Adamson v. Unum Life Insurance Co. of America

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
August 2, 2006
UNITED STATES CO URT O F APPEALS Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT

PA TRIC IA A D A MSO N ,

Plaintiff - Appellant,
No. 04-4203
v.

UNU M LIFE INSURANCE
COM PA NY OF A M ERICA, a M aine
Corporation,

Defendant - Appellee.

A PPE AL FR OM T HE UNITED STATES DISTRICT COURT
FOR T HE DISTRICT OF UTAH
(D .C . No. 2:98-CV-286-PGC)

Brian S. King, Attorney at Law, Salt Lake City, Utah, for Plaintiff - A ppellant.

Scott M . Petersen (and David N. Kelley, on the brief), Fabian & Clendenin, Salt
Lake City, Utah, for Defendant - Appellee.

Before KELLY, L UC ER O, Circuit Judges, and EAGAN, * District Judge.

KELLY, Circuit Judge.

*
The Honorable Claire V. Eagan, District Judge, United States District
Court of the Northern District of Oklahoma, sitting by designation.
 Plaintiff-Appellant Patricia Adamson appeals from the district court’s grant

of summary judgment in favor of Defendant-Appellee UNUM Life Insurance

Company of America (“UNUM ”). M rs. Adamson was a participant in an

employee benefit plan sponsored by her employer and governed by the Employee

Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461.

The plan offered life insurance coverage to eligible employees and their

spouses/dependents through UNUM . After the accidental death of her husband,

UNUM paid M rs. Adamson $100,000 in benefits, and denied her request for an

additional $300,000 on the grounds that she failed to provide the required

evidence of insurability for the additional amount of insurance and, during the

pendency of her application, she had failed to pay the appropriate premium

amount. On appeal, M rs. A damson contends that the district court erred in

granting summary judgment in favor of UNUM . Our jurisdiction arises under 28

U.S.C. § 1291, and we affirm.

Background

M rs. Adamson was a participant in an employee benefit plan sponsored by

her employer, M icron Technology, Inc. (“M icron”). UNUM contracted with

M icron to provide the group term life insurance portion of the plan. M rs.

Adamson applied and paid premiums for $50,000 coverage on M r. Adamson and

no evidence of insurability (“no evidence coverage”) was required. On July 26,

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1995, M rs. Adamson requested an additional $150,000 coverage for M r.

Adamson, which if approved would result in an aggregate of $200,000 of

coverage. The policy contained a provision for double payment for accidental

death. The no evidence coverage for M r. Adamson became effective on

September 1, 1995.

This supplemental insurance request required evidence of insurability as

well as an additional premium. As part of the underwriting process, the

Adamsons completed and signed an “Evidence of Insurability and Application for

Lifestyle Protection” on August 20, 1995. UNUM maintains it sent a September

18, 1995, letter (albeit with the wrong zip code) to M rs. Adamson requesting that

she contact a paramedic company to obtain a blood chemistry profile, urinalysis,

and other information on M r. Adamson as part of the underwriting process. M rs.

Adamson contends that she did not receive this letter. Aplt. App. at 56. M r.

Adamson was killed in a construction accident at his home on October 23, 1995.

M rs. Adams filed a claim for payment of $400,000 of benefits on November 13,

1995. UNUM paid $100,000 under the policy (half represented the “no evidence”

of insurability portion, half represented the double payment upon accidental

death), but declined her claim for an additional $300,000 for failure to provide the

required evidence of insurability. According to UNUM ’s policy, if the employee

did not submit the required evidence within 30 days of the insurer’s request, the

claim for the higher coverage amount was deemed no longer desired by M rs.

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Adamson and “the file [was] closed.” See Aplt. A pp. at 1312, 1320.

M rs. Adamson brought suit in Utah state court on various state law claims.

UNUM removed the case to federal court, and successfully urged ERISA

preemption. M rs. Adamson was allowed to amend her complaint to allege ERISA

claims, and she did so alleging a wrongful denial of benefits under 29 U.S.C. §

1132(a)(1)(B) and a breach of fiduciary duty under 29 U.S.C. § 1132(a)(2). In

2001, the district court granted UNUM summary judgment on the breach of

fiduciary claim, but denied summary judgment on the wrongful denial of benefits

claim.

The district court requested briefing, and subsequently issued an order

remanding the case to the Plan Administrator – UNUM – in order to: (1)

determine how much premium had been paid for M r. Adamson’s coverage, and

(2) allow M rs. Adamson the opportunity to submit additional information on the

issue. UNUM conducted additional discovery and concluded that M rs.

Adamson’s claim should be denied because she only paid premiums applicable to

the $50,000 level of benefits. M rs. Adamson appealed. In 2004, the district court

granted UNUM summary judgment on M rs. Adamson’s wrongful denial of

benefits claim. This appeal followed.

Discussion

W hen the district court grants a motion for summary judgment, our review

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is de novo, see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986),

and we apply the same standards as the district court. Zurich N. Am. v. M atrix

Service, Inc., 426 F.3d 1281, 1287 (10th Cir. 2005). Summary judgment is

appropriate w here no genuine issue of material fact exists, and the moving party

is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). In ERISA cases,

our review is confined to the administrative record. Sandoval v. Aetna Life &

Cas. Ins. Co., 967 F.2d 377, 381 (10th Cir. 1992).

W here, as here, an ERISA plan grants a plan administrator or a delegate

discretion in interpreting the terms of, and determining the grant of benefits

under, the plan, we are required to uphold the decision unless arbitrary and

capricious. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113-15 (1989).

In applying the arbitrary and capricious standard, the decision will be upheld so

long as it is predicated on a reasoned basis. Kimber v. Thiokol Corp., 196 F.3d

1092, 1098 (10th Cir. 1999). In fact, there is no requirement that the basis relied

upon be the only logical one or even the superlative one. Id.; see also Nance v.

Sun Life Assur. Co. of Canada, 294 F.3d 1263, 1269 (10th Cir. 2002).

Accordingly, our review inquires whether the administrator’s decision resides

“somewhere on a continuum of reasonableness— even if on the low end.”

Kimber, 196 F.3d at 1098 (internal quotation omitted).

A lack of substantial evidence often indicates an arbitrary and capricious

decision. Caldw ell v. Life Ins. Co. of N . Am., 287 F.3d 1276, 1282 (10th Cir.

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2002). Substantial evidence is of the sort that a reasonable mind could accept as

sufficient to support a conclusion. Id. Substantial evidence means more than a

scintilla, of course, yet less than a preponderance. Sandoval, 967 F.2d at 382.

The substantiality of the evidence is evaluated against the backdrop of the

administrative record as a whole. Caldwell, 287 F.3d at 1282.

W e do note that where a “standard” conflict of interest exists, the plan

administrator’s decision is entitled to less deference, and the standard conflict is

regarded “as one factor in determining whether the plan administrator’s denial of

benefits was arbitrary and capricious.” Fought v. UNUM Life Ins. Co. of Am.,

379 F.3d 997, 1005 (10th Cir. 2004). As we understand her argument, M rs.

Adamson claims that an additional reduction in deference is appropriate given an

inherent conflict of interest. Aplt. Br. at 7. She argues that under this approach,

UNUM has the burden to prove the reasonableness of its decision, with this court

taking a hard look at UNUM ’s rationale in denying benefits. W e think that this

approach neglects an essential prerequisite to invoking the burden shifting

approach based on a conflict of interest. Some proof (supplied by the claimant)

must identify a conflict that could plausibly jeopardize the plan administrator’s

impartiality. See Fought, 379 F.3d at 1005; Kimber, 196 F.3d at 1097.

UNUM acknow ledges that, at first blush, a conflict appears to exist because

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UNUM is both the insurer and the administrator. 1 Indeed, in circumstances where

an insurer doubles as the plan administrator, we have enunciated that “there is an

inherent conflict of interest between its discretion in paying claims and the need

to stay financially sound.” Pitman v. Blue Cross & Blue Shield of Okla., 217

F.3d 1291, 1296 n.4 (10th Cir. 2000); see also Fought, 379 F.3d at 1006; W elch v.

UNUM Life Ins. Co. of Am., 382 F.3d 1078, 1087 (10th Cir. 2004). It might be

just as easily observed that an insurer has an incentive to pay claims and to get it

right so as to avoid dissatisfaction (from plans as customers) and lawsuits.

W hatever the merits concerning the potential motivation of an insurer doubling as

a plan administrator, such observations were never meant to be an ipso facto

conclusive presumption to be applied without regard to the facts of the case –

including the solvency of the insurer or the nature or size of the claim. The fact

1
UNUM attempts to distinguish itself by terming its role as that of a
“fiduciary” under 29 U .S.C. § 1002(21)(iii), and as therefore only qualifying as a
“claims administrator” and not the “plan administrator” of 29 U.S.C. § 1002(16).
According to M rs. Adamson, the plan administrator is not discernable because,
counter to the demands of 29 U.S.C. § 1022(a), (b), UNUM failed to prepare a
“summary plan description,” which would have outlined the identity of, inter alia,
the plan administrator. See Aplt. App. at 1189. M rs. Adamson also argues that
the identity of the plan administrator is immaterial, as UNUM was the only actor
who had the discretion to carry out the functions traditionally assumed by a plan
administrator. The district court ordered briefing on the issue, see Aplt. App. at
1179-80, yet curiously failed to address (or even allude to) the issue in its
subsequent order granting summary judgment for UNUM . Aplt. App. at 1218-
1227. W e resist the invitation to forage into this fray, that is, to attempt to
discern whether UNUM acted as a claim administrator or plan administrator,
because our review of the administrative record persuades us that under either
alternative the contested decision must be upheld.

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that UNUM administered and insured the group term life insurance portion of this

plan does not on its own warrant a further reduction in deference.

UNUM is correct in contending that the issue about the underlying claim in

this case – the premium amounts paid by M rs. Adamson – simply goes to the

appropriate level of coverage to which M rs. A damson was entitled. This case is

not about whether an insured loss occurred – of course it did, for that issue was

resolved by UNUM in M rs. A damson’s favor. Rather, this case turns on data

furnished by M icron as the employer under a “self-reporting” policy, one w here

the employer accounts for the number of employees, the amount of coverage, and

the premium owed and forwards that information to UNUM . W ithholding and

reporting decisions are made by M icron, not UNUM . Although that data must be

applied against the plan provisions, we are at a loss in apprehending a conflict,

particularly given the almost ministerial role of UNUM in these circumstances.

Though we discern no basis for applying any other than a “pure arbitrary and

capricious” standard in this case, 2 we apply the “standard conflict” sliding scale

of deference in accordance with our precedent.

In applying this standard of review, we consider the evidence before the

plan administrator at the time he made the decision to deny benefits. See Nance,

2
M rs. Adamson does not allege, and we do not discern, any serious
procedural irregularities in this plan. Fought, 379 F.3d at 997. It simply proves
too much to declare that a serious procedural irregularity will be present in every
instance where the plan administrator’s conclusion is contrary to the result
desired by the claimant.

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294 F.3d at 1269. As noted above, the first time this case came before the district

court it was remanded in order to: (1) determine the premium amounts that had

been paid for M r. Adamson’s coverage, and (2) allow M rs. Adamson the

opportunity to submit additional information on the issue. UNUM conducted

additional discovery, and determined that M rs. Adamson’s claim should be denied

because no premium other than that applicable to the $50,000 level of benefits

was deducted from M rs. Adamson’s pay.

M rs. A damson poses a series of arguments: (1) the district court erred in

failing to find that the unequivocal policy language leads to the conclusion that

she is entitled to $400,000; (2) the district court erred because she actually paid

more in premiums than the higher level of coverage would have required; (3) to

the extent that the proper premium was not withheld, it was due to a “clerical

error or omission” on M icron’s part, and under the policy language, such an error

does not bar her recovery of the full amount; (4) to the extent that the policy

language is ambiguous, that is UNUM ’s fault as the drafter; and (5) Utah Code

Ann. § 31A-23a-410 is saved from ERISA ’s pre-emptive scope and establishes an

agency relationship betw een U N UM and M icron, therefore rendering UNUM

liable to M rs. Adamson for the higher coverage amount.

First, we note that the policy provides that:

During the time the Insurance Company is using the dependent’s
application and evidence of insurability to determine his acceptance
for amounts more than the no evidence limit he will be insured for

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 the amount for which premium is being deducted from the
employee’s pay. However, if the Insurance Company does not
approve the dependent’s application and evidence of insurability he
will continue to be insured for the no evidence limit.

Aplt. App. at 1250. According to M rs. Adamson, because she instructed M icron

to withhold the higher amounts from her salary, there could be no clearer

indication that the policy’s language contemplates that she is entitled to the

higher amount while the insurer is contemplating coverage. 3 W e are not

persuaded. The language expressly informs that it is the “amount for which

premium is being deducted” from her pay. 4 UNUM found, after extensive

discovery, that M rs. Adamson’s premium withholdings during the underwriting

period reflected the premium applicable to the $50,000 no evidence coverage.

3
On September 18, 1995, UNUM sent a letter to M rs. Adamson requesting
that her husband have certain blood work completed so it could determine
whether he was insurable at the higher coverage amount. M rs. Adamson contends
that she never received this letter. U NUM admits that the envelope did contain
the incorrect zip code. W e note that one of our sister circuits has encountered
this issue in the ERISA arena, see Schikore v. BankAmerica Supplemental
Retirement Plan, 269 F.3d 956, 962-65 (9th Cir. 2001) (holding that the Plan
Administrator’s determination that the common law mailbox rule w as inapplicable
under ERISA was arbitrary and capricious), but we decline the opportunity to
decide both the potential applicability of the mailbox rule under ERISA and the
question of whether the rebuttable presumption of that rule can be overcome by
the showing of an incorrect zip code on the mailing, because this case is easily
resolved on other grounds.
4
Clearly, we disagree with the district court’s conclusion that this
language is ambiguous. The employer can withhold only a certain amount of
premium, and that amount will correlate to a specific amount of benefits, that is,
will be a sum certain. W e are confounded by the notion that any ambiguity resides
here.

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W e agree.

First, following M r. Adamson’s death, UNUM , as required by the plan,

sought a Notice of Death from M icron’s benefits administrator. This form was

submitted, and indicated that M rs. Adamson had $50,000 worth of insurance.

Upon receipt, UNUM determined that M rs. Adamson was entitled $100,000 in life

benefits, which reflected double payment for accidental death. After M rs.

A dam son sent in a letter months later requesting an additional $300,000, UNU M

once again checked with M icron, and once again received the answer that M rs.

Adamson “only paid for the basic $50,000 spouse coverage.” Aplt. App. at 94.

Following the district court’s initial remand, UNUM obtained and reviewed

payroll and benefits records from M icron and inquired of M icron’s counsel and

benefits administrator the proper coverage amount, all of which led to the same

amount. Cognizant of our standard of review, we conclude that UNUM followed

the terms of the plan and that the conclusion was “sufficiently supported by facts

within [its] knowledge.” Kimber, 196 F.3d at 1098.

M rs. Adamson next contends that she actually paid more in premiums than

she would have been required to in order to reach the higher coverage amount.

For some unknown reason, M rs. Adamson chose to support this argument by

simply asserting that UNU M fails to present evidence showing that her premiums

reflect only $50,000 of coverage. W e disagree. As noted above, the entire

discovery process following the initial remand w as focused on, and attained,

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additional information pertinent to the determination of the relationship between

the amount of salary withheld and the amount of coverage. Further, M rs.

Adamson does not point to any evidence indicating that higher premiums were

deducted from her salary for these particular benefits. Accordingly, we find that

UNUM ’s decision was not arbitrary or capricious on this ground either.

M rs. Adamson next claims that to the extent that proper amount was not

withheld, that is best characterized as a “clerical error or omission,” and under the

terms of the policy, she cannot be denied the requested coverage on that ground.

W e note that the policy is clear that a clerical error or omission “will not . . .

affect an individual’s amount of insurance.” A plt. App. at 1268. Yet this is

inapposite to the case at hand for, as U NUM points out, there was no error –

clerical or otherwise. Accordingly, the denial of benefits was not arbitrary and

capricious on this ground either.

M rs. Adamson’s next contention is that to the extent that the language of

the plan is ambiguous, that should be construed against UNUM as the drafter.

Although we find no ambiguity, we note that this argument appears to be

foreclosed by Kimber, 196 F.3d at 1100-01, where we rejected the application of

contra proferentem when the plan administrator is given the discretion to interpret

the terms of the plan and the arbitrary and capricious standard of review applies.

Lastly, M rs. Adamson argues that Utah Code Ann. § 31A-23a-410, which

she claims is saved from ERISA ’s pre-emptive scope, establishes an agency

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relationship between UNUM and M icron, therefore rendering UNUM liable to

M rs. A damson for the higher coverage amount. Once again, we disagree. UNUM

points to the rather unambiguous policy language to counter M rs. Adamson’s

contention, which states: “For all purposes of the policy or the employer’s

coverage under that policy, the Policyholder or employer acts on its own behalf or

as agent of the employee. Under no circumstances will the Policyholder or

employer be deemed the agent of the Insurance Com pany.” Aplt. App. at 42

(emphasis supplied). W ere this language not enough to drive home the point, and

even assuming that it is not pre-empted, § 31A-23a-410 is inapplicable here,

because that statute only applies to situations where the insured’s policy has been

canceled. § 31A-23a-410 (“[A]s between the insurer and the insured, the insurer

is considered to have received the premium and is liable to the insured for losses

covered by the insurance and for any unearned premiums upon the cancellation of

the insurance.”) (emphasis supplied). Suffice it to say that M rs. Adamson’s

coverage has not been cancelled. Accordingly, we find no arbitrary and

capricious denial here either. 5

A FFIR ME D.

5
Because we dispose of this argument on this ground, we decline to
address, without deciding, whether ERISA pre-empts the claim under 29 U.S.C. §
1144(a).

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