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Erwood v. Life Insurance Company of North America

United States District Court, W.D. Pennsylvania

April 13, 2017





         This matter is before the Court following the conclusion of a bench trial held February 6, 2017, and February 7, 2017. In this case, Plaintiff Patricia Erwood ("Plaintiff) seeks to recover the losses and related damages that she sustained when Defendants WellStar Health System, Inc. and Group Life Insurance Program ("the Plan") (collectively, "WellStar") breached a fiduciary duty to Plaintiff by misrepresenting and failing to adequately inform her of the need or the means to convert two group life insurance policies purchased by her now-deceased husband, Dr. Scott Erwood, ("Dr. Erwood") as part of an employee benefit plan established pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, e/ seq., into a personal policy.


         Plaintiff filed the operative Complaint, ECF No. 34, on November 19, 2014, therein raising two Counts against WellStar and Life Insurance Company of North America ("LINA"). In Count I, brought against LINA and the Plan, Plaintiff sought relief pursuant to 29 U.S.C. § 1132(a)(1)(B). Id. ¶¶ 33-42. In Count II, Plaintiff sought relief against WellStar and LINA pursuant to 29 U.S.C. § 1132(a)(3). Id. ¶¶ 43-57. LINA filed its Answer on May 15, 2015. ECF No. 57. WellStar filed its operative Answer on August 26, 2015. ECF No. 72.

         On February 26, 2016, LINA filed a Motion for Summary Judgment. ECF No. 87. Also on February 26, 2016, WellStar filed a Motion for Summary Judgment. ECF No. 92. On April 6, 2016, Plaintiff filed a Cross Motion for Partial Summary Judgment. ECF No. 98. In an Opinion and Order issued on September 16, 2016, this Court: (1) granted LINA's Motion for Summary Judgment as to Count I and denied it as to Count II; (2) granted WellStar's Motion for Summary Judgment as to Count I and denied it as to Count II; and (3) denied Plaintiffs Cross Motion for Partial Summary Judgment. ECF No. 119.

         On February 3, 2017, Plaintiff filed a Motion to Dismiss LINA from the case because she had reached a settlement with LINA. ECF No. 137. On February 6, 2017, the Court granted the Motion to Dismiss and terminated LINA from the case.[1] ECF No. 138. Accordingly, the trial proceeded against WellStar only as to the alleged violation of 29 U.S.C. § 1132(a)(3).

         The non-jury trial was conducted on February 6, 2017, and February 7, 2017. Final Proposed Findings of Fact and Conclusions of Law were filed on February 21, 2017. ECF Nos. 145-146.

         This Court makes the following findings of fact and conclusions of law in accordance with Fed.R.Civ.P. 52, mindful that Plaintiff bears the burden of proof by a preponderance of the evidence and that the Court is the sole judge of the evidence, including credibility of the trial witnesses.


         1. Plaintiffs husband, Dr. Scott Erwood, was an employee of WellStar, where he worked as a neurosurgeon. TT1[2] at 25, 31.

         2. As a WellStar employee, Dr. Erwood was a participant in WellStar's employee benefit plans, including basic and supplemental life insurance.

         3. LIN A[3] insures the life benefits for WellStar and issued life insurance benefits to cover WellStar employees.

         4. The Plan included one basic life insurance policy (FLX-980135) and one optional or voluntary life insurance policy (FLX-980136).

         5. WellStar was the plan administrator for the Plan. TT2 at 31.

         6. During his employment with WellStar, Dr. Erwood was insured for $500, 000 in life insurance benefits under each of the life insurance policies issued by LINA, the basic and voluntary policies. As such, Dr. Erwood had a total of $ 1, 000, 000 in life insurance under the Plan. Trial Exhibit 2.

         7. In November of 2011, Dr. Erwood suffered a seizure that was subsequently diagnosed as a symptom of a malignant brain tumor. ECF No. 147 at 58.

         8. Dr. Erwood stopped working full-time at WellStar on November 16, 2011. Trial Exhibit 6.

         9. Dr. Erwood took an initial period of leave under the Family and Medical Leave Act ("FMLA") from November 16, 2011, through December 12, 2011. Trial Exhibit 1.

         10. Dr. Erwood continued to work part-time and/or receive pay from WellStar until January 30, 2012. TT1 at 67; Trial Exhibit 32.

         11. According to WellStar's records, Dr. Erwood resumed FMLA leave on January 31, 2012. The FMLA leave ended on September 4, 2012. Trial Exhibit 1.

         12. WellStar provided for its employees 36 weeks of FMLA leave for a serious medical condition. Trial Exhibit 1.

         13. While on FMLA leave, Dr. Erwood became eligible for benefits under WellStar's Long-Term Disability ("LTD") Plan, which is also insured and administered by LINA. ECF No. 91 ¶ 22; Trial Exhibit 25.

         14. Dr. Erwood filed a claim for LTD benefits through WellStar's LTD Plan. His claim was approved. ECF No. 91 ¶ 22.

         15. WellStar was aware that Dr. Erwood was on LTD. Trial Exhibit 6.

         16. Around the time Dr. Erwood resumed FMLA leave in early 2012, Joey Hunt, the director of human resources for the WellStar medical group, called the Erwoods and spoke with Plaintiff. Plaintiff expressed to Hunt that she had questions about their benefits going forward. In response, Hunt set up a meeting for the Erwoods with benefits representatives who could answer their questions. TT2 at 67-74.

         17. The meeting, which took place sometime in early 2012 at the WellStar administrative building, was attended by Plaintiff and Dr. Erwood, Joey Hunt, Vinciane Drake and Kim Love. TT2 at 67.

         18. At all times relevant to this action, Vinciane Drake was the only benefits representative for WellStar in the areas of life insurance and long-term disability. TT1 at 114; TT2atl34.

         19. Hunt invited Drake to the meeting with the Erwoods because "she handled life insurance at the time." TT2 at 70.

         20. At the 45-minute meeting, Dr. Erwood engaged in conversation, but asked the same question two or three times. Dr. Erwood and Plaintiff were both emotional in the meeting; Plaintiff was crying by the end of it. TT2 at 76-77.

         21. Vinciane Drake testified that WellStar did not have this kind of meeting with every employee who went on leave, but did so "[o]nly if they came to my office and said I don't understand this. Give me more information." TT1 at 125.

         22. At the meeting, Plaintiff and her husband repeatedly asked Ms. Drake if "everything, our coverage, is all our coverage going to remain the same. And she confirmed that it would be." TT1 at 98. Plaintiff left the meeting confident that "everything was okay, that benefitswise we were still the same." TT1 at 35. Benefits following termination (i.e., post-FMLA) were discussed at the meeting. Life insurance, but not conversion, was also discussed at the meeting.

         23. On February 21, 2012, Kim Love, Senior Human Resources Consultant for WellStar, mailed to Dr. Erwood an FMLA leave packet stating that his FMLA leave would end on September 4, 2012 and failure to return to work would be considered a voluntary separation of employment. Trial Exhibit 1.

         24. The FMLA leave packet informed Dr. Erwood that while on unpaid FMLA absence, he was responsible for paying premiums in the amount of $272.90 to WellStar to maintain medical, dental, vision and life coverage and listed the schedule for when premium payments were due. Trial Exhibit 1.

         25. The FMLA packet did not provide information regarding where to send premium payments beyond the FMLA leave period. Trial Exhibit 1.

         26. The FMLA leave packet stated that with regard to Medical, Dental, Vision, Specified Health Event and Cancer Insurance, employees on FMLA leave continue to pay the normal pay period deduction amounts to maintain these coverages, and after the initial 36 weeks, employees will begin paying the full premium rate. Trial Exhibit 1.

         27. Regarding life insurance for an employee on leave and thereafter, the FMLA packet stated: "Life insurance benefits may be continued up to 36 weeks. A continuation/conversion policy may be available for employees requesting to continue life insurance coverage beyond 36 weeks. Please contact the Benefits office for specific details." Trial Exhibit 1.

         28. The FMLA packet did not include (1) the materials necessary to convert or continue life insurance coverage beyond 36 weeks; (2) information about where to access such materials; (3) information about where to send such materials in order to complete the conversion process, nor (4) the date that said materials were due in order to ensure continuation of coverage. Trial Exhibit 1.

         29. WellStar did not send to Dr. Erwood any information regarding conversion and continuation of life insurance after the FMLA packet. TT1 at 44-45.

         30. Dr. Erwood's life insurance policies provided a Terminal Illness Benefit ("TIB") which allows the insured to claim a portion of life insurance benefits while alive if the insured suffers from a terminal illness and is expected to die within 12 months. Trial Exhibits 27, 28.

         31. On August 15, 2012, Dr. Erwood executed a TIB claim form for $250, 000. He could have claimed $250, 000 on each of the policies, for a total of $500, 000. The Erwoods filled out a portion of the required form. Trial Exhibit 6.

         32. Vinciane Drake filled out the employer portion of the TIB claim form, signed and dated it on August 21, 2012. Trial Exhibit 6.

         33. Drake noted on that form that premiums for Dr. Erwood's life insurance were paid through August 31, 2012. Trial Exhibit 6.

         34. Under the terms of the life insurance policies, an insured could apply for conversion of the policies upon expiration of coverage. The relevant policy language provides:

To apply for conversion coverage, the Insured must, within 31 days after coverage under the Policy ends:
1. submit an application to the Insurance Company; and
2. pay the required premium.
Conversion insurance will become effective on the 31st day after the day coverage under the Policy ends provided the application is received by us and the required premium has been paid.
Extension of Conversion Period If an Insured is eligible for conversion insurance and is not notified of this right at least 15 days prior to the end of the 31-day conversion period, the conversion period will be extended. The Insured will have 15 days from the date notice is given to apply for conversion insurance. In no event will the conversion period be extended beyond 90 days. Notice, for the purpose of this section, means written notice presented to ...

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