1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Rebecca Brown, No. CV-19-00025-TUC-JGZ
10 Plaintiff, ORDER
11 v.
12 Life Insurance Company of North America a/k/a CIGNA Group Insurance, 13 14 Defendants.
15 This is the third action brought by Plaintiff Rebecca Brown against Defendant Life 16 Insurance Company of North America (LINA) to enforce benefits under a long term 17 disability (LTD) policy. In this complaint, Brown seeks declaratory relief and a 18 determination that LINA incorrectly calculated the Cost of Living Adjustment (COLA) 19 benefits owed to Brown pursuant to the LTD policy.1 (Doc. 8, ¶ 52). 20 LINA has filed a Motion to Dismiss the complaint, pursuant to Fed. R. Civ. P. 21 12(b)(6), for failure to state a claim. (Doc. 10). LINA argues that (1) Brown’s action is 22 time barred and (2) the LTD policy language unambiguously supports LINA’s COLA 23 calculation. (Doc. 10). Because the Court concludes that LINA properly calculated the 24 COLA benefit pursuant to the policy, the Court will grant LINA’s motion and dismiss this 25 1 The factual background and procedural history of this case is set forth in Brown v. 26 Life Ins. Co. of N. Am., No. CV-16-00162-TUC-JAS, 2018 U.S. Dist. LEXIS 9759, at *3- 5 (D. Ariz. Jan. 18, 2018). Brown also challenged LINA’s method of calculating the COLA 27 benefit in Brown 2, but the court did not consider the argument on the merits, concluding Brown had failed to exhaust her administrative remedies. (Doc. 8 at 7, ¶ 30). Brown 28 subsequently exhausted her remedies, and the issue is ripe for consideration. (Doc. 8, ¶¶ 31 & 32). 1 action.2 2 APPLICABLE LAW 3 Dismissal under Rule 12(b)(6) can be based on “the lack of a cognizable legal 4 theory” or “the absence of sufficient facts alleged under a cognizable legal theory.” 5 Balisttreri v. Pacific Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). “While a complaint 6 attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a 7 plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than 8 labels and conclusions, and a formulaic recitation of the elements of a cause of action will 9 not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations and internal 10 quotations omitted). “[O]nce a claim has been stated adequately, it may be supported by 11 showing any set of facts consistent with the allegations in the complaint.” Id. at 563. 12 Dismissal is appropriate under Rule 12(b)(6) if the facts alleged do not state a claim that is 13 “plausible on its face.” Id. at 570; Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“A claim 14 has facial plausibility when the plaintiff pleads factual content that allows the court to draw 15 the reasonable inference that the defendant is liable for the misconduct alleged.”). When 16 assessing the sufficiency of the complaint, all well-pleaded factual allegations are taken as 17 true and construed in the light most favorable to the nonmoving party, Keates v. Koile, 883 18 F.3d 1228, 1234 (9th Cir. 2018), and all reasonable inferences are to be drawn in favor of 19 that party as well. Caltex Plastics, Inc. v. Lockheed Martin Corp., 824 F.3d 1156, 1159 20 (9th Cir. 2016). 21 LINA has attached several documents as exhibits to its Motion. “In ruling on a 22 12(b)(6) motion, a court may generally consider only allegations contained in the 23 pleadings, exhibits attached to the complaint, and matters properly subject to judicial 24 notice. . . . [A] court may consider a writing referenced in a complaint but not explicitly 25 incorporated therein if the complaint relies on the document and its authenticity is 26 unquestioned.” Swartz v. KPMG LLP, 476 F.3d 576, 763 (9th Cir. 2007) (citations and 27 internal quotations omitted). The First Amended Complaint relies on the LTD insurance
28 2 In light of this conclusion, the Court does not address LINA’s statute of limitations argument. 1 policy and challenges the interpretation of the provisions of that policy. (Doc. 10-3). 2 Therefore, the Court will consider the policy and does not convert LINA’s motion to 3 dismiss into a motion for summary judgment. The Court will not consider the other 4 exhibits attached to LINA’s Motion (Docs. 10-1 & 10-2), because they are not necessary 5 to the Court’s determination. 6 DISCUSSION 7 The parties agree that the LTD policy provides for a COLA benefit. The parties 8 disagree as to whether the COLA benefit applies to the net disability benefit or to the 9 entire monthly gross disability benefit before applying the offset for “other income” from 10 Social Security Disability Insurance or other sources. (Doc. 8, ¶ 43). LINA has applied 11 the policy’s COLA benefit to Brown’s net disability benefit. Brown asserts that LINA 12 should have applied the COLA to her gross monthly benefit. The Court concludes there 13 is no ambiguity in the policy, and under the policy terms, LINA has correctly applied the 14 COLA. 15 I. The policy is unambiguous and LINA’s interpretation of the policy is correct. 16 Insurance policies regulated by ERISA are interpreted by applying the federal 17 common law. Williams v. Nat’l Union Fire Ins. Co. of Pittsburgh, 792 F.3d 1136, 1140 18 (9th Cir. 2015) (internal citations omitted). Policy terms are interpreted based on the plain 19 meaning of the words, e.g., Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1441 (9th Cir. 20 1990), and “ambiguities are construed against the insurer and in favor of the insured.” 21 McClure v. Life Ins. Co. of N. Am., 84 F.3d 1129, 1134 (9th Cir. 1996) (internal citations 22 omitted). 23 Whether an ambiguity exists in a contract is a matter of law. State Farm Mut. Auto. 24 Ins. Co. v. Fernandez, 767 F.2d 1299, 1301 (9th Cir. 1985). An ambiguity exists if a term 25 is subject to more than one reasonable interpretation. McDaniel v. Chevron Corp., 203 26 F.3d 1099 (9th Cir. 2000). However, courts “will not artificially create ambiguity where 27 none exists . . . . If a reasonable interpretation favors the insurer and any other interpretation 28 would be strained, no compulsion exists to torture or twist the language of the policy.” 1 Evans, 916 F.2d at 1441 (internal quotations and citations omitted). Further, specific terms 2 in a contract govern interpretation over general terms. Idaho v. Shoshone-Bannock Tribes, 3 465 F.3d 1095, 1099 (9th Cir. 2006). 4 The only reasonable interpretation of the LTD policy is that the COLA benefit is 5 applied to the net disability benefit as LINA asserts. There is no ambiguity in the policy 6 provisions. The policy provides that the COLA benefit is applied to “an Employee’s 7 Disability Benefit.” In describing the COLA benefit, the policy states:
8 Each year the Insurance Company will increase an Employee’s Disability Benefit after he or she has been continuously Disabled for the COLA 9 Benefit Waiting period.
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Rebecca Brown, No. CV-19-00025-TUC-JGZ
10 Plaintiff, ORDER
11 v.
12 Life Insurance Company of North America a/k/a CIGNA Group Insurance, 13 14 Defendants.
15 This is the third action brought by Plaintiff Rebecca Brown against Defendant Life 16 Insurance Company of North America (LINA) to enforce benefits under a long term 17 disability (LTD) policy. In this complaint, Brown seeks declaratory relief and a 18 determination that LINA incorrectly calculated the Cost of Living Adjustment (COLA) 19 benefits owed to Brown pursuant to the LTD policy.1 (Doc. 8, ¶ 52). 20 LINA has filed a Motion to Dismiss the complaint, pursuant to Fed. R. Civ. P. 21 12(b)(6), for failure to state a claim. (Doc. 10). LINA argues that (1) Brown’s action is 22 time barred and (2) the LTD policy language unambiguously supports LINA’s COLA 23 calculation. (Doc. 10). Because the Court concludes that LINA properly calculated the 24 COLA benefit pursuant to the policy, the Court will grant LINA’s motion and dismiss this 25 1 The factual background and procedural history of this case is set forth in Brown v. 26 Life Ins. Co. of N. Am., No. CV-16-00162-TUC-JAS, 2018 U.S. Dist. LEXIS 9759, at *3- 5 (D. Ariz. Jan. 18, 2018). Brown also challenged LINA’s method of calculating the COLA 27 benefit in Brown 2, but the court did not consider the argument on the merits, concluding Brown had failed to exhaust her administrative remedies. (Doc. 8 at 7, ¶ 30). Brown 28 subsequently exhausted her remedies, and the issue is ripe for consideration. (Doc. 8, ¶¶ 31 & 32). 1 action.2 2 APPLICABLE LAW 3 Dismissal under Rule 12(b)(6) can be based on “the lack of a cognizable legal 4 theory” or “the absence of sufficient facts alleged under a cognizable legal theory.” 5 Balisttreri v. Pacific Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). “While a complaint 6 attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a 7 plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than 8 labels and conclusions, and a formulaic recitation of the elements of a cause of action will 9 not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations and internal 10 quotations omitted). “[O]nce a claim has been stated adequately, it may be supported by 11 showing any set of facts consistent with the allegations in the complaint.” Id. at 563. 12 Dismissal is appropriate under Rule 12(b)(6) if the facts alleged do not state a claim that is 13 “plausible on its face.” Id. at 570; Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“A claim 14 has facial plausibility when the plaintiff pleads factual content that allows the court to draw 15 the reasonable inference that the defendant is liable for the misconduct alleged.”). When 16 assessing the sufficiency of the complaint, all well-pleaded factual allegations are taken as 17 true and construed in the light most favorable to the nonmoving party, Keates v. Koile, 883 18 F.3d 1228, 1234 (9th Cir. 2018), and all reasonable inferences are to be drawn in favor of 19 that party as well. Caltex Plastics, Inc. v. Lockheed Martin Corp., 824 F.3d 1156, 1159 20 (9th Cir. 2016). 21 LINA has attached several documents as exhibits to its Motion. “In ruling on a 22 12(b)(6) motion, a court may generally consider only allegations contained in the 23 pleadings, exhibits attached to the complaint, and matters properly subject to judicial 24 notice. . . . [A] court may consider a writing referenced in a complaint but not explicitly 25 incorporated therein if the complaint relies on the document and its authenticity is 26 unquestioned.” Swartz v. KPMG LLP, 476 F.3d 576, 763 (9th Cir. 2007) (citations and 27 internal quotations omitted). The First Amended Complaint relies on the LTD insurance
28 2 In light of this conclusion, the Court does not address LINA’s statute of limitations argument. 1 policy and challenges the interpretation of the provisions of that policy. (Doc. 10-3). 2 Therefore, the Court will consider the policy and does not convert LINA’s motion to 3 dismiss into a motion for summary judgment. The Court will not consider the other 4 exhibits attached to LINA’s Motion (Docs. 10-1 & 10-2), because they are not necessary 5 to the Court’s determination. 6 DISCUSSION 7 The parties agree that the LTD policy provides for a COLA benefit. The parties 8 disagree as to whether the COLA benefit applies to the net disability benefit or to the 9 entire monthly gross disability benefit before applying the offset for “other income” from 10 Social Security Disability Insurance or other sources. (Doc. 8, ¶ 43). LINA has applied 11 the policy’s COLA benefit to Brown’s net disability benefit. Brown asserts that LINA 12 should have applied the COLA to her gross monthly benefit. The Court concludes there 13 is no ambiguity in the policy, and under the policy terms, LINA has correctly applied the 14 COLA. 15 I. The policy is unambiguous and LINA’s interpretation of the policy is correct. 16 Insurance policies regulated by ERISA are interpreted by applying the federal 17 common law. Williams v. Nat’l Union Fire Ins. Co. of Pittsburgh, 792 F.3d 1136, 1140 18 (9th Cir. 2015) (internal citations omitted). Policy terms are interpreted based on the plain 19 meaning of the words, e.g., Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1441 (9th Cir. 20 1990), and “ambiguities are construed against the insurer and in favor of the insured.” 21 McClure v. Life Ins. Co. of N. Am., 84 F.3d 1129, 1134 (9th Cir. 1996) (internal citations 22 omitted). 23 Whether an ambiguity exists in a contract is a matter of law. State Farm Mut. Auto. 24 Ins. Co. v. Fernandez, 767 F.2d 1299, 1301 (9th Cir. 1985). An ambiguity exists if a term 25 is subject to more than one reasonable interpretation. McDaniel v. Chevron Corp., 203 26 F.3d 1099 (9th Cir. 2000). However, courts “will not artificially create ambiguity where 27 none exists . . . . If a reasonable interpretation favors the insurer and any other interpretation 28 would be strained, no compulsion exists to torture or twist the language of the policy.” 1 Evans, 916 F.2d at 1441 (internal quotations and citations omitted). Further, specific terms 2 in a contract govern interpretation over general terms. Idaho v. Shoshone-Bannock Tribes, 3 465 F.3d 1095, 1099 (9th Cir. 2006). 4 The only reasonable interpretation of the LTD policy is that the COLA benefit is 5 applied to the net disability benefit as LINA asserts. There is no ambiguity in the policy 6 provisions. The policy provides that the COLA benefit is applied to “an Employee’s 7 Disability Benefit.” In describing the COLA benefit, the policy states:
8 Each year the Insurance Company will increase an Employee’s Disability Benefit after he or she has been continuously Disabled for the COLA 9 Benefit Waiting period. The increase will be the lesser of the annual increase in the Consumer Price Index (CPI-W) during the preceding 10 calendar year or the COLA Increase shown in the Schedule of Benefits. 11 (Doc. 10-3 at 16 (emphasis added)). The policy describes the Disability Benefit 12 calculation in the Schedule of Benefits, and the disability benefit calculation requires 13 offsets for other income. The “Disability Benefit Calculation” provides:
14 The Disability Benefit payable to the Employee is figured using the 15 Gross Disability Benefit, Other Income Benefits and the Return to Work Incentive. Monthly Benefits are based on a 30-day month. The 16 Disability Benefit will be prorated if payable for any period less than a month. During any month the Employee has no Disability Earnings, 17 the monthly benefit payable is the Gross Disability Benefit less Other Income Benefits. 18 19 (Doc. 10-3 at 7 (emphasis added)). The “Gross Disability Benefit” is defined, without 20 reference to offsets, as: “The lesser of 60% of an employee’s monthly Covered Earnings 21 rounded to the nearest dollar or the Maximum Disability Benefit.” (Doc. 10-3 at 7). 22 Brown’s primary argument seems to be that the text describing the “Disability 23 Benefit Calculation” fails to provide any guidance about whether the COLA 24 multiplication and enhancement comes before or after other income offset diminution of 25 the benefit. (Doc. 16 at 7). Brown asserts that “[l]isting Gross Disability Benefit and 26 other income benefits without identifying where COLA adjustment is placed in the 27 sequence creates, at a minimum, ambiguity” which must be interpreted against LINA, the 28 drafter of the agreement. (Doc. 16 at 8). The Court concludes that Brown’s 1 interpretation is inconsistent with the structure and plain language of the relevant policy 2 provisions, and therefore is not a reasonable interpretation. First, Brown ignores that the 3 only policy provision which mentions the COLA expressly states that the COLA is 4 applied to a claimant’s “Disability Benefit.” It does not state that the COLA is part of the 5 calculation of the disability benefit. The “Disability Benefit calculation” is separately 6 defined as the sum resulting after completing the calculation set forth in the “Disability 7 Benefit calculation.” Second, the “Disability Benefit calculation” provision requires that 8 the gross benefit be offset by other income. The calculation does not mention application 9 of the COLA. The logical inference is that the COLA was intentionally not included 10 because it is not part of the “Disability Benefit calculation.” 11 For the foregoing reasons the Court concludes that the structure and wording of 12 the relevant policy provisions support LINA’s interpretation of the policy, that the COLA 13 calculation is not part of the disability benefit calculation, and the COLA is applied to the 14 net benefit. The Court further finds that the failure to mention the COLA in the disability 15 benefit calculation definition does not create an ambiguity. It reinforces the conclusion 16 that the COLA application is separate from the determination of the disability benefit.3 17 Consequently, the Court concludes that Brown’s complaint fails to state a claim. 18 II. Denial of Leave to Amend 19 “A district court should grant leave to amend even if no request to amend the 20 pleading was made, unless it determines that the pleading could not possibly be cured by 21 the allegation of other facts.” Cook, Perkiss & Liehe, Inc. v. N. California Collection Serv. 22 Inc., 911 F.2d 242, 247 (9th Cir. 1990). Brown does not request leave to amend her 23 complaint, however, and amendment could not cure the defect. As the terms of the policy 24 are not subject to change, amendment would be futile.
25 3 Brown argues that she should be permitted to conduct discovery because it “may reveal additional information of why there is silence on this point [the order of the 26 calculation]” or contradict LINA’s claim that there is no written instruction or policy on this point. (Doc. 16 at 7). Discovery of an instruction or policy, however, would not 27 change the governing contract terms, which are unambiguous. See U.S. Airways, Inc. v. McCutchen, 569 U.S. 88, 102 (2013) (where the words of a plan leave gaps, a court must 28 “look outside the plan's written language” to decide what an agreement means). There are no gaps here to fill. 2 CONCLUSION 3|| Accordingly, IT IS ORDERED: 4 1. Defendant’s Motion to Dismiss (Doc. 10) is GRANTED. 5 2. The Clerk of Court shall dismiss this action with prejudice and close the file. 6 Dated this 14th day of August, 2019. 7 8
10 Honorable Jennifer“ Zipps 4 United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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