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Lundsten v. Creative Cmty. Living Servs., Inc.

United States District Court, E.D. Wisconsin

August 20, 2015

JILL M. LUNDSTEN, Plaintiff,

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          For Jill M Lundsten, Plaintiff, Counter Defendant: Thomas Armstrong, LEAD ATTORNEY, von Briesen & Roper SC, Milwaukee, WI; John C Cabaniss, Cabaniss Law, Milwaukee, WI.

         For Creative Community Living Services, Creative Community Living Services Long Term Disability Plan, Aetna Life Insurance Company, Defendants: Elizabeth A McDuffie, Gonzalez Saggio & Harlan LLP, Milwaukee, WI.

         For Aetna Life Insurance Company, Creative Community Living Services Long Term Disability Plan, Counter Claimants: Elizabeth A McDuffie, Gonzalez Saggio & Harlan LLP, Milwaukee, WI.

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         HON. RUDOLPH T. RANDA, United States District Judge.

         This matter comes before the Court on Jill M. Lundsten's motion to alter or amend the Court's judgment dismissing her action to recover long-term disability benefits under the Creative Community Living Services, Inc. (" CCLS" ) Long Term Disability Plan (" the Plan" ). Fed.R.Civ.P. 59(e). On cross-motions for summary judgment, the Court held that Lundsten's claim was untimely pursuant to the contractual limitations period set forth in the Plan. 2015 WL 1143114 (E.D. Wis. March 13, 2015).

         The Court now agrees, contrary to its prior ruling, that Lundsten's claim is not time-barred. This error -- and the waste of time and resources that it engendered -- was avoidable, and not only because the defendants' timeliness argument is wrong. More perplexing is Lundsten's failure to counter that argument, as she now has, with the point that state law provides the applicable limitations period, not the Plan language.

         It is well-worn territory that Rule 59(e) should not be used to present arguments that could have been presented before the initial entry of judgment. Caisse Nationale de Credit Agricole v. CBI Indus., Inc., 90 F.3d 1264, 1270 (7th Cir. 1996). This is not to say that district courts cannot consider newly-raised post-judgment arguments. As one court observed, Rule 59(e) " accords no right to make untimely post-judgment arguments," but it does not impose " a limit on a trial court's discretion to consider such arguments." In re UAL Corp., 360 B.R. 780, 784 (Bankr. N.D.Ill. 2007). The Court prefers

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to make the correct decision, not hide its head in the sand in the name of procedural formality. To that end, and for the reasons that follow, Lundsten's motion to alter or amend the Court's judgment is granted.

         Since Lundsten's action is not time-barred, the Court re-visited the substantive arguments in the parties' cross-motions for summary judgment. The Court now finds that Lundsten is entitled to summary judgment on her claim that the Plan's denial of benefits was arbitrary and capricious. Lundsten is also entitled to an award of attorney's fees and costs under ERISA's fee-shifting statute. Defendants, as previously held, are entitled to summary judgment on Lundsten's claim that CCLS failed to provide Plan documents in a timely manner. Defendants are also entitled to summary judgment on their claim to recover social security disability benefits under the Plan's offset provision. Contrary to the Court's prior ruling, however, the defendants are not entitled to an award of fees and costs.

         In accordance with the foregoing and the analysis that follows, this matter is remanded to the Plan administrator for further proceedings consistent with this opinion.

         I. Motion to alter or amend

         In ruling that Lundsten's claim was time-barred, the Court relied upon the contractual limitations period set forth in the Plan documents. In so doing, the Court was not aware -- because neither party highlighted this fact in their summary judgment papers -- that the Plan is insured, not self-funded. See Amended Complaint, ¶ 5 (" Creative contracted with Aetna [Life Insurance Company] to pay LTD benefits under the Plan through a policy of insurance Aetna issued to Creative" ). More to the point, Lundsten did not argue, in opposition to the defendants' timeliness argument, that insured (as opposed to self-funded) plans are subject to state insurance regulations that apply in the instant case.

         As relevant here, Wisconsin law provides that an " action on disability insurance coverage must be commenced within 3 years from the time written proof of loss is required to be furnished," Wis. Stat. § 631.83(1)(b), and moreover, that no insurance policy may " Limit the time for beginning an action on the policy to a time less than that authorized by the statutes." § 631.83(3)(a). These statutory provisions are not preempted by ERISA because they regulate insurance within the meaning of ERISA's savings clause. 29 U.S.C. § 1144(b)(2)(A).

         To determine whether a state law regulates insurance, courts first ask whether it does so from a " common-sense view of the matter." Unum Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 367, 119 S.Ct. 1380, 143 L.Ed.2d 462 (1999). Then, courts consider three factors to determine whether the regulation fits within the " business of insurance" as that phrase is used in the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq.: first, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry. Ward, 526 U.S. at 367. These factors are " guideposts, not separate essential elements ... that must each be satisfied to save the State's law." Id. at 374.

         From a common-sense standpoint, the imposition of a minimum limitations period for disability insurance claims involves the regulation of disability insurance. This conclusion is bolstered by the

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three guideposts. First, a limitations period that cannot be contractually lowered has the effect of transferring more risk to insurance companies. Second, the statute is an integral part of the policy relationship because it " dictates the terms of the relationship between the insurer and the insured, ..." Id. at 374-75. Finally, the rule is limited to the insurance industry; indeed it is " aimed at it." Id. at 375.

         A law saved from preemption may still be preempted if it falls within ERISA's " deemer clause." § 1144(b)(2)(B). State laws that purport to regulate insurance by " deeming" a plan to be an insurance are outside the saving clause and remain subject to preemption, Ward at 367 n.2., but insured plans, such as the CCLS Plan, are " subject to indirect state insurance regulation. An insurance company that insures a plan remains an insurer for purposes of state laws 'purporting to regulate insurance' after application of the deemer clause." FMC Corp. v. Holliday, 498 U.S. 52, 61, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990); see also Moran v. Rush Prudential HMO, Inc., 230 F.3d 959, 970 (7th Cir. 2000) (" The Supreme Court's interpretation of the deemer clause 'makes clear that if a plan is insured, a State may regulate it indirectly through regulation of its insurer and its insurer's insurance contracts'" (quoting FMC Corp., 498 U.S. at 64). Accordingly, Wisconsin's regulation of insured disability plans is not preempted under the deemer clause.

         The Court held that Lundsten's claim is untimely because the Plan's three-year limitations period began running in December of 2009 and expired in December of 2012 (Lundsten filed suit over a month later). 2015 WL 1143114, at *1. The Court reasoned as follows:

Lundsten argues that her claim for benefits under the 'any reasonable occupation' standard should be treated as separate from her claim under the 'own occupation' standard. This is incorrect because the deadline for filing claims is defined in relation to the elimination period, and the elimination period references a single 'period of disability.' Accordingly, Lundsten was asked to provide additional documentation to support the continuation of benefits that were initially granted under the own occupation standard. The any occupation standard references the same period of disability that is referenced in the elimination period. Put another way, there is no new elimination period when the standard shifts from own occupation to any occupation.

Id. (internal citations omitted) (emphasis added).

         Lundsten argues now, as she did before, that the limitation periods for " own occupation" and " any occupation" claims should be separate. Put another way, and in the language of the statute, she argues that the limitations period should run from " the time written proof of loss is required to be furnished," § 631.83(1)(b), Wis. Stats., on her claim for benefits under the " any reasonable occupation" standard.[1] The Court agrees. Unlike the Plan, § 631.83(1)(b) does not tie its 3-year limitations period to a single elimination period/period of disability. By referencing " proof of loss," the limitations period on a claim for " any occupation" disability benefits begins to run when the Plan requires proof of loss on a claim for those benefits.

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          Therefore, Lundsten's claim is timely, and the Court must address the substantive arguments presented in the parties' cross-motions for summary judgment.

         II. Motions for summary judgment

         Summary judgment is appropriate if the record evidence reveals no genuinely disputed material fact for trial and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The Court views the evidence in the light most favorable to the nonmoving party. Rosario v. Brawn, 670 F.3d 816, 820 (7th Cir. 2012). On cross-motions for summary judgment, the Court is required to adopt a " Janus-like perspective, viewing the facts for purposes of each motion through the lens most favorable to the non-moving party." Moore v. Watson, 738 F.Supp.2d 817, 827 (N.D.Ill. 2010). Thus, the Court " construes all inferences in favor of the party against whom the motion under consideration is made." Kort v. Diversified Coll. Servs., Inc., 394 F.3d 530, 536 (7th Cir. 2005).

         A. Background

         Lundsten was employed by CCLS as a benefits coordinator in the human resources department. Lundsten was born in 1963, has a high school education, and began her employment with CCLS on April 16, 1996, working full time until June 23, 2009. Lundsten's job duties included the following: providing clerical support to the vice president of human resources; communicating employee status changes to company sponsored benefit plan providers; ensuring accuracy in registers and account balances of participants in Section 125 for health and dental plans; securing completion of all forms to compile year-end plan data for purposes of tax completion; informing staff on a monthly basis his/her eligibility for dental coverage, enrollment, changes, and waiver forms; auditing monthly benefit plan billings and preparing payment; and verifying total hours worked of employees per pay period to ensure status coincides.

         In August of 2009, Lundsten applied for disability benefits under the CCLS Long Term Disability Plan. Lundsten indicated that her disability was fibromyalgia, degenerative disc disease, and arthritis. Lundsten's application was granted under the Plan's " own occupation" disability standard. See Plaintiff's Proposed Findings of Fact (" PPFF" ), ¶ 4 (" From the date that you first become disabled and until Monthly Benefits are payable for 24 months, you will be deemed to be disabled on any day" if you are " not able to perform the material duties of your own occupation solely because of: disease or injury" and your " work earnings are 80% or less of your adjusted pre-disability earnings" ).

         On October 6, 2010, Aetna notified Lundsten that her 24-month " own occupation" disability period would end September 20, 2011, and that in order to be entitled to LTD benefits after this period she must be considered disabled from performing any reasonable occupation. Aetna requested updated medical records evidencing Lundsten's inability to perform " any reasonable occupation." The Plan defines a reasonable occupation as " any gainful activity for which you are, or may reasonably become fitted by: education; training; or experience; and which results ...

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