Davis v. Principal Life Insurance Company

Background

Dale Davis sued four defendants over the denial of his claim for long-term disability benefits under an employee-benefit plan sponsored by Aspen Aerials, Inc. Principal insured the plan and served as its claims fiduciary through at least November 30, 2018. Unum began serving those roles on January 1, 2019. Davis alleged that he became unable to work on March 20, 2019, filed claims with both insurers, and was denied benefits. He alleged that the transition between insurers created a one-month coverage gap and that Unum denied his claim based in part on a pre-existing-condition provision and the absence of coverage under a prior policy.

Davis asserted several claims against Principal under the Employee Retirement Income Security Act of 1974, or ERISA. Principal moved to dismiss those claims for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). In deciding that motion, the court accepted the amended complaint’s factual allegations as true and drew reasonable inferences in Davis’s favor.

Claims Against Principal

The court determined that Davis plausibly alleged a claim for benefits under 29 U.S.C. § 1132(a)(1)(B), even though he did not expressly identify that provision in the complaint. Davis alleged that Principal wrongfully denied his long-term disability claim and requested accrued benefits, allegations the court viewed as characteristic of a benefits claim.

The court rejected Principal’s argument that Davis’s disability arose after Principal’s coverage and fiduciary responsibilities ended. The plan contained a cancellation-notice provision requiring a good-faith effort to notify covered members before cancellation, subject to an exception for replacement by a substantially similar policy. Davis alleged that Principal never notified him and that the Unum policy did not substantially replace the Principal policy because of the alleged one-month gap and differences in coverage. The court held that these allegations plausibly supported the possibility that Principal’s policy remained effective long enough to cover Davis’s disability. The court also declined to rely on additional facts concerning Aspen Aerials’ cancellation request because those facts were not alleged in the amended complaint.

The court also found that Davis plausibly pleaded an alternative claim for equitable relief under § 1132(a)(3). The court understood Davis’s request to enforce the Principal policy during December 2018 as a possible request for reformation or estoppel if his benefits claim failed. The court explained that such an alternative claim may be pleaded alongside a benefits claim at the motion-to-dismiss stage.

Claims the Court Rejected

The court held that Davis did not plausibly plead a fiduciary-duty claim under § 1132(a)(2). That provision allows relief for losses to an employee-benefit plan, but Davis alleged only personal injuries and did not seek recovery or another remedy on behalf of the plan.

The court also held that Davis had not pleaded a separate cause of action under § 1133. That provision requires an employee-benefit plan to provide adequate written reasons for denying benefits and a reasonable opportunity for a full and fair review. The court concluded that an alleged violation of § 1133 could support a claim under § 1132(a), but § 1133 did not itself create a freestanding claim for relief. Davis could still argue that the alleged violations supported his other ERISA claims.

Disposition

Judge Eric C. Tostrud ordered that Principal’s motion to dismiss be granted in part and denied in part. The motion was granted as to Davis’s § 1132(a)(2) fiduciary-duty claim and his freestanding § 1133 claim, and those claims were dismissed without prejudice. In all other respects, the motion was denied, leaving Davis’s § 1132(a)(1)(B) benefits claim and alternative § 1132(a)(3) equitable-relief claim in the case against Principal at this stage.