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Brown v. Life Insurance Company of North America

United States District Court, D. Arizona

August 14, 2019

Rebecca Brown, Plaintiff,
Life Insurance Company of North America a/k/a CIGNA Group Insurance, Defendants.



         This is the third action brought by Plaintiff Rebecca Brown against Defendant Life Insurance Company of North America (LINA) to enforce benefits under a long term disability (LTD) policy. In this complaint, Brown seeks declaratory relief and a determination that LINA incorrectly calculated the Cost of Living Adjustment (COLA) benefits owed to Brown pursuant to the LTD policy.[1] (Doc. 8, ¶ 52).

         LINA has filed a Motion to Dismiss the complaint, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim. (Doc. 10). LINA argues that (1) Brown's action is time barred and (2) the LTD policy language unambiguously supports LINA's COLA calculation. (Doc. 10). Because the Court concludes that LINA properly calculated the COLA benefit pursuant to the policy, the Court will grant LINA's motion and dismiss this action.[2]


         Dismissal under Rule 12(b)(6) can be based on “the lack of a cognizable legal theory” or “the absence of sufficient facts alleged under a cognizable legal theory.” Balisttreri v. Pacific Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations and internal quotations omitted). “[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint.” Id. at 563. Dismissal is appropriate under Rule 12(b)(6) if the facts alleged do not state a claim that is “plausible on its face.” Id. at 570; Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”). When assessing the sufficiency of the complaint, all well-pleaded factual allegations are taken as true and construed in the light most favorable to the nonmoving party, Keates v. Koile, 883 F.3d 1228, 1234 (9th Cir. 2018), and all reasonable inferences are to be drawn in favor of that party as well. Caltex Plastics, Inc. v. Lockheed Martin Corp., 824 F.3d 1156, 1159 (9th Cir. 2016).

         LINA has attached several documents as exhibits to its Motion. “In ruling on a 12(b)(6) motion, a court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice. . . . [A] court may consider a writing referenced in a complaint but not explicitly incorporated therein if the complaint relies on the document and its authenticity is unquestioned.” Swartz v. KPMG LLP, 476 F.3d 576, 763 (9th Cir. 2007) (citations and internal quotations omitted). The First Amended Complaint relies on the LTD insurance policy and challenges the interpretation of the provisions of that policy. (Doc. 10-3). Therefore, the Court will consider the policy and does not convert LINA's motion to dismiss into a motion for summary judgment. The Court will not consider the other exhibits attached to LINA's Motion (Docs. 10-1 & 10-2), because they are not necessary to the Court's determination.


         The parties agree that the LTD policy provides for a COLA benefit. The parties disagree as to whether the COLA benefit applies to the net disability benefit or to the entire monthly gross disability benefit before applying the offset for “other income” from Social Security Disability Insurance or other sources. (Doc. 8, ¶ 43). LINA has applied the policy's COLA benefit to Brown's net disability benefit. Brown asserts that LINA should have applied the COLA to her gross monthly benefit. The Court concludes there is no ambiguity in the policy, and under the policy terms, LINA has correctly applied the COLA.

         I. The policy is unambiguous and LINA's interpretation of the policy is correct.

         Insurance policies regulated by ERISA are interpreted by applying the federal common law. Williams v. Nat'l Union Fire Ins. Co. of Pittsburgh, 792 F.3d 1136, 1140 (9th Cir. 2015) (internal citations omitted). Policy terms are interpreted based on the plain meaning of the words, e.g., Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1441 (9th Cir. 1990), and “ambiguities are construed against the insurer and in favor of the insured.” McClure v. Life Ins. Co. of N. Am., 84 F.3d 1129, 1134 (9th Cir. 1996) (internal citations omitted).

         Whether an ambiguity exists in a contract is a matter of law. State Farm Mut. Auto. Ins. Co. v. Fernandez, 767 F.2d 1299, 1301 (9th Cir. 1985). An ambiguity exists if a term is subject to more than one reasonable interpretation. McDaniel v. Chevron Corp., 203 F.3d 1099 (9th Cir. 2000). However, courts “will not artificially create ambiguity where none exists . . . . If a reasonable interpretation favors the insurer and any other interpretation would be strained, no compulsion exists to torture or twist the language of the policy.” Evans, 916 F.2d at 1441 (internal quotations and citations omitted). Further, specific terms in a contract govern interpretation over general terms. Idaho v. Shoshone-Bannock Tribes, 465 F.3d 1095, 1099 (9th Cir. 2006).

         The only reasonable interpretation of the LTD policy is that the COLA benefit is applied to the net disability benefit as LINA asserts. There is no ambiguity in the policy provisions. The policy provides that the COLA benefit is applied to “an Employee's Disability Benefit.” In describing the COLA benefit, the policy states:

Each year the Insurance Company will increase an Employee's Disability Benefit after he or she has been continuously Disabled for the COLA Benefit Waiting period. The increase will be the lesser of the annual increase in the Consumer Price Index (CPI-W) during the preceding calendar year or the COLA Increase shown in the Schedule of Benefits.

(Doc. 10-3 at 16 (emphasis added)). The policy describes the Disability Benefit calculation in the Schedule of Benefits, and the disability benefit calculation requires offsets for other income. The ...

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