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Galante v. Financial Industry Regulatory Authority, Inc.

United States District Court, E.D. Pennsylvania

May 2, 2018

BARBARA GALANTE, individually and as Executrix of the Estate of John A. Galante Plaintiff
v.
FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., et al. Defendants

          MEMORANDUM OPINION

          NITZA I. QUIÑONES ALEJANDRO, U.S.D.C. J.

         INTRODUCTION

         Before this Court are cross-motions for summary judgment filed pursuant to Federal Rule of Civil Procedure (“Rule”) 56 by Defendant Sun Life Assurance Company of Canada (“Sun Life”), [ECF 38], and by Plaintiff Barbara Galante (“Plaintiff”), [ECF 40].[1] These cross-motions stem from a complaint filed by Plaintiff, in her own name and as Executrix of the Estate of John A. Galante (“Galante”), under the Employment Retirement Income Security Act of 1974, as amended, (“ERISA”), 29 U.S.C. § 1101, et seq. [ECF 1].

         In her complaint, Plaintiff asserts under 29 U.S.C. § 1132(a)(3)(B) a breach of fiduciary duty claim against Sun Life in relation to the denial of her beneficiary claim under an insurance welfare benefit plan (the “Plan”), established, maintained, and sponsored by the Financial Industry Regulatory Authority, Inc., (“FINRA”), Galante's employer. The Plan provides short- term and long-term disability benefits, and life insurance coverage to FINRA's participating employees.

         Sun Life, as the insurer and claim administrator of the Plan, disputes Plaintiff's allegations and argues that when Galante died, he was no longer insured and, therefore, there was no breach of any fiduciary duties in administering the Plan or in denying coverage.

         The issues raised in the parties' respective motions have been fully briefed and are ripe for disposition. For the reasons set forth, Sun Life's motion for summary judgment is granted, and Plaintiff's motion for summary judgment is denied. Consequently, summary judgment is entered in favor of Sun Life.

         BACKGROUND

         ERISA is a federal statute that establishes the minimum standards for most voluntarily established pension and health plans in private industry to protect individuals participating in these plans. ERISA requires plans to provide participants with important plan information, such as the plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty. See 29 U.S.C. §§ 1001-1461.

         To provide context to the parties' cross-motions for summary judgment, a digest of the relevant facts is appropriate; to wit:[2]

In 2005, John A. Galante (“Galante”) commenced his employment with FINRA. (Pl.'s Br. [ECF 40-3] at 4). As part of his employment benefits, Galante maintained a “basic” group life insurance policy of $173, 000.00, at no cost to Galante, with an “optional” supplemental group life coverage of $260, 000.00, (the “Policy”), [3] for which Galante paid monthly premiums by payroll deduction. (Id.). The Policy was issued by Sun Life, and Barbara Galante (Plaintiff), Galante's spouse, was the named beneficiary. (Sun Life's Mot. [ECF 38] at ¶ 4).
FINRA was Galante's employer and sponsor of Sun Life's group insurance plan, which is governed by ERISA and is self-administered. Sun Life is the claims administrator and a fiduciary of the Plan.[4] The Plan is subject to Maryland law.[5]
On March 3, 2013, Galante, then sixty-five years old, was diagnosed with a congestive heart failure condition and stopped working. (Pl.'s Br. at 4). Under the terms of the Policy, because he was sixty-five years old when he stopped working, his insurance coverage continued for twelve months with the payment of premiums. (Policy at 30). Galante died on July 28, 2015. (Pl.'s Br. at 6).
After leaving his employment and prior to his death, Galante continued to remit his monthly insurance premium payments to FINRA. FINRA forwarded the premium payments owed by all covered employees to Sun Life in a monthly gross lump payment. (Id. at 5).
Galante did not exercise his option to convert his group insurance policy to an individual policy.[6]
After Galante died, Plaintiff filed a claim for the life insurance proceeds she believed were owed to her. Sun Life denied the claim on the grounds that when Galante stopped working on March 3, 2013, he was sixty-five years of age, and that pursuant to the terms of the Policy, his insurance coverage ceased on March 3, 2014, when Galante failed to convert the expired group insurance policy to an individual insurance policy. [ECF 38-4, 38-6].
Plaintiff filed an unsuccessful administrative appeal of the denial of benefits. On September 30, 2016, Plaintiff filed this civil action asserting a claim for breach of fiduciary duty against Sun Life. [ECF 1].

         The parties do not dispute that Galante was eligible for coverage under the Policy while employed by FINRA and, at a minimum, for an additional twelve months after he stopped working due to illness. The parties disagree, however, on whether Sun Life breached its fiduciary duties to Galante in its administration of the Plan, interpretation of the Policy, and in denying Galante coverage, particularly in regards to notifying Galante of his right to convert the group policy to an individual policy prior to the group policy's expiration. As noted, Galante died almost sixteen months after his group coverage terminated in March 2014 pursuant to the terms of the Policy.

         The Policy provisions relevant to this dispute provide:

Termination of Employee's Insurance
An employee will cease to be insured on the earliest of the following dates:
the end of the month in which employment terminates. Ceasing to be Actively at Work will be deemed termination of employment, except:
the Policyholder may continue the insurance by paying the required premiums, subject to the following:
* * *
For Life Insurance-insurance may be continued for up to 12 months after an Employee is absent from work due to Injury or Sickness. However, if an Employee is under age 65, the Employer may continue an Employees insurance until the earlier of [] the date the Employee attains age 70; or [] the date the Employee is no longer receiving Long Term Disability benefits under the Employer's plan.

(Policy at 30).

         To convert from group coverage to individual coverage, the Policy provided:

If all or part of an Employee's Life Insurance ceases or reduces due to: [] termination of his employment; or [] termination of his membership in an Eligible Class . . . then the Employee may apply for an individual policy on his own life up to the amount that ceased.

(Policy at 19).

         To convert to an individual policy, a:

written application must be made to Sun Life along with payment of the first premium, within the 31 day period (the 31 day conversion period) following the date the insurance ceases or reduces. If the Employee is not given notice by the Employer of this conversion privilege within 15 days following the date his insurance ceases or reduces, the Employee shall have an additional 15 days to exercise this conversion privilege. In no event will this conversion privilege be extended beyond 60 days following the 31 day conversion period.

(Id. at 20).

         Galante stopped working on March 3, 2013, due to an illness and commenced receiving disability benefits. (Pl.'s Br. at 4). Under the specific terms of the Policy, described above, because Galante was sixty-five years old when he stopped working, Galante was permitted to continue paying for and receiving his group insurance coverage for a period of twelve months, or until March 3, 2014. Thereafter, Galante had, at most, ninety-one days from March 3, 2014 to convert his group policy to an individual policy. (Sun Life's Mot. ¶ 20; Compl. Ex. F). There is no dispute that Galante did not convert his group policy to an individual policy.

         Also relevant to our analysis are provisions of the Administrative Services Agreement (the “Agreement”), between FINRA and Sun Life, which delineated the parties' responsibilities for administrative services. [ECF 38-3]. Therein, FINRA agreed, inter alia, to:

a. Provide Sun Life with a weekly report listing all Plan participants and dependents whose coverage has terminated, in whole or in part, under the Policy (collectively, “Plan Participants”) who may be eligible to apply for the Conversion and ...

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