Cho v. First Reliance Std. Life Ins. Co.

Cho v. First Reliance Std. Life Ins. Co.

Opinion

 [*304]  MEMORANDUM²

First Reliance Standard Life Insurance  [*305]  Company ("First Reliance") appeals from the district court's order awarding Soohyun Cho the full amount of her dependent spouse's life insurance policy. First Reliance also appeals from the district court's dismissal of its third-party complaint against Giorgio Armani Corporation ("Armani"). We have jurisdiction pursuant to 28 U.S.C. § 1291, review [**2]  findings of fact for clear error and legal findings de novo, Pannebecker v. Liberty Life. Assurance Co. of Boston, 542 F.3d 1213, 1217 (9th Cir. 2008), and affirm.

First Reliance contends no benefits are due under the terms of the plan and, furthermore, that the inclusion of the non-waiver clause makes Salyers v. Metropolitan Life Insurance Company inapposite. 871 F.3d 934 (9th Cir. 2017). On the first point, First Reliance is correct. Though the policy was somewhat sloppily drafted, the "Effective Date of Dependent Insurance" clause emphasizes the evidence of insurability requirement so clearly that no reasonable person would doubt proof of good health was a necessary condition to coverage. Thus, no benefits are due under the terms of the plan.

Nonetheless, Cho is entitled to the benefits for which she paid. Because the plan was self-administered and Armani handled "nearly all the administrative responsibilities," its "direct interaction with plan participants" would have suggested it was acting with "apparent authority on the collection of evidence of insurability." See Salyers, 871 F.3d at 940-41 (citation and internal quotation marks omitted). For over a year Armani accepted Cho's premiums without any submission of evidence of insurability though it "knew or should have known" the terms of the plan required such evidence. [**3]  See id. at 941. Armani's actions were "so inconsistent with an intent to enforce" the requirement that it was reasonable for Cho to believe she was not required to submit such evidence. See id. (citation and internal quotation marks omitted).

The insertion of a non-waiver clause in the operative policy does not displace this conclusion. The Salyers court emphasized that the incorporation of agency principles into the federal common law governing employee benefit plans "creates incentives for diligent oversight and prevents an insurer from relying 'on a compartmentalized system to escape responsibility.'" Id. at 940 (citation omitted). Allowing insurers like First Reliance essentially to vitiate Salyers and the good behaviors it seeks to promote by including one sentence in their plans would be unfair and unjust. In this case, therefore, Armani is deemed to have waived on First Reliance's behalf the evidence of insurability requirement.

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