Slice-Sadler v. Principal Life Insurance Co.

Citations: 211 F. Supp. 3d 725; 2016 WL 5724824Docket: 1:15-cv-216

Court: District Court, M.D. North Carolina; October 6, 2016; Federal District Court

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Jessica Slice-Sadler filed a lawsuit on January 9, 2015, in state court against Principal Life Insurance Company regarding a disability insurance policy. The case was removed to federal court on diversity jurisdiction grounds. The primary issue remaining is the maximum monthly benefit owed to Plaintiff under the policy. The court is addressing cross-motions for summary judgment.

The Disability Income Insurance Policy was issued to Plaintiff on July 16, 2009, with an initial maximum monthly benefit of $4,750.00. Plaintiff added two riders: the Future Benefit Increase Rider (FBI Rider) for annual increases in exchange for higher premiums, and the Benefit Update Rider (BU Rider) for benefits increases every three years. From June 2010 to June 2014, Plaintiff accepted five annual increases, raising her benefit to $6,660.00.

Plaintiff became ill in January 2011, officially reducing her workload to part-time by January 2012, and could no longer work by April 2012. Diagnosed with Postural Orthostatic Tachycardia Syndrome, later linked to Ehlers-Danlos Syndrome, she submitted a claim for disability benefits on May 10, 2012. Initially denied by the Defendant, Plaintiff's appeal was also denied after an investigation. However, by February 2016, Defendant conceded that Plaintiff had a Residual Disability and was eligible for benefits, leaving only the maximum monthly benefit amount in dispute.

Plaintiff argues she is entitled to $6,660.00, while Defendant claims the amount should be $5,475.00. Summary judgment is granted to Plaintiff and denied to Defendant based on the absence of genuine material disputes regarding entitlement to the higher benefit amount.

The Court addresses cross-motions for summary judgment by evaluating each party's entitlement to judgment as a matter of law. It asserts subject matter jurisdiction based on diversity of citizenship and applies North Carolina's choice of law principles, determining that North Carolina law governs the dispute since the insurance policy was issued there. Under North Carolina law, an insurance policy is treated as a contract, with the interpretation centered on discerning the parties' intent at issuance. The claimant must demonstrate coverage, and if the policy's terms are clear and unambiguous, they will be enforced as written. However, if ambiguous, interpretations favor the insured, considering what a reasonable person would understand the policy to mean.

The dispute involves the FBI Rider, which allows for increases in the Total Monthly Benefit on each Option Anniversary, subject to certain conditions. The Defendant contends that the policy language is clear, asserting that the Plaintiff's monthly benefit should reflect the last accepted increase prior to her disability claim in May 2012, which was $5,475.00. The Defendant argues that benefit increases do not apply to claims already filed, denying eligibility for increases post-claim. Conversely, the Plaintiff argues that the policy is ambiguous and that such ambiguity favors her interpretation, asserting that her benefit should reflect the most recent accepted increase of $6,660.00, given that she accepted increases through 2014. She claims that the Defendant cannot retract these increases and argues that the policy does not clarify whether increases apply to denied claims. The Defendant's interpretation regarding the initiation of a 'new Disability' upon claim filing lacks support from the policy's language.

The term "new Disability" is not explicitly defined in the Policy, leading to the reasonable interpretation that it starts when a claimant is deemed disabled, regardless of the claim filing date. The Plaintiff reasonably deduced that accepting offers for increased benefits would indeed enhance her benefits if the Defendant ultimately accepted her disability claim. The Limitations provision in the FBI Rider aims to prevent increased benefits for a "Recurring Disability" that has already been compensated, which is not applicable in this case. At the time of the annual offers for increased benefits, the Defendant had not determined the Plaintiff to be disabled nor was it paying any benefits on her claim. The terms of Paragraph 3 in the Limitations section imply that accepting an increase means the claimant is not considered disabled by the Defendant. Thus, a claimant is deemed "Disabled" only when the Defendant accepts their claim. The Court highlights that allowing the Defendant to deny claims while accepting premiums for increased benefits would unfairly benefit the insurance company. Consequently, the Court ruled that the Plaintiff is entitled to a monthly benefit of $6,660.00 under the Policy and Rider, granting the Plaintiff's Motion for Summary Judgment and denying the Defendant’s. All references to a prior benefit amount of $6,600.00 are corrected to $6,660.00. The Plaintiff amended her complaint to streamline issues after a mediated settlement, and the benefit increases accepted between 2010 and 2014 will be analyzed collectively, referencing only the FBI Rider. Additionally, "Residual Disability" is defined as being unable to work full time in one’s occupation while not being totally disabled.