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Humana Insurance Co. of Kentucky v. O'Neal

United States District Court, E.D. Kentucky, Northern Division

July 14, 2017



          David L. Bunning United States District Judge

         I. Introduction

         This is an interpleader action by Humana to determine the beneficiary entitled to life insurance proceeds. This Court has jurisdiction over this action pursuant to 29 U.S.C. § 1132(e)(1) and 28 U.S.C. § 1331, because it arises under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 (“ERISA”).

         II. Factual and Procedural Background

         Decedent Ted Hamilton (“Decedent”) was a participant in the Humana Basic Life Insurance Plan (“the Plan”), an ERISA-regulated employee welfare benefit plan. (Doc. # 1 at ¶ 8). Interpleader Plaintiff Humana Insurance Company of Kentucky (“Humana”) administers the Plan. Id. At his time of death, Decedent was enrolled for basic life insurance coverage under the Plan. Id. at ¶ 9. The Plan provides that participants may name a beneficiary, and that if a beneficiary is not named, Humana can pay the Plan Benefits at its option to the plan participant's surviving spouse or estate. Id. at ¶¶ 12, 13; (Doc. # 28-1 at 10).

         On July 16, 2014, Decedent enrolled in the Plan through Humana's on-line platform, and named Whitney O'Neal as the primary beneficiary of the Plan Benefits. Id. at ¶ 15. On May 14, 2015, Decedent re-enrolled in the Plan through Humana's on-line platform. Id. at ¶ 14. Decedent did not select a beneficiary for the Plan Benefits during this re-enrollment process. Id. at ¶ 16.

         Decedent died on August 5, 2015. Id. at ¶ 18. Before Humana paid the Plan benefits, it received a letter from Tessa Perkins, dated August 28, 2015, asking that all proceeds be forwarded to Decedent's estate. Id. at ¶ 19. Subsequently, Humana received a letter from O'Neal dated December 9, 2015, indicating that she intended to “pursue the life insurance policy” of Decedent. Id. at ¶ 20. O'Neal had completed and signed the Beneficiary Statement on or about November 6, 2015. Id. at ¶ 21.

         Based on the facts before it, Humana could not determine whether a court would find that Decedent's July 16, 2014 beneficiary designation naming O'Neal as primary beneficiary remained valid, or whether Decedent's failure to name a beneficiary during his May 14, 2015 re-enrollment voided the designation to O'Neal. Consequently, believing that it faced exposure to multiple liability, Humana filed this interpleader action pursuant to Federal Rule of Civil Procedure 22, naming O'Neal and Perkins as defendants. Id. at ¶¶ 22-27. O'Neal filed a cross-claim against Perkins and a counterclaim against Humana. (Doc. # 6). O'Neal later voluntarily dismissed her cross-claim against Perkins. (Doc. # 17). On December 20, 2016, the Court conducted a status conference with the parties, and ordered discovery. (Doc. # 18). The matter has now culminated in a Motion for Judgment on the Record by O'Neal (Doc. # 24), [1] Humana's Motion to Dismiss O'Neal's Counterclaim (Doc. # 25), Humana's Motion for Attorney Fees (Doc. # 27), a Motion for Summary Judgment by Perkins (Doc. # 28), and a Motion for Judgment on the Pleadings by O'Neal (Doc. # 33). The various motions have been fully briefed and are now ripe for the Court's review.

         III. Analysis

         A. Standard of Review

         The parties have brought a variety of motions, with each requiring a different standard of review. First, the Court will consider Humana's Motion to Dismiss O'Neal's Counterclaim. To survive a Rule 12(b)(6) motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The plausibility standard is met when the facts in the complaint allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The complaint need not contain “detailed factual allegations, ” but must contain more than mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Id. Put another way, the “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         Next, the Court will consider Perkins's Motion for Summary Judgment in conjunction with O'Neal's Motion for Judgment on the Pleadings.[2] Summary judgment is appropriate when there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). If there is a dispute over facts that might affect the outcome of the case under governing law, then entry of summary judgment is precluded. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party has the ultimate burden of persuading the court that there are no disputed material facts and that he is entitled to judgment as a matter of law. Id. Once a party files a properly supported motion for summary judgment by either affirmatively negating an essential element of the non-moving party's claim or establishing an affirmative defense, “the adverse party must set forth specific facts showing that there is a genuine issue for trial.” Id. at 250. “The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party].” Id. at 252.

         Similarly, a party may move for judgment on the pleadings “[a]fter the pleadings are closed-but early enough not to delay trial.” Fed.R.Civ.P. 12(c). “For purposes of a motion for judgment on the pleadings, all well-pleaded material allegations of the pleadings of the opposing party must be taken as true, and the motion may be granted only if the moving party is nevertheless clearly entitled to judgment.” Tucker v. Middleburg-Legacy Place, 539 F.3d 545, 549 (6th Cir. 2008) (internal quotation marks omitted). “A motion brought pursuant to Rule 12(c) is appropriately granted when no material issue of fact exists and the party making the motion is entitled to judgment as a matter of law.” Id.

         B. Humana was not required to exhaust administrative remedies

         Defendant O'Neal contends that Humana failed to exhaust its administrative remedies as required under ERISA. (Doc. # 6 at ¶ 7; Doc. # 35 at 4-5). “Although ERISA is silent as to whether exhaustion of administrative remedies is a prerequisite to bringing a civil action, [the Sixth Circuit has] held that ‘the administrative scheme of ERISA requires a participant to exhaust his or her administrative remedies prior to commencing suit in federal court.'” Coomer v. Bethesda Hosp., Inc., 370 F.3d 499, 504 (6th Cir. 2003) (quoting Miller v. Metro. Life Ins. Co., 925 F.2d 979, 986 (6th Cir. 1991)). “The exhaustion requirement ‘enables plan fiduciaries to efficiently manage their funds; correct their errors; interpret plan provisions; and assemble a factual record which will assist a court in reviewing the fiduciaries' actions.'” Id. (quoting Ravencraft v. UNUM Life Ins. Co. of Am., 212 F.3d 341, 343 (6th Cir. 2000)).

         The Sixth Circuit has not addressed whether the exhaustion requirement also applies to plan administrators. To the contrary, within the Sixth Circuit, it is not uncommon for plan administrators to bring interpleader actions when faced with exposure to multiple liability, as Humana did here. See, e.g., Metro. Life Ins. Co. v. Marsh, 119 F.3d 415 (6th Cir. 1997). A few courts, however, have suggested that plan administrators should be required to exhaust administrative remedies before bringing an interpleader action in federal court. See McLaren Inv. & Retirement Comm. v. Whitehead, No. 1:08-CV-1178, 2009 WL 2777233 (W.D. Mich. Aug. 28, 2009). O'Neal implores this Court to do the same.

         In McLaren, as in this case, the Court was asked to determine “which of two claimants [was] entitled to benefits that [were] indisputably owing under an ERISA plan.” Id. at *2. There, the court endorsed the theory of “reverse exhaustion, ” and found that where the case required the interpretation of the Plan, and the Plan vested the administrator with discretion to interpret the Plan documents or determine eligibility for benefits, exhaustion should be required. Id. at *2-4. This Court need not decide whether to endorse “reverse exhaustion, ” because even if that theory were recognized, it would not apply in this case.

         The McLaren Court primarily based its decision on a case from the First Circuit. See Id. (citing Forcier v. Metro. Life Ins. Co., 469 F.3d 178 (1st Cir. 2006)). In Forcier, the decedent had never designated a beneficiary. Forcier, 469 F.3d at 181. The policy provision at issue read as follows:

If there is no Beneficiary at your death for any amount of benefits payable because of your death, that amount will be paid to one or more of the following persons who are related to you and who survive you:
1. spouse; 2. child; 3. parent; 4. brother and sister.
However, we may instead pay all or part of that amount to ...

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