Susan Salyers v. Metropolitan Life Ins. Co.
2017 U.S. App. LEXIS 18231
| 9th Cir. | 2017Background
- Susan Salyers, a Providence nurse and participant in an ERISA-governed benefits plan insured by MetLife, elected $20,000 spouse life insurance in 2013 but Providence’s system erroneously recorded $500,000 and deducted premiums accordingly.
- In 2014 Salyers elected $250,000 for her husband; the plan required "evidence of insurability" for amounts over $50,000, but Salyers did not submit any statement of health.
- Despite no evidence of insurability on file, Providence and MetLife adjusted premiums to reflect $250,000 and Providence confirmed $250,000 coverage to Salyers after her husband’s death.
- MetLife later learned there was no statement of health, obtained a corrected employer statement showing only $30,000 of valid coverage (the $20,000 initial plus one-level increase), and paid $30,000; Providence refunded excess premiums.
- Salyers appealed administratively and then sued under ERISA, arguing MetLife waived or should be estopped from enforcing the evidence-of-insurability requirement; the district court ruled for MetLife.
- The Ninth Circuit reversed, holding MetLife waived the evidence-of-insurability requirement because Providence acted as MetLife’s agent in enrollment/administration and its conduct (accepting premiums, confirming coverage) was attributable to MetLife.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MetLife waived the plan's evidence-of-insurability requirement | Salyers: MetLife accepted premiums and did not request a statement of health despite $250,000 showing, so it waived the requirement | MetLife: It lacked actual knowledge; Providence handled enrollment so MetLife's inaction was not inconsistent with enforcing the rule | Court: Waiver found — Providence acted as MetLife’s agent and its conduct (premiums, confirmations, omissions) is imputed to MetLife, inducing reasonable belief the requirement was relinquished |
| Whether Providence’s knowledge can be imputed to MetLife under ERISA federal common law agency | Salyers: Employer’s direct role in enrollment and communications is attributable to insurer as agent | MetLife: Preemption and ERISA policy discourage automatic imputation of employer actions to insurers | Court: Adopted federal common-law agency principles (Restatement) and imputed Providence’s knowledge and conduct to MetLife for these administrative functions |
| Whether waiver claim required detrimental reliance or other estoppel elements | Salyers: Detrimental reliance present (paid premiums; relied on confirmed coverage) | MetLife: Plaintiff must show insurer’s affirmative misconduct or reliance to find waiver/estoppel | Court: Noted Gordon but found record shows detrimental reliance and misconduct sufficient; proceeded on waiver without resolving full scope of Gordon’s rule |
| Whether a full and fair review occurred in MetLife’s administrative appeal | Salyers: MetLife’s review was inadequate and biased | MetLife: Performed review of file and denied consistently | Court: Decision unnecessary to resolve because waiver disposed of the case; waiver relieved need to adjudicate review adequacy |
Key Cases Cited
- Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551 (9th Cir. 1991) (defines waiver as intentional relinquishment or conduct inducing reasonable belief of relinquishment)
- UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358 (1999) (ERISA preempts state rules that automatically make employer agent of insurer; leaves room for federal common law)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (courts may develop federal common law of ERISA rights and obligations)
- Pannebecker v. Liberty Life Assur. Co. of Boston, 542 F.3d 1213 (9th Cir. 2008) (standard of review for ERISA bench findings)
- PM Grp. Life Ins. Co. v. Western Growers Assur. Trust, 953 F.2d 543 (9th Cir. 1992) (federal rule should align with ERISA policy goals)
- Gordon v. Deloitte & Touche, LLP Grp. Long Term Disability Plan, 749 F.3d 746 (9th Cir. 2014) (discusses interplay of waiver and estoppel and potential need for detrimental reliance)
- Pitts v. Am. Sec. Life Ins. Co., 931 F.2d 351 (5th Cir. 1991) (insurer waived defenses by continuing to accept premiums after learning of noncompliance)
- Gaines v. Sargent Fletcher, Inc. Grp. Life Ins. Plan, 329 F. Supp. 2d 1198 (C.D. Cal. 2004) (insurer waived evidence-of-insurability defense by accepting premiums and failing to notify)