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Carson v. American Quality Schools Corp.

United States District Court, N.D. Indiana, Hammond Division

May 17, 2017

SHAWN CARSON, Individually and On Behalf of the Estate of Doris Carson, Plaintiff,



         Shawn Carson's wife, Doris, passed away while employed by the Thea Bowman Leadership Academy, a charter school operated by American Quality Schools Corporation. Defendant United of Omaha Life Insurance Company was the underwriter of a group insurance plan sponsored by AQSC for its employees. Shawn Carson alleges in this case that Doris paid premiums for life insurance by way of payroll deduction, and completed all related forms provided to her by AQSC in order to secure a policy of life insurance with Shawn as the beneficiary. [DE 2 at 2.] But after Doris's death in April of 2013, Shawn's claim for life insurance proceeds was denied by United of Omaha. [Id.]

         Shawn's complaint was originally filed in state court and asserted claims of negligence and breach of contract claims against both AQSC and United of Omaha. The action was removed to this court on the basis of both diversity jurisdiction and federal question jurisdiction, specifically ERISA, the Employee Retirement Income Security Act of 1974. [DE 1 at 2-3.] When United of Omaha moved to dismiss the complaint as preempted by ERISA, I had the opportunity to explain that in this circuit, ERISA preemption is not a basis for dismissal of preempted state law claims. Instead the Seventh Circuit has held that “the proper course of action is to allow the claims to stand in federal court, but construe the state law claims as presenting ERISA claims.” Order and Opinion of 4/28/16 [DE 19 at 3], citing Bartholet v. Reishauer A.G., 953 F.2d, 1077-78 (7th Cir. 1992); McDonald v. Household Int'l, Inc., 425 F.3d 424, 425 (7th Cir. 2005). On that basis, the case has proceeded to the present stage, at which both defendants have filed motions for summary judgment which are now fully briefed and ready for ruling. Under Fed.R.Civ.P. 56(a), summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”

         Undisputed Facts

         The following facts are undisputed for purposes of the motions for summary judgment. Doris Carson was hired by the Thea Bowman Leadership Academy on November 1, 2010. Under the AQSC life insurance program, underwritten by United of Omaha, Carson became eligible for enrollment on January 1, 2011, after two months of active employment with AQSC. [A.R. at 34.][1] The life insurance program included both basic life insurance benefits in the amount of $25, 000.00 and a voluntary life insurance policy for an additional benefit up to $150, 000.00 subject to certain conditions. The life insurance plan was self-administered by AQSC. [DE 34 at 12; DE 42 at 1.] United of Omaha served as the claims review fiduciary for the Plan. [DE 34 as 12.]

         Under the heading “When Employee Insurance Begins, ” the United of Omaha policy includes this language: “[T]he Employee must request insurance by properly completing and signing an enrollment form acceptable to Us and submitting this form to the Policyholder (who will then submit the form to Us) within 31 days following the day the Employee becomes eligible for the Policy.” [A.R. at 34.] That section of the policy goes on to indicate that the Employee will become insured on the first day of the month on or after “the Employee's enrollment form, acceptable to [the insurer], is properly completed and signed; and, if required [the insurer] approve[s] Evidence of Good Health provided the Employee is Actively Employed on that date.” [A.R. at 34.] The plan definition of “Evidence of Good Health” provides that “such evidence is required when an Employee...applies for insurance more than 31 days after the date the Employee completes the Eligibility Waiting Period.” [A.R. at 33.]

         Joyce Schmidt of Pierce Benefits was the insurance broker for AQSC. [A.R. at 174.] Schmidt input Doris's life insurance application on Mutual of Omaha's website with a signature date of December 15, 2010. [A.R. at 175.] But other records suggest that Schmidt didn't input Doris's enrollment until March 17, 2011. [A.R. at 177.] After Doris's death, a representative of AQSC indicated that she had a “claim” from Doris (by which she meant an application) dated January 15, 2011. [A.R. at 175.] Two copies of a Doris Carson Enrollment Form for voluntary life insurance coverage of $100, 000.00 dated “1/15/11" appear in the administrative record. [A.R. at 168-170, 171-173.] The administrative record also contains one Enrollment Form on which Doris Carson's signature is dated “3/15/11.” [A.R. at 183-184.] A handwritten notation at the bottom of each of the three Enrollment Forms indicates that it was “emailed to Joyce 3/17/11.” [A.R. 168, 171, 183.] Doris's husband Shawn Carson is named the primary beneficiary. [A.R. at 183.]

         The administrative record does not reflect Doris Carson's submission of any Evidence of Good Health. Neither does it contain any communication to Doris Carson after receipt of her Enrollment Form indicating that Evidence of Good Health was required, or that her enrollment was rejected for lack of such evidence. For the just over two years until her death in April 2013, Doris Carson paid, and defendants accepted, the premiums applicable to the enhanced life insurance coverage - the $100, 000 policy - for which she had enrolled. The electronic record system of “Mutual of Omaha” reflected, as of April 29, 2013, that Doris Carson had voluntary life insurance of $100, 000 as an “Active Member” of the Thea Bowman High School plan. [A.R. at 185.]

         Doris Carson died on April 28, 2013 at age 44 of acute and chronic congestive heart failure and dilated cardiomyopathy. [A.R. 187] United of Omaha received a claim form signed by Shawn Carson and dated May 10, 2013, submitted with a copy of the Doris Carson Enrollment form dated March 15, 2011, a webportal printout with a “Mutual of Omaha” logo reflecting Doris Carson's enrollment for $100, 000.00 in voluntary life insurance coverage, and a copy of the Certificate of Death. [A.R. at 181-189.]

         Upon receipt of Shawn Carson's claim to the life insurance benefits, United of Omaha investigated Doris's enrollment. United of Omaha claims that it “was informed that Broker Joyce Schmidt enrolled Decedent online on March 17, 2011, but erroneously claimed a date of application of December 15, 2010 on the portal website as opposed to March 15, 2011, the date on the enrollment form.” [DE 34 at 6.] In the course of the investigation, both AQSC and broker Joyce Schmidt initially suggested that a form dated December 15, 2010 as well as a form dated January 15, 2011 existed. [DE 34 at ¶16; DE 43-1 at ¶16.] Ultimately only a form dated January 15, 2011 was provided by Ms. Schmidt to United of Omaha. [Id.]

         Shawn Carson's claim for life insurance benefits was granted as to the $25, 000.00 in basic benefits, but was denied for $100, 000 voluntary life insurance benefits. [A.R. at 165.] The premiums Doris paid for the enhanced coverage for more than two years were refunded. [Id.] The decision to deny benefits was made by United of Omaha, not by AQSC. [A.R. 144-146, 109-111.] United of Omaha explained the denial of Shawn's claim in a letter dated June 13, 2013:

According to the information received, your wife completed the enrollment form for coverage under [the voluntary policy] on March 15, 2011. The enrollment was submitted to our company on March 17, 2011. Since this was more than 31 days after your wife had completed the Eligibility Waiting Period, Evidence of Good Health was required for approval of benefits. We do not have a record of the submission of Evidence of Good Health by your wife.
Therefore, since your wife enrolled in [the voluntary policy] more than 31 days after she completed the Eligibility Waiting Period and Evidence of Good Health was not submitted and approved, your claim for benefits under this policy must be denied.

[A.R. at 145.] This explanation of the claim denial omits some of United of Omaha's internal analysis, namely its conclusion that the date on the later-produced but earlier-dated Enrollment Form had been altered to read ...

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