No Cover Because Suicide Before Policy’s Second Year Anniversary

Suicide is a Selfish Act That Harms Others

Suicide is an act that harms everyone involved with the person who commits the deadly act. It is never well planned. It is never done to help anyone else. It is designed to make someone else take on the troubles of the suicide and clean up the mess.

In Kim Lauga v. Applied Cleveland Holdings, Inc., Et Al, Civil Action No: 16-14022 Section: “H”(3), United States District Court Eastern District Of Louisiana (July 20, 2018) Glen Lauga was unwilling or unable to wait a few weeks to kill himself so that his widow could collect on the life insurance policy. By not waiting he deprived her of the benefits of the policy.

BACKGROUND

Kim Lauga sued because of the denial of life insurance benefits under a group life insurance policy (“the Plan”) governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). Kim’s husband, Glenn Lauga (“Glenn”), purchased life insurance coverage as part of the benefits offered by his employer, Applied-Cleveland Holdings, Inc. and Applied Consultants, Inc (collectively, “Applied”), and administered by Defendant Metropolitan Life Insurance Company (“MetLife”). The Plan named Plaintiff as the primary beneficiary.

Glenn initially requested the coverage in March 2013 but it did not become effective until August 2013. On July 9, 2015 (23 months and a few days before the policy was in effect two years), Glenn committed suicide. Plaintiff’s claim for benefits under the Plan was denied because the Plan excludes payment in the event that the insured commits suicide within two years of the date the insurance took effect.

The purchase of the life insurance was convoluted with the first attempts starting in February 2013 during the open enrollment period for the March 1, 2013 plan year, Glenn completed Applied’s online enrollment form requesting $400,000 in life insurance coverage. As part of the application, Glenn was required to complete a Statement of Health form. The form instructed the employee to fill in the remainder of the form and send it directly to MetLife. Glenn filled out a Statement of Health form on March 13, 2013. Glenn’s form requested only $200,000 of coverage and was missing information from the Insurance Information section, including his date of hire and annual salary. Glenn submitted the form to Applied. The same day, Applied submitted the form to MetLife, which received it on March 14, 2013.

MetLife’s application process required that Glenn undergo a paramedical exam, which was scheduled by a third-party provider. Glenn’s application was terminated in Applied’s system on June 18, 2013 for the failure to complete a paramedical exam. On July 5, 2013, the paramedical exam was completed. MetLife received the results on July 10, 2013. On July 11, 2013, MetLife approved Glenn for $200,000 of coverage. Glenn’s application to Applied was reinstated on July 18, 2013 upon approval from MetLife. The insurance coverage was given an effective date of August 1, 2013. During the 2015 open enrollment period, Glenn obtained an additional $240,000 in coverage, just a few months before he killed himself by suicide on July 9, 2015.

Plaintiff submitted a claim for life insurance benefits to MetLife on July 10, 2015. MetLife issued a denial of benefits on December 18, 2015 based on the Plan’s two-year suicide exclusion. MetLife completed the administrative appeal of Plaintiff’s claim on June 3, 2016, upholding the denial of benefits. In such an event, the Plan requires that all premiums paid be refunded. MetLife refunded the premiums paid toward Glenn’s coverage in two parts, a check issued to Applied in July 2016 and a credit on Applied’s August 2016 invoice. Applied refunded the premium amounts paid by Glenn to Plaintiff on November 11, 2016.

THE CLAIMS

The Plaintiff sought 1) equitable relief as a remedy for breach of fiduciary duty under 29 U.S.C. § 1132(a)(3) in failing to timely bind coverage at the requested amount; 2) for benefits under the terms of the plan pursuant to 29 U.S.C. § 1132(a)(1)(B), either as reformed following a grant of equitable relief on Claim 1 or as written; 3) for penalties pursuant to 29 U.S.C. § 1132(c)(1) for Defendants’ failure to furnish plan documents upon request; and 4) for attorney’s fees pursuant to 29 U.S.C. § 1132(g)(1).

LAW AND ANALYSIS

Plaintiff’s Claim for Breach of Fiduciary Duty

Plaintiff identifies several equitable remedies available to her: reformation, surcharge, and equitable estoppel. Reformation requires a plaintiff to show either a mutual mistake of both parties or the mistake of one party coupled with fraud or inequitable conduct by the other. Surcharge requires a plaintiff to show that a) the defendant owed the plaintiff a fiduciary duty, b) the defendant breached that duty, c) plaintiff suffered actual harm, and d) defendant’s breach of duty was the cause of plaintiff’s harm. Equitable estoppel requires a plaintiff to prove “(1) a material misrepresentation; (2) reasonable and detrimental reliance upon the representation; and (

Previously, the Court held that the substance of the relief that Plaintiff seeks—redress for the failure of Defendants to timely bind the insurance policy—is equitable in nature and separate from that available under the Plan. Nothing in the evidence submitted changes that conclusion.

Defendant Applied’s Breach of Fiduciary Duty

Plaintiff specifically alleges that Defendant Applied breached its duties to Plaintiff as a Plan fiduciary by: 1) failing to fill in Glenn’s employment start date and salary information on the first Statement of Health form, 2) failing to notify MetLife that Glenn had applied for $400,000 in coverage through the online system, and 3) failing to take corrective measures to bind life insurance in the amount of $400,000 as Glenn originally requested.

Here, Applied did not take on the role of intermediary between the employee and insurance provider, did not make any misrepresentations, and did not perform the function of evaluating whether coverage had been bound. Because Applied was performing a clerical function, rather than exercising discretion, Applied owed Plaintiff no fiduciary duty.

Assuming that nothing else changed and the entire timeline of Glenn’s application moved forward by eight days, MetLife would have approved the coverage on July 3, 2013. In that case, the coverage would still have become effective on August 1, 2013, the first day of the month after the application was approved. Plaintiff argues that the delay was actually 24 days, the time from when Glenn submitted his initial Statement of Health form to when he submitted the complete version.

Defendant MetLife’s Breach of Fiduciary Duty

Plaintiff specifically alleges that Defendant MetLife breached its duties to Plaintiff as a Plan fiduciary by: 1) failing to make a reasonable effort to obtain the missing information on the Statement of Health form, and 2) failing to process the application in a timely manner.

MetLife does not owe a fiduciary duty in the processing of enrollment applications because such an action is clerical, not discretionary. The actions of MetLife were classic clerical functions that do not give rise to a fiduciary duty.

Since Plaintiff admits “there is a complete absence of any evidence of the cause of the delay”  and since Plaintiff bears the burden to establish that MetLife’s conduct caused Plaintiff’s harm, she offered nothing beyond speculation. Accordingly, Defendant MetLife is entitled to summary judgment on Plaintiff’s claim against it for breach of fiduciary duty.

Plaintiff was not successful on any of her claims asserted in this lawsuit.

ZALMA OPINION

It appears, especially since he doubled the limits shortly before the suicide that Glenn intended to have Met Life pay his spouse after his suicide. However, since he did not read the policy, did not wait three or four weeks until the policy was two years old, he not only harmed his spouse by committing suicide his actions deprived her of the benefits of the life insurance policy and got her nothing more than an unsuccessful lawsuit. Suicide, in this case, established that it is a selfish act.


© 2018 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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