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Jackman Financial Corp. v. Prudential Insurance Company of America

September 22, 2010


The opinion of the court was delivered by: Judge Robert M. Dow, Jr.


Plaintiff Jackman Financial Corp. ("Jackman") is seeking to recover approximately $7500 pursuant to a funeral assignment for life insurance benefits payable due to the death of Ronald Anderson, a resident of Georgia, under the terms of a life insurance policy issued to Anderson's employer, HCA Management Services, L.P. ("HCA"). On September 17, 2009, Plaintiff filed its complaint in the Circuit Court of Cook County, Illinois, against Defendants Prudential Insurance Company of America ("Prudential") and HCA for breach of contract against Prudential (Count I), breach of fiduciary duty against Prudential (Count II), negligence against both Prudential (Count IV) and HCA (Count III), and bad faith against Prudential (Count V). On October 13, 2009, Prudential removed the suit to this Court on the ground that Plaintiff's claims are completely preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et. seq. Currently before the Court are HCA's motion for summary judgment [26] and Prudential's motion for summary judgment [31]. For the reasons stated below, both motions are granted.

I. Background*fn1

Plaintiff Jackman is a small, Chicago-based financing company that advances funds to pay funeral expenses in return for an assignment of the deceased's life insurance proceeds. Prudential SOF ¶ 1. Ronald Anderson ("Ronald")*fn2 held a life insurance policy through a benefit plan sponsored by his employer, HCA, and issued by Prudential under HCA's Company Group Insurance Contract, policy number G-44028-TN (the "Plan"). Prudential SOF ¶ 3. In regard to assignments, the Plan states:

You may assign your insurance under a Coverage. Unless the schedule of the Benefits states otherwise, insurance under any Coverage providing death benefits may be assigned only as a gift assignment. * * * Prudential will not decide if an assignment does what it is intended to do. Prudential will not be held liable to know that one has been made unless it or a copy is filed with Prudential through the Contract holder. Prudential SOF ¶ 4. The Summary Plan Description provided to HCA employees states that "Prudential will only recognize an assignee as the owner of the rights after it has received and registered the written assignment request." Prudential SOF ¶ 5.

Ronald died on February 23, 2008. Prudential SOF ¶ 2. On February 27, 2008, Aileen Anderson, Ronald's wife and the beneficiary of Ronald's life insurance benefits, executed a funeral assignment to Jackman in order to pay for her husband's funeral and burial expenses. The funeral assignment stated that Aileen would assign over to Jackman $7,511.10 from the proceeds of the life insurance policy administered by Prudential. Prudential SOF ¶ 6-7. On the same date, Jackman contacted HCA to verify that Ronald was entitled to life insurance benefits through HCA. HCA SOF ¶ 2. Jackman asserts that it confirmed the existence of a life insurance policy payable to Ronald's beneficiary. Upon verifying Ronald's entitlement in the benefits, Jackman advanced the funds to Aileen. HCA SOF ¶ 2 (Comp. ¶ 9-10). On or about March 13, 2008, Jackman sent a copy of the assignment to HCA, but did not send a copy to Prudential. HCA received the assignment but did not inform Prudential of the assignment.

Prudential received Aileen's claim for Ronald's life insurance benefits on March 27, 2008, and paid $110,000 to Aileen on April 29, 2008. Prudential SOF ¶ 11-12. On June 29, 2009, Jackman called Prudential and demanded payment, but was informed that Prudential had no knowledge of assignment, and had already paid Aileen, the beneficiary designated on Ronald's life insurance policy. Prudential SOF ¶ 9 (Comp. ¶ 13). The parties do not dispute that, at the time that Prudential paid the insurance proceeds to Aileen, Prudential was unaware of any assignment. The parties also do not dispute that Prudential did not receive a copy of the funeral assignment until Plaintiff's counsel contacted Prudential just prior to this litigation.

Jackman claims that HCA and Prudential are liable for their failure to recognize the assignment and that HCA, as an agent of Prudential, was negligent in failing to inform Prudential about the assignment. HCA SOF ¶ 2. On February 5, 2010, HCA moved for summary judgment [26] on the grounds that the Court has no personal jurisdiction over HCA and that Jackman failed to provide any evidence in support of its allegations that HCA was Prudential's agent or that HCA had a duty to Jackman. In response, Jackman argues that its negligence claim against HCA is not preempted by ERISA and that HCA is liable because Jackman's detrimental reliance created a duty on the part of HCA that HCA breached. On February 19, 2010, Prudential moved for summary judgment [31] on the grounds that Jackman's state law claims are preempted by ERISA and that Prudential paid the life insurance proceeds to Aileen because Aileen and Jackman failed to follow the procedures effectuating an assignment as set forth in the Plan and HCA Benefit Plans Summary Plan Description. Jackman did not file a response to Prudential's motion for summary judgment or to Prudential's statement of facts.

II. Analysis*fn3

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In determining whether there is a genuine issue of material fact, the Court "must construe the facts and draw all reasonable inferences in the light most favorable to the nonmoving party." Foley v. City of Lafayette, Ind., 359 F.3d 925, 928 (7th Cir. 2004). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). The party seeking summary judgment has the initial burden of establishing the lack of any genuine issue of material fact. Celotex Corp. v. Catrett,477 U.S. 317, 323 (1986). Once the moving party has met its burden, the nonmoving party must "set forth specific facts showing that there is a genuine issue for trial." Id. at 324. Thus, summary judgment is proper "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at 322.

A. Jackman's Claims against Prudential (Count I, II, IV and V)

In its complaint, Plaintiff Jackman asserts the following state law claims against Prudential: breach of contract, breach of fiduciary duty, negligence and bad faith under Georgia's insurance bad faith statute. Prudential contends that Plaintiff's state law claims all relate to an ERISA-governed plan, and therefore are preempted, and furthermore that Prudential paid the life insurance proceeds to Aileen, the beneficiary designated on Ronald's life insurance policy, in accordance with governing Plan documents.

ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). "State laws" includes "all laws, decisions, rules, regulations, or other State action having the effect of law, of any State." 29 U.S.C. § 1144(c)(1). A state law claim "relates to" an ERISA plan, and is thus preempted, "if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983); see also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48 (1987). In Pilot Life Insurance Co., the Supreme Court held that ERISA preempts state common law tort claims and breach of contract claims, including bad faith claims, "based on alleged improper processing of a claim for benefits under an employment benefit plan." Id.; see also Smith v. Blue Cross Blue Shield of Wisconsin, 959 F.2d 655, 657 (7th Cir. 1992). Plaintiff's claims seek to supplement the exclusive remedies provided for under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), by requesting damages, statutory penalties and interest relative to the payment of benefits at issue. As the Supreme Court noted in Aetna Health Inc. v. Davila, 542 U.S. 200, 216 (2004), "any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted."

Here, Plaintiff's claims clearly "relate to" an ERISA plan. In fact, all of Plaintiff's claims are predicated upon Prudential's failure to pay benefits according to the terms of the Plan provided to Ronald by his employer as an employee benefit and an assignment related thereto. As an alleged assignee of the benefits, Jackman is permitted to sue for failure to pay benefits under ERISA, 29 U.S.C. § 1132(a)(1)(B). See, e.g., Kennedy v. Conn. Gen. Life Ins. Co., 924 F.2d 698 (7th Cir. 1991). Plaintiff alleges that Prudential breached its contract with the decedent. By its own admission, Jackman admits that the claim for relief "relates to" the Plan because it concerns a breach of the ...

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