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Barber v. Lincoln National Life Insurance Co.

United States District Court, W.D. Kentucky, Louisville Division

May 15, 2017

OLIVER H. BARBER, III, on behalf of himself and two classes of similarly situated persons PLAINTIFF
v.
LINCOLN NATIONAL LIFE INSURANCE COMPANY DEFENDANT

          MEMORANDUM OPINION AND ORDER

          Joseph H. McKinley, Jr., Chief Judge United States District Court

         This matter is before the Court on Defendant Lincoln National Life Insurance Company's (“Lincoln”) motion to dismiss. (DN 9.) Fully briefed, this matter is ripe for decision. For the reasons stated below, the motion is GRANTED.

         I. Background

         This matter arises out of a long-term disability insurance policy. Plaintiff Barber was employed as a business litigation attorney with Stites & Harbison PLLC (“Stites”). (Pl.'s Compl. [DN 1] ¶ 7.) Barber was diagnosed with Parkinson's disease in November 2014. (Id. ¶ 8.) Stites has a long-term disability policy with Lincoln for its employees. (Id. ¶ 9.) This policy is, according to Barber, an “own occupation” policy, meaning that “a beneficiary's entitlement to full disability benefits is determined not by his ability to work in any position, but rather by his ability to continue in his own occupation - in Mr. Barber's case, as a litigator.” (Id. ¶ 11.) Due to his diagnosis, Barber applied for benefits under the policy, and his application was approved on December 14, 2015. (Id. ¶ 9.)

         After approving his claim for benefits, Lincoln began enquiring with Barber about any other sources of income he had. (Id. ¶ 15.) Barber informed Lincoln that he was working as an independent contractor for a political campaign. (Id. ¶ 16.) Lincoln then began reducing Barber's monthly benefit due to this other source of income. (Id.) Barber requested that Lincoln reverse its decision to offset his monthly benefit, and Lincoln notified Barber via an October 25, 2016 letter that it was denying his request. (Id. ¶ 25.) Barber then initiated the present action, asserting claims under the Employee Retirement Income Security Act of 1975 (“ERISA”) for recovery of benefits owed to him (Count I) and seeking to enjoin unlawful withholding of offset benefits (Count II). He asserts these claims on behalf of himself and two classes of similarly situated persons. (Id. ¶ 26.) Lincoln has moved to dismiss Counts I and II pursuant to Fed.R.Civ.P. 12(b)(6), as well as Count II pursuant to Fed.R.Civ.P. 12(b)(1). (DN 9.)

         II. Standard of Review

         Upon a motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), a court “must construe the complaint in the light most favorable to plaintiffs, ” League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (citation omitted), “accept all well-pled factual allegations as true, ” id., and determine whether the “complaint . . . states a plausible claim for relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Under this standard, the plaintiff must provide the grounds for its entitlement to relief, which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff satisfies this standard only when it “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. A complaint falls short if it pleads facts “merely consistent with a defendant's liability” or if the alleged facts do not “permit the court to infer more than the mere possibility of misconduct.” Id. at 678-79. Instead, a complaint “must contain a ‘short and plain statement of the claim showing that the pleader is entitled to relief.'” Id. at 677 (quoting Fed.R.Civ.P. 8(a)(2)). “But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         III. Discussion

         A. Count I - Denial of Benefits

         Count I of the complaint seeks to recover benefits, pursuant to 29 U.S.C. § 1132(a)(1)(B), that are owed to Barber under the policy. Lincoln's motion to dismiss argues that Barber has not plausibly stated a claim upon which relief may be granted, as the policy clearly entitled Lincoln to offset Barber's monthly benefit with his outside income earned as a political consultant. Because the policy permits this offset, Lincoln argues that Barber cannot plausibly show that its decision to offset his benefit was “arbitrary or capricious.”[1]

         The policy, which was attached to the complaint and referenced throughout, states that Lincoln “has the authority to manage this Policy, interpret its provisions, administer claims and resolve questions arising under it.” (Policy [DN 1-2] at 18.) A denial of benefits “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.” Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). If the plan grants discretion to an administrator, the Court reviews the administrator's decision under the arbitrary and capricious standard. Wells v. U.S. Steel & Carnegie Pension Fund, Inc., 950 F.2d 1244, 1247 (6th Cir. 1991). Here, the policy “express[ly]” grants Lincoln the discretionary authority to determine Barber's eligibility for benefits. Yeager v. Reliance Std. Life Ins. Co., 88 F.3d 376, 380 (6th Cir. 1996) (citations omitted). Therefore, Count I of the complaint should be dismissed if it does not plausibly show that Lincoln's decision to offset Barber's benefits was made arbitrarily and capriciously.

         The policy offers two different types of benefits: total disability benefits and partial disability benefits. When one is “totally disabled”, the monthly benefit will equal “the Insured Employee's Basic Monthly Earnings multiplied by the Benefit Percentage . . . minus Other Income Benefits.” (Policy [DN 1-2] at 24.) When one is only “partially disabled, ” it means that the insured employee “is engaged in Partial Disability Employment, ” which is defined as “working at his or her Own Occupation or any other occupation” under reduced hours, pay, or duties. (Id. at 10, 24.) The monthly benefit for one who is partially disabled is the lesser of either the “Insured Employee's Predisability Income, minus all Other Income Benefits (including earnings from Partial Disability Employment), ” or the “Insured Employee's Predisability Income multiplied by the Benefit Percentage . . . minus Other Income Benefits, except for earnings from Partial Disability Employment.” (Id. at 28.)

         Barber alleges that his income as a political consultant is not “Other Income Benefits” that can be deducted from his monthly benefit. However, “Other Income Benefits” is defined in the policy as “benefits, awards, settlements or Earnings, ” with Earnings defined as “pay the Insured Employee earns or receives from any occupation or form of employment, ” including “salaried or hourly Employee's gross earnings.” (Id. at 30.) This definition would clearly encompass any compensation Barber received from his political consulting, since that is an “occupation or form of employment.” Thus, the plain text of the policy indicates that Barber's income from political consulting could be considered Other Income Benefits, which are taken into account when calculating total disability benefits, as well as one of two formulas considered when calculating partial disability benefits. Since the plain text of the policy demonstrates that Lincoln was permitted to deduct this amount from Barber's benefits, it was reasonable for it to interpret the policy in such a manner. See Perez v. Aetna Life Ins. Co., 150 F.3d 550, 556 (6th Cir. 1998) (requiring a court to “give effect to the unambiguous terms of an ERISA plan”). As such, Barber has not established that he is entitled to relief, since the complaint does not plausibly demonstrate that Lincoln acted arbitrarily or capriciously in deciding to offset his benefits.

         Barber argues in opposition that no deference should be given to Lincoln's interpretation, as it both makes decisions on eligibility for benefits and pays out those same benefits, creating an inherent conflict of interest. However, the arbitrary and capricious standard is “not altered by the existence of [the defendant's] inherent conflict of interest created by acting as both the administrator and issuer of the Plan . . . we consider it a factor in determining whether the plan administrator's decision was arbitrary and capricious.” Tate, 538 F. App'x at 601. See also Davis v. Ky. Fin. Cos. Ret. Plan, 887 F.2d 689, 694 (6th Cir. 1989) (possible conflict of interest only a factor in determining whether decision was arbitrary and capricious). Even considering this ...


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