Second Circuit Holds Insurer Did Not Abuse Its Discretion Paying Life Insurance Benefits to Decedent’s Adopted Children Over His Estate

In Campbell v. We Transport, Inc., et al., No. 20-1289, __F.App’x__, 2021 WL 1941636 (2d Cir. May 14, 2021), the pro se Plaintiff-Appellant, Collette Campbell, sought payment of life insurance proceeds for her brother (the insured) for whom she incurred funeral expenses. Campbell is also the administrator of her brother’s estate. She filed suit under the Employee Retirement Income Security Act (“ERISA”) against Unimerica Life Insurance Company of New York, and her brother’s former employer, We Transport, Inc. The district court granted summary judgment to Defendants and Campbell appealed. Upon reviewing the district court’s grant of summary judgment de novo, the Second Circuit affirmed.

Campbell argued that Unimerica did not have discretion to pay her brother’s life insurance benefits to his adopted children instead of to his estate. The policy provides in relevant part:

If there is no named beneficiary living at the Covered Person’s death, We will pay any amount due to the estate or, at Our option, to his: 1. legal spouse; 2. natural or legally adopted children in equal shares; or 3. estate.

Unimerica took the position that it had discretion to pay the benefits to the insured’s adopted children over his estate. Campbell contended that the above provision only applies if there is no named beneficiary living at the time of the insured’s death. Here, her brother never named a beneficiary. Campbell argued that New York law requires the proceeds to be paid to the estate. The court noted that the arbitrary and capricious standard applies to Unimerica’s decision. Under this standard, where there are two rational interpretations of a plan provision, the administrator’s interpretation must be allowed to control. The court did not believe that Campbell’s interpretation of the policy is equally plausible to Unimerica’s. Even if it was, its decision to pay the life insurance benefits to the insured’s adopted children was not arbitrary and capricious.

Campbell also argued that Unimerica denied her the “full and fair review” of her claim that is required by 29 U.S.C. § 1133(2). Specifically, Unimerica denied her access to key information in reviewing her claim and unfairly denied her a chance to present her case. The court did not decide whether Campbell, who is not a plan participant, is entitled to seek relief under § 1133(2), but if she were, the typical remedy would be a remand to the administrator to conduct a full and fair review. The court found that a remand here would serve no purpose since all the relevant records have been provided through the litigation. The court is satisfied that the benefits determination was made on a rational basis and Campbell’s argument under § 1133(2) lacks merit. Lastly, the court rejected Campbell’s argument that Unimerica should have initiated an interpleader action. While Defendants could have filed an interpleader action, their failure to do so does not mean they violated ERISA.