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K.S.B. and K.T.B. ex rel Harris v. Securian Life Insurance Co.

United States District Court, M.D. Georgia, Athens Division

October 29, 2019

K.S.B. and K.T.B. ex rel. NYISHA HARRIS, Plaintiffs,
v.
SECURIAN LIFE INSURANCE COMPANY, Defendant.

          ORDER

          CLAY D. LAND, CHIEF U.S. DISTRICT COURT JUDGE

         Plaintiffs claim that when Kevin Bennett died on August 5, 2017, he was survived by two minor children, K.S.B. and K.T.B., who are nine-years-old and five-years-old, respectively. Under the terms of Bennett's employer-sponsored group life insurance policy with Defendant Securian Life Insurance Company, Bennett's children were the undisputed beneficiaries of the policy death benefits in the amount of $28, 000. Instead of paying those benefits to K.S.B. and K.T.B, Securian erroneously paid them to Bennett's parents based upon the representation of the parents that Bennett had no children, the lack of any mention of children in Bennett's obituary, and Bennett's decision to waive life insurance on his children with him as the beneficiary. Had Securian visited Bennett's home before paying the benefits, it would have discovered Bennett's long-term girlfriend and his two children.

         After learning of the Securian policy's existence, the mother of K.S.B. and K.T.B., who was Bennett's long-time girlfriend and shared his home with their children, attempted to make a claim for the benefits on K.S.B. and K.T.B.'s behalf. Before a formal claim could be made, Securian responded that the benefits had already been paid to someone else and that the claims file had been closed. No. notice was provided at that time that the life insurance policy was part of an ERISA Plan; nor was there any mention of any administrative appeals rights under the Plan or that exhaustion of such an appeal was required before a lawsuit could be filed.

         Not satisfied with Securian's response, K.S.B. and K.T.B's lawyer made a formal demand on Securian a few months later, providing Securian with their birth certificates showing them to be Bennett's natural children and pointing out that the Securian policy clearly made them the beneficiaries of the life insurance benefits. Securian stood firm and confirmed its previous decision- it would not be paying the kids a dime. It did include with this correspondence a document that explained that the children could administratively appeal that decision. That document, however, did not clearly explain that they were required to exhaust administrative remedies before they could file a lawsuit. It simply stated that they had the right to an administrative appeal, and that they could file a lawsuit after that appeal. While the notice did reasonably inform them that they could appeal and still file a lawsuit even if they lost that appeal, the notice did not clearly inform them that they could only file a lawsuit after they pursued an appeal. Moreover, the Securian policy and the plan documents do not indicate that exhaustion of administrative remedies is a prerequisite for filing a lawsuit.

         With their claim now having been rejected twice, knowing that Securian had all the information it needed to determine that the children were the rightful beneficiaries, understanding that they could administratively appeal, believing that such an appeal would be pointless, and not having been adequately informed that they must nevertheless pursue a pointless administrative appeal as a prerequisite to filing suit, the children's counsel filed a lawsuit to recover the benefits.

         Securian argues that it paid the correct beneficiaries under its policy. But that argument ignores the plain language of the policy which makes Bennett's children the undisputed beneficiaries, and it misconstrues the present record which clearly establishes that K.T.B. and K.S.B. are Bennett's natural children. Securian also overreaches in its reliance upon a Georgia statute that protects insurers in limited circumstances from having to pay a claim twice when it pays benefits in accordance with the policy terms before it has notice of a competing claim. Securian's strongest argument is that the children failed to exhaust their administrative remedies, but as explained in the remainder of this order, that failure is excused because of futility and inadequate disclosure of the exhaustion requirement. Accordingly, K.S.B. and K.T.B.'s motion for partial summary judgment (ECF No. 14) is granted, and Securian's motion (ECF No. 18) is denied. Securian's motion to dismiss K.S.B. and K.T.B.'s breach of fiduciary duty claim (ECF No. 15) is terminated as moot.

         FACTUAL BACKGROUND

         Securian issued Group Life Insurance Policy No. 34362-G to cover employees of PepsiCo., Inc. and associated companies. Cruz Decl. ¶ 2, ECF No. 4-1; see generally Notice of Removal Ex. 6, Policy, ECF No. 1-7. The policy has an effective date of September 1, 2014 and has been renewed every year since then. Id. The policy allows an employee to designate a beneficiary to receive death benefits. But, if an employee does not designate a beneficiary, the policy says Securian will pay death benefits to:

(1) [the decedent's] lawful spouse if living, otherwise;
(2) [the decedent's] natural or legally adopted child (children) in equal shares, if living, otherwise;
(3) [the decedent's] parents in equal shares, if living, otherwise;
(4) [the decedent's] siblings in equal shares, if living, otherwise;
(5) the personal representative of [the decedent's] estate.

Policy 5, ECF No. 1-7 at 39.

         Bennett was a PepsiCo employee covered under the policy who died suddenly on August 5, 2017. He had not named a beneficiary for the policy, and he was not married at the time of his death. PepsiCo notified Securian of Bennett's death on August 15, 2017. Bennett's obituary stated “Kevin D. Bennett . . . of Union Point passed away on August 5, 2017” and “[h]e is survived by his parents, Mr. David C. Bennett and Mrs. ...


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