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Salyers v. Metropolitan Life Insurance Co.

United States Court of Appeals, Ninth Circuit

September 20, 2017

Susan Salyers, an individual, Plaintiff-Appellant,
v.
Metropolitan Life Insurance Company, Guardian Ad Litem, MetLife, Inc., Defendant-Appellee.

          Argued and Submitted March 6, 2017 Pasadena, California

         Appeal from the United States District Court for the Central District of California Percy Anderson, District Judge, Presiding D.C. No. 2:14-cv-07490-PA-JC

          Christian J. Garris (argued), Law Offices of Christian J. Garris, Los Angeles, California, for Plaintiff-Appellant.

          Ian Seth Linker (argued), Metropolitan Life Insurance Co., New York, New York; Misty A. Murray, Hinshaw & Culbertson LLP, Los Angeles, California; for Defendant-Appellee.

          Before: Harry Pregerson, Richard A. Paez, and Marsha S. Berzon, Circuit Judges.

         SUMMARY [*]

         Employee Retirement Income Security Act

         The panel reversed the district court's judgment in favor of the defendant following a bench trial in an ERISA action concerning life insurance.

         The plaintiff bought a $250, 000 life insurance policy on her husband, but the defendant insurer paid out only $30, 000 because the plaintiff had not submitted evidence of insurability with her coverage election, as required under the ERISA-governed benefits plan. The panel held that the defendant waived the evidence of insurability requirement because it did not ask the plaintiff for a statement of health, even as it accepted her premiums for $250, 000 in coverage. The panel held that, under the federal common law of agency, the knowledge and conduct of the policyholder-employer could be attributed to the defendant. The panel remanded the case to the district court with instructions to enter judgment in favor of the plaintiff for the amount of the $250, 000 policy that remained unpaid.

          OPINION

          PREGERSON, CIRCUIT JUDGE.

         Plaintiff-Appellant Susan Salyers ("Salyers"), a nurse at Providence Health & Services ("Providence"), bought a $250, 000 life insurance policy on her husband through an ERISA-governed benefits plan. Salyers paid premiums commensurate with that amount of coverage. When Salyers's husband died shortly thereafter, Defendant-Appellee Metropolitan Life Insurance Company ("MetLife") paid out only $30, 000. MetLife refused to pay the full $250, 000 because Salyers had not submitted evidence of insurability with her coverage election, as required under the plan. After unsuccessfully appealing the denial of benefits through MetLife's administrative process, Salyers filed suit against MetLife. The district court conducted a bench trial and entered judgment for MetLife. Salyers appealed. We reverse.

         FACTUAL AND PROCEDURAL BACKGROUND

         Salyers is a nurse at Providence. She was a participant in an ERISA-governed employee welfare benefits plan ("the Plan") that provided, among other benefits, dependent life insurance. MetLife issued the group policy that funded life insurance benefits under the Plan.

         At the time Salyers first applied for dependent life insurance in 2013, the Summary Plan Description listed eligibility requirements for Dependent Life Insurance coverage and described "How the Plan Works":

Each fall you elect your Dependent Life benefit options to be effective for the next calendar year. During your first enrollment as newly benefits eligible employee [sic], you may select any amount of spouse/Adult Benefit Recipient domestic partner coverage up to $50, 000 without evidence of insurability (statement of health). After the first year, spouse/Adult Benefits Recipient domestic partner coverage amounts may be increased by one level per year for coverage levels up to and including $50, 000. No evidence of insurability is required for this increase. Evidence of insurability is required for any coverage amount above $50, 000 or for any increase of more than one benefit level.

         On August 15, 2013, Salyers submitted her benefits elections to Providence. On the Benefits Enrollment Form, which warns that "MetLife may require evidence of insurability depending on your election, " Salyers elected life insurance coverage in the amount of $20, 000 for herself and $20, 000 for her spouse, Gary Wolk ("Gary"). Because Salyers elected only $20, 000 in coverage for Gary, no evidence of insurability was required.

         Although Salyers elected only $20, 000 in coverage for Gary, Providence mistakenly entered $500, 000 in its system. Due to this administrative error, Providence deducted premiums from Salyers's paycheck based on $500, 000 in coverage during the last four months of 2013. During that time, neither Providence nor MetLife asked Salyers to submit a statement of health or any other evidence of insurability for Gary's 2013 coverage.[1]

         During the next open enrollment period, Salyers elected $250, 000 in life insurance coverage for Gary, effective January 1, 2014. The 2014 Plan documents reiterated that evidence of insurability was required for elections of coverage of over $50, 000. The Plan's 2014 open enrollment guide stated that "any coverage you elect requiring a statement of health will not take effect until approved by MetLife." Salyers did not submit a statement of health or other evidence of insurability with her 2014 election. Nonetheless, Salyers's premium payments were adjusted to reflect her ...


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