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Hogan v. Unum Life Ins. Co. of Am.

United States District Court, W.D. Washington, Seattle Division

January 27, 2015

FRANCES HOGAN, M.D., Plaintiff,
v.
UNUM LIFE INSURANCE COMPANY OF AMERICA, Defendant

For Francis Hogan, M.D., Plaintiff, Counter Defendant: Melton L Crawford, LEAD ATTORNEY, MACDONALD HOAGUE & BAYLESS, SEATTLE, WA.

For Unum Life Insurance Company of America, Defendant, Counter Claimant: D Michael Reilly, Steven Douglas Jensen, LEAD ATTORNEYS, LANE POWELL PC, SEATTLE, WA.

Page 1017

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT'S MOTION AND CROSS-MOTION FOR SUMMARY JUDGMENT

RICARDO S. MARTINEZ, UNITED STATES DISTRICT JUDGE.

I. INTRODUCTION

This matter comes before the Court on the parties' Motions and Cross-Motion for Summary Judgment. Dkts. #18, #19 and #26. The parties seek judgments as a matter of law with respect to an offset by Defendant Unum Life Insurance Company of America (" Unum" ) in disability insurance benefits. Having reviewed the record before it, and having found that oral argument is not necessary in this matter, the Court now GRANTS Plaintiff's Motion for Summary Judgment and DENIES Defendant's Motion and Cross-Motion for Summary Judgment for the reasons discussed herein.

II. BACKGROUND

The sequence of events leading up to the matters at issue in this case are undisputed. Dr. Hogan is a psychiatrist, formerly employed by Group Health Permanente, P.C. (" Group Health" ). Unum issued a group disability insurance policy to Group

Page 1018

Health, Policy No. 122917 002 (" the Unum Policy" ), under which Dr. Hogan is covered. Dkt. #20, Ex. C and Dkt. #21, Ex. 1 at 6. Dr. Hogan applied for disability benefits under the Unum Policy in 2007. Unum found Dr. Hogan disabled as of January 5, 2007, and, following a 90-day " Elimination Period," began paying her disability benefits. Dkt. #21, Ex. 1 at 9 and Ex. 2 at 150.

In the same timeframe, Dr. Hogan also applied for disability benefits under a different disability insurance policy, which she had privately purchased in 1986 through the American Psychiatric Association (" APA Policy" ). Dkt. #20, Ex. A and Dkt. #21, Ex. 2 at 61, 67-78 and 133. She was determined to be eligible for benefits under that policy as well, and she received $3000/month, also beginning in 2007. See id. at 98.

The Unum Policy allows Unum to reduce the monthly disability benefit it must pay by any amount the insured person receives that constitutes a " Deductible Source of Income." Dkt. #21, Ex. 1 at 24. The Policy defines " Deductible Sources of Income" to include benefits received under any " other group insurance plan." Id. It also identifies other income sources which are not " Deductible Sources of Income" and for which it will not reduce the benefit it must pay, including " franchise disability income plans." Id. at 25-26.

Dr. Hogan timely advised Unum of the APA policy, and that she had applied for and received benefits under it. Unum acknowledges that it received notice: " as early as 12/6/07 . . . the insured made us aware of the possible benefits under this group policy. Supp statements received 11/17/08, 2/6/10 and 6/28/13 noted the $3,000 benefit being received." Dkt. #21, Ex. 2 at 98. Between 2007 and 2013, Unum paid Dr. Hogan her full benefit under its policy, and did not deduct the amount provided under the APA Policy.

In March 2013, Unum assigned a new " Disability Benefits Specialist" to Dr. Hogan's claim, Jennifer Gurganus. Dkt. #21, Ex. 2 at 55-56. On May 22, 2013, Ms. Gurganus noted that Dr. Hogan had reported the APA policy was an individual disability policy, but " this was not verified with AIG." Dkt. #21, Ex. 2 at 58. Ms. Gurganus further observed that if Dr. Hogan's APA policy " is considered a group policy, it may be an offset to the [Unum] LTD policy." Id.

Ms. Gurganus requested a copy of the APA policy for review. Dkt. #21, Ex. 2 at 66 and 79-80. Ms. Gurganus reviewed the policy and entered a note stating " Based on my review, it appears that it is a group insurance plan and would be considered an offset." Id. at 81. She asked Unum " Offset Consultant" Andy Gaither for his opinion. Mr. Gaither responded that the APA policy " IS a Group Disability Policy and is documented in the policy. Therefore, any benefits received by the claimant under this policy ARE an offset to the LTD benefits payable under our LTD policy." Dkt. #21, Ex. 2 at 81.

Ms. Gurganus then wrote to Dr. Hogan on August 1, 2013, informing her that:

. . . under some circumstances, your LTD policy provides for the reduction of your LTD benefits by those disability income benefits received from another group insurance plan.
This letter shall constitute notification that your policy with the American Psychiatric Association serves as a reduction to your Long Term Disability benefits. We have confirmed that this policy was issued as a group policy.
Beginning August 5, 2013, your monthly benefit will be reduced by your $3,000 benefit received from the American Psychiatric

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Association policy resulting in a gross monthly benefit of $478.64.

Dkt. #20, Ex. G and Dkt. #21, Ex. 2 at 84. Unum further requested a copy of Dr. Hogan's award letter so that it could determine whether " an overpayment on your policy has occurred." Id. Unum provided the same information to Dr. Hogan's attorney in September of 2013. Dkt. #21, Ex. 2 at 86-87.

In October of 2013, Ms. Gurganus received confirmation from her legal department that the APA payments should have been deducted from the UNUM benefits because they were provided under a group policy, and was directed to " come to an amicable resolution regarding this back period." Dkt. #21, Ex. 2 at 90. On October 30, 2013, Unum informed Dr. Hogan's attorney that it had confirmed that the APA policy was a group policy and that it would be deducting the APA benefits from all future payments under the Unum Policy. Dkt. #21, Ex. 2 at 92. Unum further noted it would be contacting counsel shortly regarding the overpayment that had been occurring since 2007. Id. Unum also informed counsel that Dr. Hogan had the right to appeal. Id.

On January 24, 2014, Unum wrote to Dr. Hogan and informed her that it had erroneously overpaid her in the amount of $177,878.71 since she had been receiving disability benefits from January of 2007, but that it had " decided to waive part of the overpayment and [was] requesting $45,348.43 only." Dkt. #20, Ex. H and Dkt. #21, Ex. 2 at 100-101. Unum's internal notes reflect that because Unum had been on notice of the APA Policy since 2007, and because it had been continuously advised by Dr. Hogan of her receipt of benefits under the APA Policy, Unum was limited to pursuing all but the most recent 24 months of overpayment and would need to waive the remainder. Id. at 98-99.

Dr. Hogan appealed Unum's determination that her APA policy was a " group policy" and thus a " Deductible Source of Income" allowing Unum to reduce the monthly benefit it must pay her. Dkt. #21, Ex. 2 at 108-142. She focused on the portion of the Unum policy providing that income received from a " franchise disability income plan" was not a " Deductible Source of Income," and provided legal authority defining franchise insurance and ...


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