NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 12a1119n.06
Nos. 10-4297/10-4560 FILED
Oct 31, 2012
UNITED STATES COURT OF APPEALS DEBORAH S. HUNT, Clerk
FOR THE SIXTH CIRCUIT
ELFRIEDE WRAY, )
)
Plaintiff-Appellee, )
)
v. )
)
AMERICAN UNITED LIFE INSURANCE ) ON APPEAL FROM THE UNITED
COMPANY, ) STATES DISTRICT COURT FOR THE
) SOUTHERN DISTRICT OF OHIO
Defendant-Appellant, )
)
JAMES ROBERT FLECK and SCOTT )
ALLEN FLECK, )
)
Defendants. )
Before: SILER, DAUGHTREY, and WHITE, Circuit Judges.
MARTHA CRAIG DAUGHTREY, Circuit Judge. Defendant American United Life
Insurance Company appeals the judgment of the district court reversing an administrative
determination that plaintiff Elfriede Wray was not a designated beneficiary of James M.
Fleck’s life insurance policy with American United. After the district court concluded that
Wray was indeed a proper beneficiary, however, the insurance company sought leave to
file a cross-claim against Fleck’s two sons, James R. Fleck and Scott Fleck, in order to
recover insurance proceeds paid to them that the court concluded should have been
distributed to Wray. The district court denied leave to file the cross-claim, and American
United now also alleges error in that exercise of the court’s discretion. We conclude that
No. 10-4297
Wray v. American United Insurance Company
the district court failed to engage in the proper analysis in deciding whether to permit the
cross-claim and, therefore, reverse that portion of the judgment and remand the case to
the district court for further consideration.
FACTUAL AND PROCEDURAL BACKGROUND
American United sold a group life insurance policy to The Countrymark Co-op
Member Group Benefits Plan Trust.1 As senior vice-president of Southwest Landmark,
Inc., an “insured unit” under the policy, James M. Fleck was authorized to purchase life
insurance from American United and did so. The initial application filled out by Fleck was
signed and dated on December 29, 2000, and did not give an indication on the form that
any particular persons were to be listed as either “basic and supplemental insurance”
beneficiaries or as “accidental death and dismemberment” beneficiaries. Instead, a
separate, undated, unsigned page also appearing in the record listed Fleck’s then-wife
Lynn, and his two sons as primary beneficiaries of the basic and supplemental life
insurance policy and apportioned 20 percent of the proceeds of the policy to Lynn and 40
percent to each of the sons.
A subsequent application signed and dated by James M. Fleck on December 3,
2002, included the notation “See Attached” in the space provided for listing the primary
beneficiary for the basic and supplemental life insurance proceeds. A sheet, presumably
1
The Group Benefits Plan Trust also contracted with The Hartford Life and Accident Insurance
Com pany to provide accidental death and dism em berm ent coverage to qualified em ployees.
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attached to the application, again lists Lynn, Scott, and James R. Fleck as primary life
insurance beneficiaries, but adjusts the percentage portions to be received by those
individuals to 10 percent for Lynn and 45 percent for each of the two sons.
Finally, on December 30, 2003, James M. Fleck signed and dated the policy
application that is the focus of this litigation. On that form, the insured checked a box
indicating that he wished to change the beneficiaries of the policy and, in the spaces
provided on the form for designating the beneficiaries of the basic and supplemental life
insurance policy and the accidental death and dismemberment policy, wrote the word
“Attached.” As with the 2000 and 2002 applications that either began coverage or changed
the percentages to be distributed to the beneficiaries, the appellate record contains a copy
of an additional sheet of paper that lists the names, addresses, and percentage
distributions for the selected beneficiaries. The 2003 application attachment, however,
removed Lynn Fleck (from whom James M. Fleck was then divorced) as a beneficiary,
added Elfriede Wray as a primary beneficiary, and assigned one-third of the proceeds of
the basic and supplemental life insurance to Wray and each of his two sons.
Unfortunately, James M. Fleck died in an automobile accident on June 16, 2007.
Three days later, Gayle Wubbolding, the client services coordinator for Employee Benefit
Management Corporation, an entity specializing in the servicing of self-funded benefit
programs, contacted plaintiff Wray by letter and informed Wray that she was one of the
three listed beneficiaries on James M. Fleck’s life insurance policy and on his accidental
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death and dismemberment policy. Wubbolding offered to file Wray’s claim for benefits
under the policies once Wray provided her with two certified copies of James M. Fleck’s
death certificate, Wray’s birth date and Social Security number, the birth dates and Social
Security numbers of James R. and Scott Fleck, the police report of James M. Fleck’s
accident, and any newspaper articles about the accident.
Wray evidently provided Wubbolding with the requested information because three
months later, Wubbolding sent letters to both American United and to The Hartford
enclosing the documentation necessary to secure payment of the insurance benefits to the
three beneficiaries listed on the policy application. In both letters, Wubbolding further
requested that the insurance companies contact her should they “have any questions or
need any further information” regarding the claims.
Less than two weeks later, The Hartford mailed letters to the Fleck brothers and to
Wray approving their claims under the accidental death policy. The Hartford then
deposited one-third of the value of that policy into separate accounts for the benefit of each
of the three individuals. But, Wray’s dealings with American United were not as trouble-
free. In two identical letters dated 11 days apart, the defendant insurance company,
although expressing its condolences to Wray “for [her] loss,” explained that “[b]ased on
information submitted by the employer/policyholder, [there] is no signed and dated
beneficiary designation. The proceeds under the insured’s group life insurance policy are
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payable to the ‘Estate of James Fleck.’” Thereafter, American United issued a check for
the full amount of the policy, plus interest, to the “Estate of James Fleck” only.
In response, Wray filed an action against American United, Employee Benefit
Management Corporation, James R. Fleck, and Scott Fleck in Ohio state court, seeking
payment of one-third of the benefits of James M. Fleck’s life insurance policy. The case
was eventually removed to federal court and the Employee Benefit Management
Corporation was dismissed as a defendant. After a hearing, the district court issued a
written order that first concluded that Wray had adequately exhausted her administrative
remedies in seeking to overturn the insurance company’s adverse decision. The district
judge further ruled that Wray was not equitably estopped from pursuing her claim, and that
the documents submitted to American United showed conclusively that James M. Fleck
had indeed designated the plaintiff as a beneficiary of his life insurance policy.
Consequently, the district court entered judgment in favor of Wray for one-third of the value
of the policy, plus interest from the date of Fleck’s death, and costs.
In light of the district court’s ruling, American United moved for leave to file a cross-
claim against James R. Fleck and Scott Fleck for recoupment of the money the insurance
company had paid to the Estate of James M. Fleck instead of to Wray. The district judge
denied that motion, however, stating:
The proposed cross claim states at ¶ 10 that “Because the beneficiary
designation was not signed and dated as required by the [American United]
policy, [American United] paid benefits to the Estate of the Decedent . . .”
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This allegation is inconsistent with the law of the case as it presently stands.
At page 12 of the court’s order dated September 14, 2010, the court states
that “Fleck completed a designation of beneficiary form which he signed and
dated December 30, 2003.” Doc. 52. The court will therefore deny
defendant [American United]’s motion for leave to file its cross claim against
the Fleck defendants on the ground that the proposed cross claim is
inconsistent with the law of the case as it presently stands.
In that same order, the district court recognized that some of Wray’s claims had not
yet been resolved. Nevertheless, because appellate affirmance of the court’s ruling on
Wray’s beneficiary status would render her claims against Scott and James R. Fleck moot,
the district judge certified that issue for immediate appeal pursuant to the provisions of
Federal Rule of Civil Procedure 54(b). Moreover, even though American United’s
proposed cross-claim against the Flecks would not be mooted by affirmance of the district
court’s ruling, the district judge noted:
Because the cross claim is closely related to plaintiff’s claim against
[American United], it would serve the interest of judicial economy for this
court to certify its order denying [American United] leave to file the cross
claim and allow the court of appeals to consider that issue at the same time
it considers [American United]’s appeal of the judgment in favor of plaintiff
on her claim against it.
American United now asks this court to overturn the conclusions reached by the district
court on those two certified issues.
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DISCUSSION
Wray’s Status As A Beneficiary
American United challenges, on both procedural and substantive grounds, the
district court’s determination that Wray was a named beneficiary of James M. Fleck’s life
insurance policy. The company first asserts that the plaintiff did not exhaust her
administrative remedies because Wray never personally submitted a claim for benefits.
In advancing this argument, the insurance company contends that it received no
documents directly from Wray. Instead, argues the company, it received a request for
payment of the policy proceeds only from Employee Benefit Management Corporation, an
entity that was neither Wray’s actual agent nor her apparent agent.
Under Ohio law, however, an agent may bind a principal in the context of apparent
authority if the evidence reflects:
(1) that the principal held the agent out to the public as possessing sufficient
authority to embrace the particular act in question, or knowingly permitted
him to act as having such authority, and (2) that the person dealing with the
agent knew of the facts and acting in good faith had reason to believe and
did believe that the agent possessed the necessary authority.
Brainard v. Am. Skandia Life Assurance Corp., 432 F.3d 655, 662-63 (6th Cir. 2005)
(quoting Master Consol. Corp. v. BancOhio Nat’l Bank, 575 N.E.2d 817, 822 (Ohio 1991)).
Consequently, “[t]he apparent power of an agent is to be determined by the act of the
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principal and not by the acts of the agent . . . [.]” Id. at 663 (brackets in original) (quoting
Master Consol. Corp., 575 N.E.2d at 822).
Plaintiff Wray has satisfied both prongs of the apparent authority test outlined in
Brainard. First, the very fact that Wray did not file an insurance claim herself, but rather
relied upon Wubbolding to do so on her behalf after providing Wubbolding with the
necessary information to support the claim, is strong evidence that Wray had designated
Employee Benefit Management Corporation as her agent for this limited purpose. Second,
it is equally clear that American United treated Wubbolding as possessing the necessary
authority to file a claim for benefits on Wray’s behalf. Indeed, after receiving the claim filed
by Wubbolding requesting payment to Wray, to Scott Fleck, and to James R. Fleck,
American United evaluated the request as a properly-filed claim. Moreover, the insurance
company’s claim-denial letters were sent to Wray, unequivocally indicating the company’s
belief that the plaintiff had filed a request for payment through Wubbolding, who was also
copied on the denial notification.
Wray clearly relied upon Wubbolding to file her benefits claim for her, and American
United clearly treated that request by Wubbolding as a claim on Wray’s behalf. Had the
company not considered Wubbolding’s letter of September 13, 2007, as a request for
payment by Wray, there would have been no justification for the insurance company’s
letters of September 27 and October 8, 2007, informing Wray that she was not considered
a proper beneficiary of the policy by American United. The record before this court thus
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unequivocally supports the district court’s conclusion that Wray did, in fact, file a claim for
benefits under James M. Fleck’s life insurance policy. We reject American United’s
assertion to the contrary out-of-hand.
In a corollary to its exhaustion argument, the defendant insurer also alleges that
Wray should have been equitably estopped from pursuing payment of benefits under
James M. Fleck’s life insurance policy because American United detrimentally relied upon
the plaintiff’s failure to file a claim for benefits in determining that only Scott and James R.
Fleck were proper beneficiaries. Had Wray actually filed a claim for benefits, argues the
defendant, the insurance company could have proceeded to determine who the proper
beneficiaries of the policy were. The company thus contends that Wray, after receiving
notification that she would not be paid under the policy, should have contested that
determination by pursuing additional review by American United. Importantly, however,
American United’s denial letters of September 27 and October 8, 2007, never explained
to the plaintiff the necessity of seeking such review, how such review could occur, or even
that such review was possible. In light of the insurer’s failure to outline the steps required
to dispute an adverse claim determination, American United cannot successfully contend
that the company detrimentally relied upon Wray’s inaction or that her failure to continue
to pursue review of which she was not aware somehow prejudiced American United.
Advancing two primary arguments, American United also challenges the district
court’s substantive ruling in this matter that James M. Fleck properly designated Wray as
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a beneficiary of his life insurance policy. When a policy vests discretionary authority in a
benefit-plan administrator to make eligibility decisions, we review those decisions under
the highly deferential “arbitrary and capricious” standard. Moos v. Square D Co., 72 F.3d
39, 41 (6th Cir. 1995). When, as here, however, no such discretion is accorded the
decision-maker, a reviewing court examines benefits determinations de novo. See Metro.
Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008) (citing Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101, 115 (1989)).
American United’s first argument to circumvent the district court’s interpretation of
the documents submitted to the company would require us to read into the relevant
insurance policy additional language that the drafters of the provision did not include. The
parties do not dispute that Section 13 of James M. Fleck’s life insurance policy provided
that an insured may change beneficiaries “at any time by written request” if the request is
“(a) signed and dated; (b) filed through the Group Policyholder; and (3) sent immediately
to [American United’s] Home Office by the Group Policyholder.” There is also no dispute
that James M. Fleck’s form to change beneficiaries was signed by Fleck and dated
December 30, 2003. American United insists, nevertheless, that the additional page that
listed the beneficiaries of the policy was not signed and dated and, thus, that the
policyholder failed to comply with the policy terms. Nowhere in the policy, however, did the
company insert language requiring that every page of a change-of-beneficiary form be
signed and dated. Rather, the policy requires only that the change form somewhere
contain the signature of the policyholder and the date on which the change was requested.
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Hence, the change-of-beneficiary form submitted by James M. Fleck on December 30,
2003, fully satisfied the policy’s requirements.
American United would have this court believe that the failure of an insured to sign
and date every sheet of a change form, despite the absence of any contractual obligation
to do so, makes it impossible for the company to determine whether a designated second
sheet was actually attached to the form. Although conceding that the district court “may
be correct” that the change-of-beneficiary form with the word “Attached” written on it “refers
to some other document, [the company contends that] there is nothing in the record that
makes it ‘apparent’ [that the separate sheet listing the beneficiaries and the percentages
of the proceeds they were to receive] is in fact Mr. Fleck’s beneficiary designation.”
The district court made a factual determination that the sheet of paper submitted by
the plaintiff as the list of beneficiaries of the policy was indeed the attachment to which
Fleck referred on the pre-printed beneficiary information form. As with other factual
determinations by a district court, we must accept those findings unless they are clearly
erroneous. See, e.g., Roach v. United States, 106 F.3d 720, 723 (6th Cir. 1997) (citing
Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985)). Far from being clearly
erroneous, the factual finding of the district court in this regard is the only logical conclusion
supported by the evidence in the record.
The form itself indicates that the reason the document was being submitted to
American United was to change beneficiaries. To have submitted the form without a list
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of the “new” beneficiaries would, therefore, have been useless. Because the space
provided on the form to list the primary beneficiary of the basic and supplemental life
insurance policy contains the word “Attached,” it makes logical sense to conclude that an
additional sheet of paper would also have been provided.
Moreover, both the company’s preprinted form and the typewritten “attached” sheet
listing the primary beneficiaries, their addresses, and the percentage of benefits to be
received by them were stamped “RECEIVED BY GROUP LIFE CLAIMS” on the same
date -- September 18, 2007. Because the second piece of paper listed James M. Fleck’s
sons as beneficiaries, because the preprinted form indicated that another sheet of paper
would be attached, and because both sheets of paper were received by American United
at the same time, it was not clearly erroneous for the district court to conclude that the
designation of Wray as a one-third beneficiary of James M. Fleck’s life insurance policy
was part of a signed and dated document that complied with the terms of the policy.
Additional factors also support the factual determination of the district court that the
undated, unsigned portion of the submission was part and parcel of the change-of-
beneficiary form. For instance, American United’s preprinted form allows the insured to
name a person or persons as a primary beneficiary. The form, however, contains space
for only one name and one address. Consequently, if an insured wished to have multiple
primary beneficiaries, he or she would, by necessity, be required to attach additional
sheets of paper to the form. Furthermore, the attached sheet submitted to American
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United by Fleck includes the same headings – “primary beneficiary(ies)” and “basic and
supplemental life” – as does the signed and dated form when designating the individuals
entitled to benefits under the policy. For all these reasons, it makes perfect sense that the
district court would conclude that the sheet designating Wray, James R. Fleck, and Scott
Fleck as one-third beneficiaries under the life insurance policy was indeed a part of the
signed and dated form submitted to American United.
American United’s second argument in support of its interpretation of the documents
presented to it proposes that James M. Fleck’s December 30, 2003, change-of-beneficiary
form could not have been intended to provide benefits to Wray because a later 2005 form
did not list the plaintiff as a recipient of insurance proceeds. What American United
conveniently ignores, however, is the self-evident fact that the 2005 form on which the
defendant relies for its argument was not a form for designating James M. Fleck’s life
insurance beneficiaries. Instead, the highlighted 2005 form that has no listing of primary
basic and supplemental life insurance beneficiaries is clearly denominated as a form to
waive life insurance coverage on James M. Fleck’s dependents. Because Fleck’s sons
were, at that time, approximately 20 and 30 years of age and no longer his dependents,
James M. Fleck had no further need to pay premiums for dependent life insurance. In
short, therefore, the form on which American United relies to support this argument is
completely irrelevant to the issue on appeal. The district court thus did not err in
concluding that the insurance company mistakenly denied benefits to plaintiff Wray as a
beneficiary of James M. Fleck’s life insurance policy.
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Denial Of Leave To File Cross-Claim
After the district court ruled that Elfriede Wray was entitled to one-third of the
proceeds from James M. Fleck’s life insurance policy, American United sought leave to
amend its answer to Wray’s complaint in order to assert a cross-claim against James R.
Fleck and Scott Fleck for return of the insurance proceeds that should have been paid to
Wray but that were instead divided between the two sons. In paragraph 10 of the
proposed cross-claim, American United alleged, “Because the beneficiary designation was
not signed and dated as required by the [American United] policy, [American United] paid
benefits to the Estate of the Decedent . . . .” Viewing that statement as “inconsistent with
the law of the case as it presently stands,” the district court denied American United leave
to file the cross-claim for that reason.
Federal Rule of Civil Procedure 15(a)(2) provides that, at such a late stage in the
proceedings, a party may amend its pleadings only with the consent of the parties or with
the court’s leave. The rule also provides, however, that the court should “freely give leave
when justice so requires.” Fed. R. Civ. P. 15(a). “We generally review for abuse of
discretion the denial of a motion for leave to amend . . ., but we review de novo a district
court’s determination that amendment would be futile.” Indah v. U.S. Sec. and Exch.
Comm’n, 661 F.3d 914, 924 n.6 (6th Cir. 2011) (citing Yuhasz v. Brush Wellman, Inc., 341
F.3d 559, 569 (6th Cir. 2003)).
In determining whether to grant a motion to amend:
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Undue delay in filing, lack of notice to the opposing party, bad faith by the
moving party, repeated failure to cure deficiencies by previous amendments,
undue prejudice to the opposing party, and futility of amendment are all
factors which may affect the decision. Delay by itself is not sufficient reason
to deny a motion to amend. Notice and substantial prejudice to the opposing
party are critical factors in determining whether an amendment should be
granted.
Wade v. Knoxville Utils. Bd., 259 F.3d 452, 458-59 (6th Cir. 2001) (quoting Head v. Jellico
Hous. Auth., 870 F.2d 1117, 1123 (6th Cir. 1989)). Moreover, “[w]hen amendment is
sought at a late stage in the litigation, there is an increased burden to show justification for
failing to move earlier.” Id. at 459 (citation omitted).
In this case, the district court did not engage in a reasoned examination of the
factors that we have identified as essential to assisting our review of a decision to deny
leave to amend a pleading. Instead, the court simply focused upon one paragraph of the
proposed cross-claim that identified the reason American United chose to deny benefits
to the plaintiff and declared that it was against the law of the case. That the district court’s
claimed justification is insufficient does not, however, establish that leave to amend should
be denied. In order to allow for a more reasoned evaluation of the merits of American
United’s motion, the district court’s ruling regarding the request to amend must be reversed
and the matter remanded for reconsideration in light of this court’s statements in Wade.
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CONCLUSION
An examination of the documents submitted on the plaintiff’s behalf for payment of
life insurance benefits establishes that James M. Fleck adequately informed American
United of his intent to change his beneficiary designation to provide Elfriede Wray with one-
third of the proceeds of his life insurance policy. We therefore AFFIRM that portion of the
district court judgment reversing the administrative decision that denied life insurance
benefits to plaintiff Wray. However, because the district court failed to examine factors
identified by this court as crucial to determining whether to grant a motion to amend a
pleading, we find it necessary to REVERSE the district court’s denial of American United’s
motion for leave to file a cross-claim and REMAND the matter to the district court for
further consideration of that matter.
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