Jackman Financial Corp. v. Humana Insurance
641 F.3d 860
| 7th Cir. | 2011Background
- Torrence and his brother Adair were killed in the same car crash; Torrence named Adair as sole beneficiary of his employer group life policy.
- The policy contains a facility-of-payment clause allowing the insurer to pay the proceeds to listed relatives or the estate if the named beneficiary is not alive.
- Torrence’s mother, Nancy Kelly, later assigned Torrence’s life insurance proceeds to Jackman Financial; she also filed as Torrence’s administrator and claimed to be the beneficiary.
- Humana paid the policy proceeds to Torrence’s minor children under the facility-of-payment clause after reviewing affidavits and guardianship requirements.
- Jackman filed an ERISA claim seeking to recover the proceeds; the district court granted Humana summary judgment, and Jackman appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Humana properly exercised the facility-of-payment clause | Jackman asserts assignment grants rights to proceeds and Humana should pay the estate. | Humana could pay to any listed class under the clause, not strictly to the named beneficiary or assignee. | Humana did not abuse discretion; facility-of-payment gave option to pay children. |
| Whether Kelly's assignment forecloses Humana's discretion under the clause | Assignment to Jackman vested an interest in the proceeds. | Kelly’s assignment does not attach because the estate/administrator had no fixed right until Humana selected a beneficiary. | Assignment did not defeat Humana’s discretion under the facility-of-payment clause. |
| Whether ERISA standard of review was satisfied | District court misapplied the standard and should evaluate de novo. | Plan granted discretionary authority; review is for abuse of discretion. | Court applied abuse-of-discretion standard and upheld Humana's decision. |
| Whether Humana should be awarded attorney fees | Fees should be denied given no merits to Humana’s position. | ERISA permits fees to the prevailing party; Humana should recover. | Fees denied; Jackman’s position not substantially unjust; discretion on fee award exercised against Humana. |
Key Cases Cited
- Forcier v. Metropolitan Life Ins. Co., 469 F.3d 178 (1st Cir. 2006) (facility-of-payment clause contemplates payment to class or equitably entitled)
- Hess v. Reg-Ellen Machine Tool Corp., 423 F.3d 653 (7th Cir. 2005) (arbitrary and capricious standard requires a reasoned basis)
- Tegtmeier v. Midwest Operating Engineers Pension Trust Fund, 390 F.3d 1040 (7th Cir. 2004) (abuse-of-discretion review framework)
- Holmstrom v. Metropolitan Life Ins. Co., 615 F.3d 758 (7th Cir. 2010) (recognizes abuse-of-discretion standard with deference to administrator's reasoning)
- Mote v. Aetna Life Ins. Co., 502 F.3d 601 (7th Cir. 2007) (informed decision with plausible explanation sustains denial)
- Gallo v. Amoco Corp., 102 F.3d 918 (7th Cir. 1996) (reasonableness of plan administrator's decision under ERISA)
- Herman v. Central States, Southeast & Southwest Areas Pension Fund, 423 F.3d 684 (7th Cir. 2005) (five-factor test for attorney-fee awards in ERISA cases)
- Sullivan v. William A. Randolph, Inc., 504 F.3d 665 (7th Cir. 2007) (fee award considerations in ERISA litigation)
- Brewer v. Protexall, Inc., 50 F.3d 453 (7th Cir. 1995) (ERISA fee-shifting considerations)
- Quinn v. Blue Cross & Blue Shield Ass'n, 161 F.3d 472 (7th Cir. 1998) (interpretation of plan provisions and discretion)
- Kennedy v. Connecticut General Life Ins. Co., 924 F.2d 698 (2d Cir. 1991) (ERISA interpleader/benefit distribution principles)