United States District Court, D. Kansas
JEANNE A. McFARLAND, Plaintiff,
UPS GROUND FREIGHT, INC. et al., Defendants.
MEMORANDUM AND ORDER
JAMES P. O'HARA, Magistrate Judge.
This suit, filed under the Employee Retirement Income Security Act of 1974 ("ERISA"), challenges the denial of life insurance benefits and seeks to recover penalties and attorney's fees for alleged failure to comply with ERISA's disclosure requirements. The result in this case largely hinges on application of the so-called mailbox rule to certain delinquency notices sent by the insurer to the insured.
On June 23, 2014, with the parties consent,  the undersigned U.S. Magistrate Judge, James P. O'Hara, conducted a bench trial. The plaintiff, Jeanne A. McFarland, appeared in person and through counsel, Tamatane Aga, Jr. The defendants, United Parcel Services, Inc. and UPS Ground Freight, Inc., the latter formerly known as Overnite Transportation Company ("Overnite") (collectively, "UPS"), and The Prudential Insurance Company of America ("Prudential"), appeared through counsel, Karrie J. Clinkinbeard.
Several months before trial, U.S. District Judge Kathryn H. Vratil denied defendants' motions for summary judgment, although nearly all of the material facts of the case are uncontroverted. During the bench trial, the court heard sworn testimony from plaintiff Jeanne McFarland-her only witness. Defendants called just two witnesses-Edward Long, the administrative services manager of UPS's corporate health care department, and Kathleen Earp, the benefits delivery director of Aon Hewitt, a third-party benefits administrator for UPS.
After trial, at the court's request, counsel filed revised proposed findings of fact and conclusions of law to clarify the issues in light of the actual testimony as captured in the trial transcript. The court is now prepared to rule. This memorandum and order constitutes the court's findings of fact and conclusions of law, in accordance with Rule 52(a)(1) of the Federal Rules of Civil Procedure.
II. Findings of Fact.
Plaintiff's husband, Toli Fuimaono ("the decedent"), was employed by Overnite from 1999 until 2005. During the decedent's employment with Overnite, he enrolled in an optional supplemental life insurance plan through Aetna Insurance Company for "basic plus 2 times pay" (i.e., equal to one year's pay, plus twice one year's pay). In 2005, Overnite was acquired by UPS and the decedent's life insurance coverage transferred from the Aetna policy to UPS's Flexible Benefits Plan ("the Plan"), under a Prudential policy. After the Plan took effect on July 1, 2006, UPS became the plan administrator and the benefits department was transferred to UPS headquarters in Atlanta, Georgia.
As earlier indicated, UPS used a third-party, Aon Hewitt, to administer the Plan. Aon Hewitt prepared the enrollment worksheets and packets of documents to be mailed to employees, and provided the addresses for the employees to a third-party mailing company, CMD, which then put the packets together. Kathleen Earp, the benefits delivery director at Aon Hewitt, explained in her detailed testimony that, when Overnite's employees were brought under the Plan in 2006, every employee (including the decedent) was sent a packet with a personalized enrollment worksheet detailing the various plan options, a copy of the Summary Plan Description ("SPD"), and the enrollment guide. Ms. Earp testified that Aon Hewitt provided the enrollment materials to CMD on April 28, 2006 and, within three business days, CMD mailed the enrollment packets to the employees' home addresses.
Plaintiff testified she personally does not recall ever seeing the above-described SPD, the Plan, or enrollment forms. But she doesn't dispute an enrollment guide for the Plan and an enrollment worksheet were sent to the decedent.
In May 2006, the decedent was mailed a copy of the SPD. The enrollment materials contained a personalized identification number ("PIN"), which was necessary for any employee to make elections online or via telephone. On May 19, 2006, the decedent enrolled online for supplemental life insurance coverage under the Plan. On July 1, 2006, the decedent's enrollment in the Plan became effective. The decedent then started paying for the supplemental coverage via automatic payroll deductions.
The SPD specifically provides: "You are responsible for your share of the costs and may be billed if your leave extends beyond 20 days. If you fail to make timely payment of this bill, your coverage will be terminated. If you are billed, you must pay the billed amount; it will not be deducted from your paycheck when you return to work." It further provides: "If your leave extends beyond 20 days, you may be billed. If you fail to make timely payment of this bill, your coverage will be terminated. If your supplemental life insurance is terminated for non-payment, you must provide evidence of insurability to begin coverage again upon return to work."
On August 17, 2006 (i.e., less than two months after the supplemental life insurance became effective), the decedent went on approved medical leave from UPS. Because his leave of absence extended beyond twenty days, the direct billing procedures under the Plan were triggered.
On September 10, 2006, Aon Hewitt's direct billings and payments service mailed the decedent a bill for the Plan, stating $526.24 was due by October 1, 2006-this bill related to various benefits, not just life insurance, for the period August 18, 2006 (the day after the decedent went on approved medical leave from UPS), through October 31, 2006. It's uncontroverted UPS never received payment for this September direct billing.
On October 10, 2006, the decedent was mailed a second direct bill for the Plan, stating that $761.82 was due by November 1, 2006 (related to various benefits, including but not limited to life insurance, for the period from August 18, 2006 through November 30, 2006). It's uncontroverted UPS never received payment for this October direct billing.
On November 10, 2006, the decedent was mailed a third direct bill for the Plan, stating that $986.13 was due (for the period August 18, 2006 through December 31, 2006). The November direct billing statement also contained a notice stating "because the amount due was not received by the date this statement was created... [c]overage will be terminated effective 08-18-2006 unless your unpaid previous balance of $761.82 is received. Once terminated, coverage cannot be reinstated. THIS IS YOUR FINAL NOTICE FOR THE UNPAID PREVIOUS BALANCE." Here again, it's uncontroverted UPS never received payment for the November direct billing.
Finally, on December 10, 2006, the decedent was mailed a "confirmation-of-coverage" letter, stating his life insurance (and the other benefits too) were terminated, effective August 17, 2006, because of nonpayment of premiums.
UPS audits its mailing vendors to ensure they send out billing notices timely and accurately. Aon Hewitt also maintains a log of all billing notices generated and mailed to employees.
As earlier indicated, plaintiff doesn't dispute that the above-described direct-billing statements and the termination letter were mailed to the decedent's address of record: 3225 Shady Bend Drive, Independence, Missouri 64052. However, plaintiff testified she and the decedent "shared the task of opening and reviewing any mail they received at their home." Plaintiff testified she personally did not receive any of the direct premium billing statements or the termination letter at her home. But significantly, she admitted it's at least possible "mail came to [their] house and Mr. Fuimaono opened it and [she] just never ...