986 F. Supp. 2d 1140
C.D. Cal.2013Background
- Decedent Cara Dietrich was an employee of Redlands Community Hospital and completed a Group Benefit Enrollment Form on October 30, 2006 requesting $260,000 in supplemental voluntary life insurance and naming Susan Patterson as beneficiary.
- The group policy (issued by Reliance Standard) required proof of good health when enrollment occurred more than 31 days after first eligibility (there was a 90‑day waiting period ending Sept. 10, 2006); Dietrich submitted no proof of good health.
- Dietrich paid premiums (allegedly via payroll deductions) from October 2006 until her death on March 28, 2010; Reliance Standard collected premiums for more than three years.
- After Dietrich’s death Reliance Standard paid basic-life proceeds but denied the $260,000 supplemental benefit on grounds Dietrich never satisfied the proof-of-good-health condition; it then refused the appeal.
- Plaintiff (beneficiary) sued under ERISA § 1132 seeking the supplemental benefit; she moved for summary adjudication that Reliance Standard is liable to pay the $260,000.
- The district court considered whether the policy’s incontestability clause bars Reliance Standard from denying coverage based on the unmet condition precedent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Reliance Standard may deny supplemental benefit for failure to submit proof of good health when premiums were paid >2 years | Incontestability clause bars Reliance from contesting policy after it was in force and premiums paid for >2 years; thus Reliance cannot deny benefit | Coverage never went into effect because proof of good health was a condition precedent; therefore incontestability clause does not apply | Court held incontestability clause precludes Reliance from denying the supplemental benefit; Reliance’s defense (failure to meet condition precedent) is barred |
| Standard of review applicable to denial of benefits under ERISA plan with discretionary language | (Not disputed) Plaintiff proceeds under ERISA; issue here is legal (incontestability) so de novo review | Reliance pointed to plan discretion (would trigger abuse-of-discretion) | Court used de novo review for the legal question of incontestability despite plan’s discretionary language |
| Whether Reliance conducted timely investigation such that policy could be contested | Plaintiff: Reliance had >3 years and only investigated after death, increasing need for incontestability protection | Reliance: argued denial was not a contest within meaning of clause and that it did not allege fraud/misrepresentation | Court found Reliance had ample time to investigate and that denial based on condition precedent is a “contest” covered by incontestability clause |
| Admissibility/disputed factual assertions about premium payments and requests for insurability | Plaintiff: payroll records and admissions support that premiums were paid continuously; absence of contrary proof | Reliance: objected to characterization and evidence but offered no evidence denying premium payments | Court treated premium-payment fact as uncontroverted for summary adjudication (evidence can be made admissible at trial) |
Key Cases Cited
- Amex Life Assurance Co. v. Superior Court, 14 Cal.4th 1231 (1997) (incontestability clause bars insurer from contesting policy based on breach of condition precedent after contestability period if premiums paid)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (ERISA denial-of-benefits review is de novo unless plan grants administrator discretionary authority)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment standard; moving party’s initial burden)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (summary judgment requires no genuine issue of material fact)