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Opheim v. Standard Ins. Co.

United States District Court, N.D. Iowa, Western Division

January 9, 2018

DOUGLAS OPHEIM, Plaintiff,
v.
STANDARD INSURANCE CO., Defendant/Third-Party Plaintiff,
v.
JAMES L. STEVENS, Third-Party Defendant.

          OPINION AND ORDER ON THE MERITS

          MARK W. BENNETT, U.S. DISTRICT COURT JUDGE

         TABLE OF CONTENTS

         I. INTRODUCTION ........................................................................... 3

         A. Factual Background ............................................................... 3

         B. Procedural Background ........................................................... 8

         II. LEGAL ANALYSIS ........................................................................ 9

         A. Opheim's Claims .................................................................... 9

         1. Opheim's denial of benefits claim ..................................... 10

         a. Arguments of the parties ....................................... 10

         b. Applicable standards ............................................ 12

         i. Standard of review ....................................... 12

         ii. The “plan documents rule” ............................ 12

         c. Analysis ............................................................ 16

         2. Opheim's equitable relief claim ....................................... 19

         3. Attorney fees .............................................................. 19

         a. Arguments of the parties ....................................... 19

         b. Applicable standards ............................................ 20

         c. Analysis ............................................................ 22

         B. Standard's Third-Party Claim .................................................. 24

         1. Standard's claim for a constructive trust ............................ 24

         a. Arguments of the parties ....................................... 24

         b. Applicable standards ............................................ 25

         c. Analysis ............................................................ 28

         2. Attorney fees .............................................................. 29

         III. CONCLUSION ............................................................................ 30

         In this ERISA[1] action, plaintiff Douglas Opheim seeks payment of life insurance benefits originally paid to him, then demanded back, by defendant Standard Insurance Company (Standard), because Standard refused to pay him the benefits again when he later discovered a designation naming him as the beneficiary. In the interim, Standard had paid those benefits to third-party defendant James Stevens. In a third-party claim, Standard asserts that, if it is required to pay benefits to Opheim, it is entitled to a constructive trust over the benefits it has paid to Stevens.

         I. INTRODUCTION

         A. Factual Background

         Unless indicated otherwise, the parties do not appear to dispute the following facts.

         Plaintiff's decedent Lisa K. Opheim (formerly Lisa Nichols) was employed by Peoples Bank of Rock Valley, Iowa, as a trust administration/operations assistant. One of her employment benefits was life insurance coverage pursuant to a group life insurance plan, governed by ERISA, under which Peoples Bank was a participating employer, the policy holder was Iowa Bankers Insurance and Services, Inc. (Iowa Bankers), of Johnston, Iowa, and Standard was the insurer and plan administrator. The plan provided for basic accidental death and dismemberment (ADD) benefits in the total face amount of $115, 000, basic term life insurance benefits in the face amount of $65, 000, and additional term life insurance benefits in the face amount of $65, 000. In her original application for these benefits, dated October 15, 2009, Lisa Opheim designated plaintiff Douglas Opheim (Opheim) as the primary beneficiary of her ADD insurance benefits and basic group term life insurance benefits, but designated James Stevens, her father, as the primary beneficiary of her additional term life insurance benefits. Appendix (docket no. 14) at 105.

         Subsequently, on November 16, 2010, Lisa executed a change of beneficiary form designating Opheim as the beneficiary of her additional term life insurance benefits, indicating an effective date of November 22, 2010, the date of her marriage to Opheim. Appendix at 132. The plan provided, in pertinent part, as follows:

Naming A Beneficiary Beneficiary means a person you name to receive death benefits.
You may name one or more Beneficiaries. Two or more surviving Beneficiaries will share equally, unless you specify otherwise. You may name or change Beneficiaries at any time without the consent of a Beneficiary.
Your Beneficiary designation must be the same for Life Insurance and AD&D Insurance death benefits. Your Beneficiary designations for Life Insurance and your Supplemental Life Insurance may be different.
You must name or change Beneficiaries in writing. Your designation:
1. Must be dated and signed by you;
2. Must be delivered to the Policyholder or Employer during your lifetime;
3. Must relate to insurance provided under the Group Policy; and
4. Will take effect on the date it is delivered to the Policyholder or Employer.

         Appendix at 71. Peoples Bank had a copy of the November 16, 2010, designation form in its files, which showed a hand-written note in the upper righthand corner by Gary De Jager, the human resources director for Peoples Bank, indicating that the form had been mailed to Iowa Bankers on December 1, 2010. Id. at 106. Standard did not find a copy of the November 16, 2010, designation in its file, however.

         Lisa Opheim died in a car accident on or about October 1, 2014. On or about October 10, 2014, Peoples Bank submitted claim information for her life insurance benefits, signed by Mr. De Jager, to Standard and/or Iowa Bankers. Id. at 223. That claim identified the “name of Beneficiary” as Opheim and his relationship to Lisa Opheim as “Spouse.” Id. On November 21, 2014, Standard paid Opheim $130, 000 plus interest in benefits for the basic term life insurance and the additional term life insurance. Id. at 108 (transaction summary report). On January 15, 2015, Standard also paid Opheim $115, 000 in ADD benefits. Id.

         On or about March 2, 2015, however, Kim Smothers, a Life Benefits Analyst for Standard, called Opheim, and that same day sent him a letter, informing him that he had been paid the $65, 000 in additional life insurance benefits in error. Appendix at 136. Ms. Smothers's explanation for the mistake, in her letter, was the following:

Unfortunately, [the October 15, 2009, ] designation was overlooked when we initially reviewed the claim, likely because we were focused on the change form Mrs. Opheim completed on October 31, 2013, adding Dependents Life and naming her step-children as beneficiaries. As a result, all the benefits were paid to you, including the $65, 000 Additional Life, which should have actually been paid to Mr. Stevens.

         Appendix at 136. In her letter, Ms. Smothers “ask[ed] that [Opheim] send us a $65, 000 check payable to Standard Insurance Company, ” and stated that Standard would then send a check to Stevens. Id. Opheim sent Standard a check dated March 14, 2015, in the amount of $65, 000. Id. at 152. Standard received the check on March 24, 2015, then sent Stevens a $65, 000 check enclosed in correspondence dated April 6, 2015. Id. at 141.

         Subsequently, on November 24, 2015, Opheim sent Ms. Smothers the following email:

Dear Ms. Smothers,
In your letter dated 3/2/15, attached, you indicated that Lisa's father, James Stevens, was beneficiary for Lisa's Additional Life Benefits. You referenced her Beneficiary Designation dated 10/15/09. I accepted that and assumed there was some mistake on Lisa's and my end. I assumed that, somewhere, Lisa and I hadn't made the proper indications to name me as the beneficiary of all her insurance policies.
I offer, however, a beneficiary change form dated 11/16/10, also attached, that, as far as I can tell, does name me as the primary beneficiary effective 11/22/10 (the date we were married) for her Group Term Life (GTL) and Additional Life (ADDL) policies. I ran across this form last weekend while cleaning out some files. Is this the correct form for your company? Am I interpreting the form correctly? ADDL stands for Additional Life, correct or not?
Please review this and get back to me either by email or phone at [redacted]. Thank you.

         Appendix at 118.

         As mentioned, above, Peoples Bank also had a copy of the November 16, 2010, designation form in its files. Mr. De Jager wrote a letter, dated December 11, 2015, to Ms. Smothers, id. at 131, which Opheim attached to an email to Ms. Smothers on December 11, 2015. Id. at 130. In his letter, Mr. De Jager explained that he had found a copy of the November 16, 2010, designation in Lisa Opheim's employee file with Peoples Bank, and that, based on his handwritten note at the top righthand corner of the designation form, he stated that he had mailed a copy of the form to Iowa Bankers on December 1, 2010. Id. at 131; see also Id. at 106 (copy of designation with Mr. De Jager's notation). Nevertheless, Standard points out that there is no document in the Administrative Record ...


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