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Sugalski v. Paul Revere Life Insurance Co.

United States District Court, D. Massachusetts

March 30, 2015



TIMOTHY S. HILLMAN, District Judge.


Rachel C. Sugalski ("Plaintiff" or "Sugalski") filed a complaint against The Paul Revere Life Insurance Company ("Paul Revere") in the Massachusetts Superior Court alleging claims for breach of contract (Count I), breach of the implied covenant of good faith and fair dealing (Count II), violation of ERISA, §502(a)(1)(B) (Count III), violation of the Massachusetts Consumer Protection Statute ("Chapter93A"), Mass.Gen.L. ch. 93A (Count IV), and violation of Mass.Gen.L. ch. 176D, §3(9)(Count V). Sugalski also seeks a declaratory judgment (Count VI). The action was removed to this Court on the grounds that this Court has original federal question jurisdiction because Sugalski has alleged an ERISA violation. Paul Revere has filed a counterclaim against Sugalski seeking restitution pursuant to 29 U.S.C. § 1132(a)(3), for an overpayment of benefits.

This Memorandum of Decision and Order addresses The Paul Revere Life Insurance Company's Motion For Partial Summary Judgment And To Strike Jury Claim (Docket No. 16) and Plaintiff's Cross-Motion For Summary Judgment (Docket No. 32). For the reasons set forth below, Paul Revere's motion for partial summary judgment and to strike jury claim is allowed and Sugalski's motion for summary judgment is denied.

Standard of Review

"Cases that concern benefit determinations under an ERISA plan... are not typical cases when it comes to summary judgment. When an ERISA plan gives an administrator discretionary authority to determine eligibility for benefits or construe the plan's terms, the district court must uphold the administrator's decision unless it is arbitrary, capricious, or an abuse of discretion.' In such cases, summary judgment is simply a vehicle for deciding the issue" and "the nonmoving party is not entitled to the usual inferences in its favor.' D & H Therapy Assoc., LLC v. Boston Mut. Life Ins. Co., 640 F.3d 27, 34 (1st Cir. 2011)(internal citations and citations to quoted cases omitted). However, where the plan does not give the plan administrator authority to determine benefit eligibility or construe the terms of the plan, review is de novo. The presumption is that the administrator has no discretion, and the burden is on the administrator to show that the plan gives it discretionary authority in order for discretionary review to apply. Geiger v. Hartford Life Ins. Co., 348 F.Supp.2d 1097, 1105-06 (E.D. Cal. 2004). Paul Revere has established that it has discretion to determine benefit eligibility and interpret plan provisions, see Aff. Of Chris Foster (Docket No. 43)(Administrative Record) ("Ad.Rec."), Vol. III, at p. 567, and, therefore, this Court's review is discretionary. One last caveat- the Court reviews de novo the plan administrator's interpretation of non-plan documents used to determine eligibility. Hannington v. Sun Life and Health Ins., 711 F.3d 226, 231 (1st Cir. 2013).

"[A]n ERISA benefit determination is within the discretion of the plan administrator so long as it is reasoned and supported by substantial evidence.'... review of whether a plan administrator abused its discretion does not require that [the court] determine either the "best reading" of the ERISA plan or how [it] would read the plan de novo. [Additionally, ] the doctrine of contra proferentem does not apply to review of an ERISA plan construction advanced by an administrator given authority to construe the plan.... Challenges to benefit determinations in this circuit have typically involved the application of contested facts to uncontested plan terms.... [Where] the relevant plan terms [are] clear and unambiguous'... the devil is in the details' of applying the facts to those terms." D&H Therapy Assoc., LLC., 64 F.3d at 35 (internal citations and citations to quoted cases omitted). "In some cases, an inherent conflict of interest exists; that is, the plan administrator (typically, an insurer) not only evaluates claims but also underwrites the plan. [Paul Revere] has such a dual role. This inherent conflict may be weighed as a factor in assessing the reasonableness of [Paul Reveres] decision, but its existence does not perforce alter [the Court's] standard of review." Colby v. Union Sec. Ins. Co. & Mgmt. Co. for Merrimack Anesthesia Associates Long Term Disability Plan, 705 F.3d 58, 62 (1st Cir. 2013).

Facts Relevant To Both Motions

Abraham W. Haddad, DMD, P.C. ("Haddad") established a benefit plan effective April 1, 1994. The plan name is the "Abraham W. Haddad, DMD, P.C. Group Long-Term Disability Insurance Plan" (the "Plan"). The Plan, which is funded by a group disability insurance policy issued by Paul Revere, provides disability benefits for employees of Haddad. Haddad paid 100% of the premium for the disability coverage provided by the Plan and is the Plan Sponsor and Plan Administrator. The Summary Plan Description contains information related to ERISA, including the Plan Name, Plan Sponsor, Plan Administrator, and Claims Administrator[1]. The Summary Plan Description provides a description of how to file a claim pursuant to ERISA and how to exercise the right to an administrative appeal.

On June 2, 2009, Sugalski signed a Disability Payment Options/Reimbursement Agreement in which she chose the option of having her disability benefits paid with "no reduction for amounts received by other sources until a final determination of [her] eligibility to receive those benefits is made." Furthermore, she acknowledged that if she receives an overpayment as the result of receiving any other benefits from sources specified in the Plan, she would refund the same. Ad.Rec., Vol. III, at p. 373.

Sugalski was injured in October 2008, when she fell off a stationary bike while exercising at a health club. In April 2009, she submitted a claim for disability benefits. At the time her disability began, Sugalski was an employee of Haddad. Paul Revere approved her claim and began paying her benefits in the amount of $3, 203.40 per month. That amount was reduced to $1, 538.00 per month when Sugalski started receiving disability payments from the Social Security Administration. In February 2009, Ms. Sugalski filed a lawsuit against the health club and two bike manufacturers. In September 2009, Unum sent Sugalski's counsel a letter asking to be kept apprised of the status of the litigation because the policy had a provision that could allow her benefits to be reduced by certain income benefits she received. Counsel agreed to keep Unum informed.

Around June 2013, Sugalski's personal injury case went to trial. Some counts were tried to the jury and others to the trial judge; claims against one defendant went to the jury. In accordance with Massachusetts law, the jury was instructed that there could be no recovery for her loss of income; instead, she was limited to recovery reasonable and necessary medical expenses, physical and emotional pain and suffering, diminishment of earning capacity and physical scarring. The jury returned a verdict in Sugalski's favor for $260, 000. Sugalski settled with two other defendants in the lawsuit as a "hedge" against a low or adverse jury verdict. The settlement amounts were kept confidential because the judge still had portions of the case under consideration. None of the hedge settlements made any specific apportionment of amounts for reasonable and necessary medical expenses, physical and emotional pain and suffering, loss of earning capacity, physical scarring or prejudgment interest. At the conclusion of the trial, the jury verdict together with prejudgment interest did not exceed the amounts of the hedge settlements and Sugalski did not receive any additional funds from the jury verdict. The trial judge decided the claims before him in favor of the Defendants. The net recovery to Sugalski after payment of attorney's fees, expert witness fees and a substantial lien from her medical insurer was $225, 000.

On October 2, 2013, a representative of Unum contacted Sugalski's counsel and requested information concerning the results of the trial. Counsel informed Unum that Sugalski had settled with two defendants during trial and that neither of the settlements, nor the jury's verdict made any specific apportionment for damages. Unum thereafter demanded $85, 576.09 from the recovery. The amount was determined based on the reduction of benefit provisions of the Plan and the information provided to Unum by Sugalski. Sugalski replied in a letter stating that there was no basis for concluding she had been overpaid benefits and that the only possible basis for claiming an overpayment under the policy did not apply. On May 29, 2014, Paul Revere sent Sugalski a letter in which it set forth its calculation of the overpayment amount. After revising its figures based on new information about the amount received by Sugalski in the settlement, Paul Revere determined that the overpayment amount was $84, 588.08 and that as of that date, after deduction of disability benefits due to Sugalski, the overpayment amount outstanding was $74, 595.68.


Paul Revere seeks summary judgment on Counts I, II, IV, V and VI of the Complaint because these state law claims are preempted by ERISA. Furthermore, Paul Revere seeks to strike Sugalski's jury claim on the grounds that there is no right to trial by jury in ERISA cases. Sugalski seeks summary judgment on ...

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