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Loberg v. Cigna Group Ins.

Citations: 781 F. Supp. 2d 857; 50 Employee Benefits Cas. (BNA) 2291; 2011 U.S. Dist. LEXIS 13418Docket: 8:09CV280

Court: District Court, D. Nebraska; February 10, 2011; Federal District Court

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Plaintiffs Janell and Russ Loberg filed a lawsuit against CIGNA Group Insurance and Life Insurance Company of North America (LINA) for the denial of accidental death benefits following the death of their son, Wade Loberg. The case is under the Employee Retirement Income Security Act of 1974 (ERISA). The court is addressing cross-motions for summary judgment from both parties. Janell Loberg was an employee of Valmont Industries and eligible for coverage under Valmont's Group Accident Policy with LINA, which included benefits for dependents like Wade.

The Policy stipulates that LINA pays benefits for losses from bodily injuries caused by accidents during coverage, but excludes losses resulting from sickness, disease, or other specified exclusions. The term "accident" is not defined within the Policy. Wade died in a vehicle crash on September 4, 2008, when his pickup truck overturned after crossing the center line and rolling. An autopsy identified the cause of death as blunt trauma, and a toxicology report revealed a blood alcohol concentration of 0.172. Wade's death certificate confirmed that he died from blunt trauma due to an automobile accident. The court's ruling indicates partial granting and denial of both parties' motions for summary judgment.

On October 3, 2008, the Lobergs filed a claim for accidental death benefits under a policy with LINA, which was denied on December 5, 2008. The denial letter cited evidence from reports indicating that Wade Loberg had a blood alcohol level of 0.172 at the time of his crash, significantly above Nebraska's legal limit of 0.08. The letter asserted that the policy only covers losses caused by accidents, and since Wade was operating under the influence, his death did not qualify as an accident under the policy's terms. Consequently, no benefits were payable. The Lobergs initiated legal action on July 10, 2009, which LINA removed to federal court on August 18, 2009, citing relevant statutes. 

In their amended complaint, the Lobergs included claims for breach of contract, bad faith, and intentional infliction of emotional distress (IIED). However, the court previously determined that the IIED claim was preempted by ERISA, as it stemmed from the denial of benefits related to an ERISA-regulated plan. The court found that the breach of contract and bad faith claims were similarly preempted. Acknowledging ERISA's preemption, the Lobergs' summary judgment motion framed the issue as whether LINA appropriately denied their claim. The court agreed, converting the preempted state law claims into a federal claim under ERISA's civil enforcement provisions, thereby establishing a basis for federal jurisdiction.

Rule 56(c) of the Federal Rule of Civil Procedure allows for summary judgment when there is no genuine issue of material fact, and the movant is entitled to judgment as a matter of law. In cases with primarily legal issues, such as this one, summary judgment is particularly suitable. When a plan under the Employee Retirement Income Security Act (ERISA) grants discretionary authority to an administrator for benefits determinations, courts review the administrator's decisions for abuse of discretion. LINA is designated as the plan fiduciary, with the authority to interpret the Policy and decide on benefits claims, thus necessitating an abuse of discretion standard of review.

Under this standard, an administrator's interpretation must be upheld if it is reasonable, meaning that a reasonable person could reach a similar conclusion, even if an alternative reasonable interpretation exists. Factors to consider in determining reasonableness include consistency with the Plan's goals, avoidance of rendering any language meaningless, compliance with ERISA requirements, consistency with prior interpretations, and alignment with the Plan’s explicit language. Additionally, a determination must be supported by substantial evidence, defined as evidence adequate for a reasonable mind to accept as support for a conclusion.

The Lobergs are contesting LINA's denial of accidental death benefits for Wade's death in a crash, with LINA arguing that the death did not qualify as an "accident" under the Policy. LINA contends its interpretation was reasonable and backed by substantial evidence. LINA requested the Court apply the Wickman test, which assesses whether circumstances leading to a claim for accidental death benefits were "accidental." However, the Court decides against applying the Wickman standard and will return the case to LINA for an initial determination regarding whether Wade’s death was accidental.

The Wickman case established a three-part subjective-objective test for defining 'accident' under ERISA-governed accidental death and dismemberment insurance policies. In Wickman, the decedent's death resulted from a fall from a bridge, which the insurance company denied as an accidental death. The First Circuit ruled that the decedent's death was not classified as an accident, outlining the test as follows: first, assess the reasonable expectations of the insured at the time of policy purchase; second, if the insured did not expect the injury, evaluate the reasonableness of those expectations; and third, if evidence on the insured's expectations is insufficient, conduct an objective analysis considering whether a reasonable person in similar circumstances would view the injury as likely due to intentional actions. This standard has been influential in subsequent cases, particularly regarding alcohol-related crashes.

In King v. Hartford Life, the Eighth Circuit examined whether an alcohol-related motorcycle crash constituted an accident under ERISA. Initially, a three-judge panel found that the decedent's death was accidental, as a reasonable person would not foresee such an outcome. However, the Eighth Circuit later vacated this decision upon rehearing en banc, emphasizing the need to focus solely on the evidence available to plan administrators at the time of their decision, prohibiting the introduction of new evidence or post hoc rationalizations.

Courts must prevent claimants from being misled by post-litigation rationales regarding plan interpretations. The Eighth Circuit addressed Hartford's initial justification for denying accidental death benefits, asserting that a reasonable person would foresee death from driving while intoxicated. The court pointed out that other cases have evaluated alcohol-related accidents using a "reasonably foreseeable" standard but avoided deciding if this was appropriate since Hartford had shifted its argument to the "highly likely to occur" standard during litigation. The court criticized Hartford for its inconsistent application of standards, concluding that the case exemplified a situation where an administrator provided a post hoc justification that differed from the original rationale used in the administrative process. Consequently, the Eighth Circuit remanded the case to Hartford for reevaluation of the benefits claim under the correct "highly likely to occur" standard. The court established two key guidelines: (1) an ERISA plan administrator cannot change its rationale during litigation, and the court is not to apply the correct standard but rather let the administrator make the initial determination; (2) there is a distinct difference between "highly likely to occur" and "reasonably foreseeable," a distinction Hartford contested. Federal courts generally agree that alcohol-related incidents are not considered "accidental" under ERISA-governed insurance contracts, but the Eighth Circuit clarified this distinction exists within its jurisdiction.

A categorical rule that alcohol-related automobile crashes are not considered accidents is impermissible for plan administrators handling accidental death benefits claims. Courts have consistently rejected such per se rules, emphasizing that denials must not be based solely on a decedent's elevated blood alcohol concentration (BAC) without a clear articulation that the crash was foreseeable. An administrator's unsupported assertion that the dangers of driving under the influence are well-known constitutes an improper application of a per se rule. Consequently, the case must be remanded to LINA for a reevaluation using the standard they now assert as correct. This approach aligns with Eighth Circuit precedents, which dictate that if an administrator initially uses one standard and later claims a different one during litigation, the appropriate remedy is to return the case for reconsideration under the newly asserted standard. Various cases support this procedure, reinforcing the requirement for consistency in the standards applied by plan administrators when evaluating claims.

LINA has altered its stance on the standard used to evaluate Wade's death as an accident. In its current argument, LINA advocates for the Wickman 'highly likely to occur' standard, contrasting with its previous reliance on a categorical rule that alcohol-related deaths are not accidents. In the Denial Letter, LINA denied benefits by asserting that Wade's death was not an accident due to his blood alcohol content (BAC) of 0.172, significantly above Nebraska's legal limit of 0.08. LINA's rationale emphasized public safety concerns related to drunk driving laws, concluding that Wade, being aware of the risks, could not have had an accidental death under the Policy.

However, LINA's initial decision failed to consider the specific circumstances of Wade's crash and instead applied a blanket rule once it noted his BAC, which courts have deemed impermissible. As a result, the court will not evaluate whether LINA's denial was reasonable based on substantial evidence; instead, it will remand the case to LINA to reassess Wade's death under the Wickman standard. LINA must analyze Wade's subjective expectations and the reasonableness of those expectations, considering whether a person with similar characteristics would view the incident as highly likely to occur. While Wade's BAC may indicate impaired judgment, it does not constitute sufficient evidence that he intended or reasonably expected to die. Ultimately, LINA must base its determination on more than just Wade's elevated BAC.

The Lobergs allege that LINA provided a faulty summary plan description, which failed to disclose that a state statute violation would disqualify claims for accidental death benefits. They assert this omission violated 29 U.S.C. § 1022(a) by not informing them of their rights and obligations under the policy. LINA contends that the claim lacks merit because the Lobergs did not specify a remedy and substantive remedies for a faulty summary plan description are generally unavailable without extraordinary circumstances. To succeed, the Lobergs must demonstrate prejudicial reliance on the description, which they have not established. Consequently, the court dismisses Count IV of the Amended Complaint due to the lack of demonstrable detrimental reliance. The case is returned to LINA to assess whether Wade Loberg’s death was accidental, as per the standards established in Wickman v. Northwestern Nat'l Ins. Co. The Lobergs' motion for summary judgment is partially granted, allowing their claim for accidental death benefits to proceed to LINA, while LINA’s motion for summary judgment is partially granted, dismissing Count IV with prejudice. All other aspects of both motions are denied, and the action is stayed pending LINA's review, with a status report required by September 1, 2011.

A discrepancy exists in the record regarding the crash location, with references to both County Road 6 and County Road 7, but the Court deems this immaterial. The exact time of the crash is unknown; however, a police report estimated that Wade died three to four hours before a trooper arrived at 7:45 a.m. The Denial Letter indicates that LINA's Accident Specialist reviewed multiple documents, including the Proof of Loss Claim Form, Wade's death certificate, the motor vehicle accident report, and an alcohol and drug analysis report, alongside the insurance policy. Nebraska law prohibits operating a vehicle with a BAC of 0.08 or higher. There is uncertainty as to whether the Lobergs pursued any administrative appeal remedy with LINA; LINA's initial answer suggested a potential failure to exhaust remedies, but this defense was not reiterated in subsequent filings. Consequently, the Court concludes that the Denial Letter represents LINA's final decision on the claim. The insurance policy designates the Insurance Company as the Plan fiduciary for claims review under ERISA, granting it discretion in interpreting plan terms and making final decisions. Additionally, benefits were denied under the policy's suicide exclusion. The Denial Letter suggests LINA may have applied a "reasonably foreseeable" standard in determining that Wade's death was not an accident due to his awareness of the risks of driving under the influence. However, even if this standard were questioned, the shift in LINA's interpretation regarding what constitutes an accident persists, making a return to LINA appropriate.