Hirschkron v. Principal Life Insurance

Citations: 141 F. Supp. 3d 1028; 2015 U.S. Dist. LEXIS 147685; 2015 WL 6651146Docket: Case No. 15-CV-00664-JD

Court: District Court, N.D. California; October 29, 2015; Federal District Court

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In this ERISA action, plaintiff Amy Hirschkron, a former employee of FTI Consulting, Inc., was denied long-term disability benefits under the FTI Consulting Employee Benefit Plan. She claims this denial violated ERISA Sections 502(a)(1)(B) and (a)(3). Both parties agree that the Plan is governed by ERISA and that the long-term disability benefits are funded by a group insurance policy issued by Principal Life. The dispute centers on the standard of review for the denial of benefits.

The Court, addressing cross-motions for partial judgment on the pleadings, considers them under Rule 56, treating them as motions for partial summary judgment. Plaintiff contends that a de novo standard should apply, while the defendant argues for an arbitrary and capricious standard. The Court grants the plaintiff's motion and denies the defendant's.

Citing the U.S. Supreme Court’s decision in Firestone Tire and Rubber Co. v. Bruch, the Court notes that the standard of review for benefit eligibility determinations is de novo unless the plan grants the administrator discretionary authority. Both parties identify three key documents: the Group Policy, the Group Booklet-Certificate, and the Employer Application for Group Insurance. The plaintiff acknowledges that the Group Policy and the Group Booklet-Certificate contain language granting the defendant discretionary authority to interpret the policy and determine eligibility for benefits.

The Group Booklet-Certificate issued by Principal grants complete discretion to the insurer regarding the interpretation of group insurance provisions, eligibility for benefits, and the determination of benefits provided. The plaintiff contends that these discretionary provisions are invalid under California Insurance Code Section 10110.6(a), effective January 1, 2012, which voids any policy provision that reserves discretionary authority for determining eligibility or interpreting terms for any life or disability insurance covering California residents. This section applies to both group and individual insurance products and is self-executing. The defendant does not dispute the plaintiff's residency or that the Plan provides disability coverage, nor does it argue that the Plan was issued before this law's effective date. The only counter-argument from the defendant is that a choice of law provision in the Group Policy designates Maryland law. However, this argument is deemed irrelevant since California Insurance Code Section 10110.6 applies regardless of the choice of law provision, effectively nullifying discretionary provisions. The court aligns with prior rulings asserting that choice of law provisions cannot override California's statutory rights concerning the standard of review for claims denials, emphasizing that California residents are entitled to a fair review of such denials.

Defendant cited Doe v. PricewaterhouseCoopers Health, Welfare Benefit Plan to argue for a more favorable legal precedent; however, the Court determined that Doe does not specifically address the relevant issue, as it broadly references California law without mentioning California Insurance Code Section 10110.6. The Court disagrees with any interpretation of Doe that suggests a choice of law provision can override the applicability of this Insurance Code section regarding the standard of review in claim denials. The primary issue for the Court is the standard of review for the denial of long-term disability benefits. The Court concluded that there are no material facts in dispute and that plaintiff is entitled to judgment as a matter of law under Rule 56(a) of the Federal Rules of Civil Procedure. While the Plan documents grant the defendant discretionary authority concerning the insurance provisions and eligibility determinations, the Court ruled these provisions as void and unenforceable under California Insurance Code Section 10110.6. Thus, the Court will apply a de novo standard of review to the denial of benefits challenged under 29 U.S.C. 1132(a)(1)(B). A case management conference is scheduled for December 9, 2015, at 1:30 p.m., and the parties must submit a joint status statement with a revised schedule by December 2, 2015.