Cerone v. Reliance Standard Life Insurance
9 F. Supp. 3d 1145
S.D. Cal.2014Background
- Debra Cerone sued under ERISA for $250,000 accidental death benefits after her husband Donald Cerone died in a 2011 car crash; the insurer Reliance Standard had denied the claim and the appeal in 2012 based on policy exclusions (alcohol/controlled substances).
- The group life/accidental death Policy, issued to The Picerne Group and delivered in California, contained a discretionary clause granting Reliance authority to interpret the policy and determine benefits.
- California Insurance Code § 10110.6, effective January 1, 2012, voids discretionary clauses in life/disability policies renewed on or after their anniversary date for California residents.
- The Policy had an anniversary date of January 1 and thus was considered "renewed" on January 1, 2012, the same day § 10110.6 became effective.
- Plaintiff’s claim was filed in January 2013; Reliance denied benefits initially on January 10, 2012 and on appeal on August 20, 2012—both after § 10110.6 took effect.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicable standard of review for denial of ERISA benefits | § 10110.6 voids discretionary clause; review should be de novo | Policy’s pre-2012 discretionary clause controls because claim arose in Aug 2011; statute not retroactive; review should be abuse of discretion | De novo review: § 10110.6 applied when policy renewed Jan 1, 2012 before denials, voiding discretionary clause |
| Which policy/version governs | The controlling policy is the one in effect when benefits were denied (2012) | The 2011 policy (when claim arose) should govern because claim arose before § 10110.6 | Benefits had not vested and the controlling plan is the one in effect at denial; 2012 policy governs |
| Vesting of welfare/accidental death benefits | Benefits did not vest; no contractual vesting language in policy | Argued rights were vested upon filing claim, preventing post-claim change | No vesting: welfare benefits don’t vest absent clear contractual language; employer may change plan; thus non-vested and governed by policy at denial |
| Preemption challenge to § 10110.6 | § 10110.6 regulates insurance and is saved from ERISA preemption | § 10110.6 conflicts with ERISA administrative scheme and impermissibly amends plan | § 10110.6 is not preempted; falls under ERISA savings clause and applies by operation of law on renewal |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (de novo review applies unless plan grants administrator discretion)
- Saffon v. Wells Fargo & Co. Long Term Disability Plan, 522 F.3d 863 (granting discretionary authority triggers abuse-of-discretion review)
- Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154 (controlling plan is the one in effect when benefits are denied; welfare benefits do not vest absent clear contractual language)
- Stephan v. Unum Life Ins. Co. of Am., 697 F.3d 917 (policy renewal incorporates changes in law effective at renewal)
- Standard Ins. Co. v. Morrison, 584 F.3d 837 (state laws regulating discretionary clauses fall under ERISA savings clause)
- Hackett v. Xerox Corp. Long-Term Disability Income Plan, 315 F.3d 771 (explaining why non-vested welfare benefits are governed by plan in effect at claim accrual)