SIMPSON v. SUN LIFE OF CANADA

Herndon, District Judge:

I. Introduction

On December 22, 2000, the Estate of Richard Simpson filed its Fifth Amended Complaint alleging, inter alia, violations of the Employment Retirement Income Security Act by Defendants Sun Life of Canada, a disability insurance company, Hartford Life Companies, a life insurance company, and Mitretek Systems, Inc., Simpson's former employer (Doc. 132). Simpson's estate alleges that sometime prior to March 1997 Simpson developed a debilitating mental illness. The estate alleges that Sun Life wrongfully terminated Simpson disability benefits, causing Mitretek to terminate Simpson's employment, and causing Simpson to forfeit $500,000 in life insurance benefits. Sun Life has filed a motion to dismiss all counts of Simpson's Complaint asserted against Sun Life (Counts I, IV, VIII, and IX) (Doc. 108).

The original Complaint was filed by Richard Simpson. Mr. Simpson died on September 28, 1999, and this litigation was thereafter pursued by his estate.

Simpson's estate alleges that because of Simpson's depression he failed to convert his group life insurance policy with Hartford Life into an individual policy within the specified time after termina tion of his employment.

II. Analysis

When ruling on a motion to dismiss for failure to state a claim, the district court assumes as true all facts well-pled plus the reasonable inferences therefrom and construes them in the light most favorable to the plaintiff. Fries v. Helsper, 146 F.3d 452, 457 (7th Cir. 1998) (citing Wiemerslage Through Wiemerslage v. Maine Township High School Dist. 207, 29 F.3d 1149, 1151 (7th Cir. 1994)). The question is whether, under those assumptions, the plaintiff would have a right to legal relief. Id. This standard also has been articulated:

[U]nder "simplified notice pleading," . . . the allegations of the complaint should be liberally construed, and the "complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."

Lewis v. Local Union No. 100 of Laborers' Int'l Union, 750 F.2d 1368, 1373 (7th Cir. 1984) (quoting Conley v. Gibson, 355 U.S. 41, 46-47 (1957)). Accord Fries, 146 F.3d at 457; Vickery v. Jones, 100 F.3d 1334, 1341 (7th Cir. 1996).

The Seventh Circuit has reiterated the liberal standard governing notice pleading:

It is sufficient if the complaint adequately notifies the defendants of the nature of the cause of action. . . . As the Supreme Court has recently reminded us, the Federal Rules of Civil Procedure do not permit us to demand a greater level of specificity except in those instances in which the Rules specifically provide for more detailed elaboration. See Leatherman v. Tarrant County Narcotics Intelligence Coordination Unit, 507 U.S. 163, 168 (1993).

Duda v. Bd. of Educ. of Franklin Park Pub. Sch. Dist. No. 84, 133 F.3d 1054, 1057 (7th Cir. 1998); See also Kaplan v. Shure Brothers, Inc., 153 F.3d 413, 419 (7th Cir. 1998). In fact, the Seventh Circuit has instructed that a plaintiff's claim must survive a 12(b)(6) dismissal motion if relief could be granted under any set of facts that could be proved consistent with the allegations. Hi-Lite Products Co. v. American Home Products Corp., 11 F.3d 1402, 1409 (7th Cir. 1993).

A. Count I

Sun Life argues that Count I of the Fifth Amended Complaint should be dismissed because Simpson's estate has failed to allege facts that would give rise to a cognizable claim under ERISA. Specifically, Sun Life contends that Simpson's estate has failed to allege, under the applicable standard of review, that Sun Life's decision to terminate Simpson's disability benefits was arbitrary and capricious. In the Complaint, Simpson's estate alleges that Sun Life failed to consider the opinions of Simpson's treating physicians in making its decision to terminate Simpson's disability benefits. Specifically, Simpson's estate alleges that "Sun Life's refusal and failure to consider the medical records submitted by the Plaintiff in his appeal was arbitrary and capricious" (Doc. 132, ¶ 41) and that "Sun Life's disregard of the opinions of three separate treating mental health care providers in favor of a records view by a non-treating, non-examining physician was arbitrary and capricious" (Doc. 132, ¶ 42). The Court finds that Simpson's estate has alleged facts in Count I of the Fifth Amended Complaint sufficient to state a cause of action under ERISA. Accordingly, the Court DENIES Sun Life's motion to dismiss Count I of Simpson's Fifth Amended Complaint.

Sun Life also argues that the Court should strike Simpson's prayer for relief insofar as it prays for the recovery of lost investment income. The Court DENIES Sun Life's request at this time.

B. Count IV

In Count IV Simpson's estate seeks to recover from Sun Life the $500,000 in life insurance proceeds that was forfeited by his failure to exercise the conversion option within the requisite time frame. Sun life argues that this is not a cognizable claim under ERISA. A plaintiff's claim must survive a 12(b)(6) dismissal motion if relief could be granted under any set of facts that could be proved consistent with the allegations. Hi-Lite Products Co., 11 F.3d at 1409 . The Court finds that Count IV contains sufficient allegations to survive Sun Life's motion to dismiss. Thus, the Court DENIES Sun Life's motion to dismiss Count IV of Simpson's Complaint.

C. Count VIII

Sun Life argues that Count VIII of Simpson's Fifth Amended Complaint should be dismissed because his claim for vexatious and unreasonable refusal to pay under 215 ILCS 5/155 is preempted by ERISA. ERISA generally preempts any state law which "relates to" employee benefit plans. 29 U.S.C. § 1144(a); Tomczyk v. Blue Cross Blue Shield, 951 F.2d 771, 775 (7th Cir. 1991). However, section 1144(b)(2)(A) of ERISA provides a savings clause in that a state law which specifically "regulates insurance" escapes this preemption. 29 U.S.C. § 1144(b)(2)(A). A state law will only be redeemed under the "savings clause" if all prongs of a three-part test are met: (1) the state law must be specifically directed toward the insurance industry, (2) the state law must regulate the "business of insurance" as defined by case law interpreting the McCarran-Ferguson Act, and (3) allowing the state law claims to proceed must not undermine ERISA's civil enforcement procedures. Tomczyk, 951 F.2d at 775-76 . To determine whether the state law regulates the "business of insurance," the court considers: (1) whether the practice has the effect of transferring or spreading a policyholder's risk, (2) whether the practice is an integral part of the policy relationship between the insurer and the insured, and (3) whether the practice is limited to entities within the insurance industry. UNUM Life Ins. Co. v. Ward, 526 U.S. 358, 367 (1999).

As part of the Illinois Insurance Code, section 155 is certainly directed toward the insurance industry. Regardless of whether section 155 satisfies the McCarran-Ferguson test, however, the Court finds that it fails the third part of the "savings clause" test. Allowing a state law claim to proceed under section 155 would undermine ERISA's civil enforcement procedures. ERISA § 502(a) provides an extensive list of remedies available to a participant or beneficiary asserting improper processing of a claim for benefits under an ERISA-regulated plan. 29 U.S.C. § 1132(a). A participant may sue to "recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). A participant may also bring an action for breach of fiduciary duty. 29 U.S.C. § 1132(a)(2). The "[r]elief may take the form of accrued benefits due, a declaratory judgment on entitlement to benefits, or an injunction against a plan administrator's improper refusal to pay benefits." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 53 (1987). The Court may also, in its discretion, award attorney's fees to either party. Id. Congress intended that these civil enforcement provisions be the exclusive remedy for beneficiaries and participants seeking to recover under an ERISA-regulated plan. Id at 53-54. Section 155 of the Illinois Insurance Code provides a variety of remedies, such as attorney's fees and statutory penalties, when a court finds that the insurance company vexatiously or unreasonably delayed in settling a claim. Because ERISA sets forth the exclusive remedies available to beneficiaries and participants seeking to recover under an ERISA plan, allowing a claim to proceed under section 155 of the Illinois Insurance Code would undermine ERISA's civil enforcement procedures. Thus, section 155 is preempted by ERISA. Accordingly, the Court GRANTS Sun Life's motion to dismiss Count VIII of Simpson's Fifth Amended Complaint and DISMISSES with prejudice Count VIII of the Complaint.

D. Count IX

In Count IX of the Fifth Amended Complaint Simpson's estate alleges that Sun Life's denial letter failed to meet the requirements of ERISA. Sun Life argues that Count IX should be dismissed because the denial letter demonstrates that they did comply with the requirements of ERISA. Motions to dismiss are intended only to test the legal sufficiency of the plaintiff's complaint, not to address the claims on their merits. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) ("The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims."); Caremark, Inc. v. Coram Healthcare Corp., 113 F.3d 645, 648 (7th Cir. 1997). Thus, the Court DENIES Sun Life's motion to dismiss Count IX of Simpson's Fifth Amended Complaint.

III. Conclusion

The Court GRANTS in part and DENIES in part Sun Life's motion to dismiss Simpson's Fifth Amended Complaint (Doc. 108). The Court DENIES Sun Life's motion as to Counts I, IV, and IX, GRANTS Sun Life's motion as to Count VIII, and DISMISSES with prejudice Count VIII of Simpson's Fifth Amended Complaint.

IT IS SO ORDERED.