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Banks v. Prudential Insurance Co. of America

United States District Court, E.D. Arkansas, Jonesboro Division

March 30, 2015

ALICE BANKS, PLAINTIFF
v.
PRUDENTIAL INSURANCE COMPANY OF AMERICA, DEFENDANT

For Alice Banks, Plaintiff: William Jennings Stanley, Stanley & Woodard, PLC, Jonesboro, AR.

For Prudential Insurance Company of America, Defendant: Elizabeth Wilson Vaughan, Alston & Bird LLP, Atlanta, GA; Kimberly Dickerson Young, Friday, Eldredge & Clark, LLP, Regions Center, Little Rock, AR.

OPINION AND ORDER

Kristine G. Baker, United States District Judge.

Plaintiff Alice Banks brings this action against Prudential Insurance Company of America (" Prudential" ) to recover benefits under a life insurance policy covering her exhusband, Jack McKelvey. Ms. Banks originally brought this action in state court as a breach of contract claim (Dkt. No. 2). Prudential removed the case to this Court, asserting that Ms. Banks's claims are preempted by the Employee Retirement Income Security Act (" ERISA" ), 29 U.S.C. § § 1001--1461 (Dkt. No. 1). This Court agreed that this case is governed by ERISA and set a schedule for the filing of the administrative record and the parties' briefs (Dkt. No. 22). The case is now before the Court on Ms. Banks's opening brief (Dkt. No. 23), Prudential's brief (Dkt. No. 24), and Ms. Banks's reply brief (Dkt. No. 25). For the reasons that follow, the Court finds that Prudential did not abuse its discretion in determining eligibility for benefits under the Plan and in denying Ms. Banks's claim for life insurance benefits.

I. Background

Ms. Banks is a former employee of Wal-Mart Stores, Inc. (" Wal-Mart" ). In March 1995, while married to Mr. McKelvey, Ms. Banks enrolled in an ERISA-governed employee welfare benefit plan (the " Plan" ) sponsored by Wal-Mart and underwritten by Prudential. Although Prudential insured the Plan, Prudential apparently did not administer the Plan at that time. Prudential stated in a September 12, 2011, letter to the Arkansas Insurance Department that it began administering the Plan on January 1, 2008 (AR. 144).[1] It appears from the record that CIGNA administered the Plan in 1995.

Ms. Banks, who enrolled under her former name as Alice McKelvey, was insured under the Plan as an associate employee of Wal-Mart. At the time of her enrollment, Ms. Banks while completing the same form also enrolled for " Dependent Optional Life" insurance for Mr. McKelvey, for spouse coverage, and LeAnne Mace, who is identified as " daughter" on the enrollment form, for child coverage (AR. 178). On the enrollment form for dependent optional life insurance, as to spouse coverage, Ms. Banks designated herself as a beneficiary to receive 100% of the life insurance benefits and also designated Ms. Mace as a beneficiary to receive 100% of the life insurance benefits ( Id. ).

Ms. Banks and Mr. McKelvey divorced in 2003. Prudential was not notified of the divorce at that time (Dkt. No. 23, at 2). However, Ms. Banks timely paid all premiums and the policy remained in effect through Mr. McKelvey's death on April 11, 2011. As discussed in more detail below, Prudential sent letters to Mr. McKelvey's family members indicating that, according to Prudential's records, Mr. McKelvey did not name a beneficiary. Ms. Banks repeatedly asserted that she was the named beneficiary of Mr. McKelvey's life insurance benefits. Prudential maintained in response that there was no beneficiary designation on file and that it would pay the benefits in order of the highest-class survivor, per the Plan's provisions. In November 2011, Prudential paid the benefits to Mr. McKelvey's mother, at which time Prudential still maintained that there was no beneficiary designation on file (AR. 8, 70). Prudential apparently located the original beneficiary forms in December 2011 and produced them to Ms. Banks's counsel on December 19, 2011 (AR. 71). However, Prudential continued to deny Ms. Banks's claim, stating in a December 30, 2011, letter to Ms. Banks's counsel that Mr. McKelvey became the de facto owner of the policy after he and Ms. Banks divorced and that, at the time of his death, Mr. McKelvey had not named a beneficiary for the policy. Ms. Banks subsequently filed suit.

A. The Plan

For the pertinent language of the Plan, the parties reference the Group Universal Life (" GUL" ) booklet-certificate, which became effective on January 1, 2005, and replaced any previous certificates issued on the policy (AR. 280--317). The Plan applied to all former " Associates" who were insured under Group Contract No. G-43939-AR on the day their employment terminated (AR. 283), which includes Ms. Banks. The GUL booklet-certificate includes a definition section that provides in part:

Associate: A person employed by the Employer, a proprietor or partner of the Employer. The term also applies to that person for any rights after the insurance ends.
Associate Insurance : Insurance on the person of an Associate.
***
Covered Person under the Universal Life Coverage including any of the additional provisions that may be part of the Universal Life Coverage: An Associate who is insured for Associate Insurance under that Coverage; a Qualified Dependent for whom an Associate is Insured for Dependents Insurance under that Coverage.
Dependents Insurance: Insurance on the part of a dependent.
***
You: A former Associate.

(AR. 306).

Under the rules for eligibility, a " Qualified Dependent" for dependents insurance is the associate's spouse, except while the spouse is on active duty in the armed forces of any country or while the spouse is insured for associate insurance (AR. 288--89). To be eligible for ependents insurance, the associate must be eligible for associate insurance, must have a " Qualified Dependent," and that " Qualified Dependent" must have been covered for dependents insurance on December 31, 2004 under the prior carrier's plan (AR. 288). Dependents insurance begins on the first day of the month coinciding with or following the date on which the person is a qualified dependent and the associate meets several requirements, including that " You [the former associate] have enrolled on a form approved by Prudential and agreed to pay the required contributions" (AR. 290).

In the " General Information" section, the booklet-certificate's " Beneficiary Rules" provide in part: " 'Beneficiary' means a person chosen, on a form approved by Prudential, to receive the insurance benefits. You have the right to choose a Beneficiary. If there is a Beneficiary for the insurance, it is payable to that Beneficiary." (AR. 303). The beneficiary rules allow the associate to change the beneficiary as follows: " You may change the Beneficiary at any time without the consent of the present Beneficiary. The Beneficiary change form must be filed through the Employer. The change will take effect on the date the form is signed." ( Id. ). The beneficiary rules further provide: " Any amount of insurance for which there is no Beneficiary at your death will be payable to the first of the following: Your (a) surviving spouse; (b) surviving child(ren) in equal shares; (c) surviving parents in equal shares; (d) surviving siblings in equal shares; (e) estate." ( Id. ).

The rules for " When Insurance Ends" as to associate and dependents insurance provide for continued coverage when the insurance would otherwise end for certain reasons. That provision states in relevant part:

Continued Coverage Under the Group Contract for Associates and Their Dependent Spouses:

If a persons' Face Amount of Insurance under the Universal Life Coverage and any of the additional provisions made a part of the Universal Life Coverage would, but for these provisions, end because:

(1) the Associate ceases to be in the Covered Classes for the insurance; or
(2) the Associate's class has been removed from the Covered Classes for the insurance; or
(3) with respect to a person who is a dependent spouse, the Associate dies or is ...

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