferred from PCBB/TriNet to plaintiff's employer's plan. Echague Decl., Ex. 8 at E00715-716.

Ms. Echague's leave of absence from PCBB was extended through August 31, 2011. Echague Decl., Ex 9 at E00613. She died on June 23, 2011.

On June 27, 2011, TriNet notified Mr. Ehcague by letter that a group life insurance claim had been submitted on his behalf. It requested additional information from him. It mentioned, for the first time, that MetLife was the administrator of the life insurance Policies. Echague Decl., Ex. 10 at E0061. In July 2011, plaintiff was informed that the life insurance claim was denied by MetLife for nonpayment of premiums. Plaintiff forwarded the email regarding the denial to TriNet and appealed the denial with MetLife. Echague Decl., Exs. 11 & 12. In his appeal, plaintiff argued that neither he nor his wife had been informed that the policies were at risk of terminating and that neither he nor his wife received notice from anyone that PCBB was no longer making premium payments. Id., Ex. 12 at E00604.

According to TriNet and PCBB, the ERISA Plan at issue is " The TriNet Employee Benefit Insurance Plan Section, 125, Section 1209." Southwick Decl. ¶ 4. The Plan is a cafeteria-type plan which provided employees of PCBB with a number of health and welfare benefits to choose from. The Basic and Supplemental Life Insurance Policies at issue were offered under the Plan. Id. ¶ 5. TriNet acts as the " Plan Administrator" for the Plan and the Policies, and MetLife is the " Claims Administrator" under the Policies. Id.

TriNet employee Sheryl Southwick testified that the ERISA-required Summary Plan Description (SPD) for the Plan is the " TriNet Signature Benefits Guidebook & Summary Plan Description" along with the applicable Certificates of Insurance for the Policies issued by MetLife. Id. ¶ 7 (emphasis added). Confusingly, and contrary to that statement, Ms. Southwick then states that prior to October 2010, the Guidebook was titled the " TriNet Signature Benefits," but the SPD for the 2010-2011 Plan Year is the called the " TriNet Benefit Guidebook & Summary Plan Description." Ms. Southwick attaches a copy of the TriNet Benefit Guidebook and SPD to her declaration as Exhibit A. Southwick Decl., Ex. A.

The TriNet Benefits Guidebook & Summary Plan Description explains that the Guidebook plus the " separate Carrier Certificates" found on the HR Passport site make up the entire SPD. Ex. A at DT000360. The Guidebook briefly explains the types of life insurance available to employees (Basic, Supplemental, GVUL), conversion rights (to allow insurance to continue if " benefit coverage terminates" ), and refers employees to the " carrier certificates" for more information about specific policies.

The Certificates of Insurance for the MetLife Basic and Supplemental Life Insurance Policies provide:

CONTINUATION OF INSURANCE WITH PREMIUM PAYMENT. . .

FOR FAMILY AND MEDICAL LEAVE

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Certain leaves of absence may qualify for continuation of insurance under the Family and Medical Leave Act of 1993 (FMLA), or other legally mandated leave of absence or similar laws. Please contact the Policyholder for information regarding such legally mandated leave of absence laws.

AT THE POLICYHOLDER'S OPTION

The Policyholder has elected to continue insurance by paying premiums for employees who cease Active Work in an eligible class for any of the reasons specific below.
1. for the period You cease Active Work in an eligible class due to injury or sickness, up to 2 months;
***
At the end of any of the continuation periods listed above, Your insurance will be affected as follows:
***
o If You do not resume Active Work in an eligible class at this time, Your employment will be considered to end and Your insurance will end in accordance with the DATE YOUR INSURANCE ENDS subsection of the section entitled ELIGIBILITY PROVISIONS: INSURANCE FOR YOU.
***

DATE YOUR INSURANCE ENDS

Your insurance will end on the earliest of:

for all coverages

1. the date the Group Policy ends; or
2. the date insurance ends for Your class; or
3. the end of the period for which the last premium has been paid for You; or

for Basic Life Insurance

4. the last day of the calendar month in which Your employment ends; Your employment will end if You cease to be Actively at Work in any eligible class, except as stated in the section entitled CONTINUATION OF INSURANCE WITH PREMIUM PAYMENT; or
5. the last day of the calendar month in which You retire in accordance with the Policyholder's retirement plan; or
***
Please refer to the section entitled LIFE INSURANCE; CONVERSION OPTION FOR YOU for information concerning the option to convert to an individual policy of life insurance if Your Life Insurance ends.
In certain cases insurance may be continued as stated in the section entitled CONTINUATION OF INSURANCE WITH PREMIUM PAYMENT.

***

LIFE INSURANCE: CONVERSION OPTION FOR YOU
If Your Life Insurance ends for any of the reasons stated below, You have the option to buy an individual policy of life insurance (" new policy" ) from Us during the Application Period in accordance with the conditions and requirements of this section. This is referred to as the " option to convert." Evidence of Your insurability will not be required.

When You Will Have the Option ...


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