Baker v. Metropolitan Life Insurance Co.

The employer's resort to an agreement extraneous to the plan and its determination that the employee was entitled to the increased benefits are in direct conflict with the terms of the plan; as such, the employer's decision is arbitrary and capricious and not entitled to "full force and effect" under the plan.

X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:Keith Baker worked for Burlington Resources and was enrolled in Burlington’s group life insurance plan. On Nov. 2, 1997, he elected to receive basic and supplemental life insurance benefits equal to one-time his salary for both his basic and supplemental benefits. When Burlington acquired another company in 1997 it began looking for a new insurer to cover all of its employees. Metropolitan Life Insurance eventually won the bid. In the meantime, Baker had to go on short-term disability on Oct. 19, 1998, due to skin cancer. Baker was still on Burlington’s list of active employees, so he received an e-mail notice entitling all “active” employees to enroll in the new Met Life benefits plan. Baker called Burlington’s human resources department to increase his life insurance coverage to six times his annual salary. Burlington confirmed his election by letter, but noted that any change would not be effective until Jan. 1, 1999. Baker died on Jan. 15, 1999. The Met Life plan had not been finalized yet. It was not finalized until October, but it was made retroactive to Jan. 1. Baker’s wife submitted a claim for benefits under the policy. Met Life paid her the benefits due under the previous policy — $126,180 — but refused to pay the six-time salary benefit under the new policy. Burlington gave Baker’s wife a non-recourse loan for the amount due under the new plan, and Baker’s wife assigned her claims to Burlington. Burlington and Baker’s wife filed suit against Met Life, alleging violations of Employee Retirement Income Security Act of 1974 and state law. The district court granted Met Life’s motion for summary judgment in its entirety, finding that Baker did not meet the “active work requirement,” as defined in the plan, at the time of his death. The “active work requirement” provided: “You must be Actively at Work in order for your Personal Benefits to become effective. If you are not Actively at Work on the date when your Personal Benefits would otherwise become effective, your Personal Benefits will become effective on the first day after you return to Active Work.” HOLDING:Affirmed in part; vacated and remanded in part. The court agrees that Baker was not actively at work as of the plan’s retroactive effective date of Jan. 1, 1999. He was still on short-term disability and not going to work. Accordingly, the court finds, his increased benefits never became effective under the Met Life plan. The court also notes that the plan requires participants seeking to increase their benefits to provide proof of their good health. Baker provided no such certificate, which would also preclude his recovery under the plan. The court next considers what effect, if any, Burlington’s confirmation of Baker’s election had on his wife’s claim for benefits under the new plan. The court agrees that an entitlement to benefits must originate in the asserted collateral agreement governing the initial enrollment period. Burlington says its e-mail notice created that collateral agreement. The court rules that even assuming that the e-mail notice created a collateral agreement, “it is clear that Burlington’s interpretation of this correspondence is not entitled to deference under the Plan.” Burlington was only authorized to determine eligibility for entitlement to plan benefits in accordance with the terms of the plan itself. Burlington’s assertion that it determined Baker was entitled to increased benefits directly conflicts with the terms of the plan. The court does, however, find the district court acted prematurely in dismissing Burlington’s state-law claims, as those claims were not at issue in Met Life’s motion for summary judgment. OPINION:Jolly, J.; Jolly, Wiener and Barksdale, JJ. CONCURRENCE: Jacques L. Wiener Jr., J. The concurrence emphasizes the use of the two-step framework for analyzing a challenge to denial of ERISA benefits established by Wildbur v. ARCO Chem. Co., 974 F.2d 631 (5th Cir. 1992): “Under Wildbur, the court first must decide whether the plan administrator’s interpretation of the plan is legally correct. If it is, the inquiry ends because no abuse of discretion could have occurred; but if the administrator’s determination is found not to be legally correct, the court must determine whether the administrator’s legally incorrect decision also rose to the level of abuse of discretion, . . . which in this context is equivalent to an ‘arbitrary and capricious’ decision.” The concurrence thinks the majority opinion relies on an exception to the framework, but finds the exception is warranted under the circumstances.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 3 articles* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

Trending Stories

 

Featured Product

Global Briefing

A weekly, curated selection of our international content from around the globe, across the business of law, in-house, regulatory, technology and more, with expert insights from our senior editors.

Learn More

More from ALM

 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Privacy Policy

About Us / Contact Us / Site Map / Advertise With Us/ Customer Service / Terms of Service/ FAQ / Privacy Policy

Publications

Law Topics

Rankings

More

Law.com

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.