The opinion of the court was delivered by: David N. Hurd United States District Judge
MEMORANDUM-DECISION and ORDER
Plaintiffs Dillon A. Knopick and Stefani L. Knopick (collectively "plaintiffs" or "Knopicks") brought this suit against Metropolitan Life Insurance Company ("MetLife") and Adspace Networks, Inc. ("Adspace") (collectively "defendants") alleging MetLife breached its contract with plaintiffs' father Roger Knopick ("decedent") by refusing to pay plaintiffs a supplemental life insurance benefit after his death. The Knopicks also allege Adspace, the decedent's former employer, was negligent in failing to timely delivery the decedent's enrollment documents to MetLife. Plaintiffs contend this delay contributed to the denial of supplemental benefits.
Plaintiffs moved for judgment on the record. Defendants opposed and moved for summary judgment dismissing the complaint. Plaintiffs opposed. Oral argument was heard in Utica, New York on August 13, 2010. Decision on both motions was reserved.
The following facts are undisputed unless otherwise noted.*fn1 Prior to his death decedent resided in California and was employed by defendant Adspace. Adspace offered its employees supplemental life insurance coverage*fn2 under its Supplemental Term Life and Accidental Death and Dismemberment Plan (the "Plan") which was funded by a group policy issued to Adspace by MetLife. To facilitate its insurance offerings, Adspace utilized the brokerage services of the Hauser Group.
The Plan provides "[i]f You are in an eligible class on April 01, 2008, You will be eligible for insurance on that date." MET 0097. As an active full-time non-officer employee of Adspace, decedent was within the class of eligible employees, and thus had the option to enroll on April 1, 2008. The enrollment provision provides:
If You are eligible for insurance, You may enroll for insurance by completing the required form. In addition, You must give evidence of Your insurability satisfactory to Us*fn3 at Your expense if You are required to do so under the section entitled EVIDENCE OF INSURABILITY.
On April 1, 2008, decedent completed an application for life insurance benefits and elected coverage in the amount of $420,000. He named the plaintiffs, both adult children of the decedent, as primary beneficiaries for thirty-five percent (35%) each and a third party for thirty percent (30%) of the benefits. By enrolling in the Plan, the decedent authorized semi-monthly deductions from his paycheck in the amount of $28.75.
A. Evidence of Insurability
The parties dispute the meaning of "Evidence of Insurability." Under the Plan, employees could elect coverage in multiples of $10,000 up to a maximum of $500,000. Of that, the first $100,000 was a Non-Medical Issue ("NMI") amount, which was a guaranteed benefit and required no further eligibility or approval. Any coverage in excess of the NMI amount required Evidence of Insurability. The section titled Evidence of Insurability provides:
We require evidence of insurability satisfactory to Us as follows:
1. In order to become covered for an amount of Supplemental Life Insurance greater than the Non-Medical Issue Amount as shown in the SCHEDULE OF BENEFITS.
If You do not give Us evidence of Your insurability, or if such evidence of insurability is not accepted by Us as satisfactory, the amount of Your Supplemental Life Insurance will be limited to the Non-Medical Issue Amount. MET 00109. The terms "underwriting" nor "physical examination" appear in this section nor within the definition section of the policy.*fn4
The decedent submitted the enrollment materials on April 1, 2008, while he was actively at work, to Adspace's Human Resources Director Lana Krasnyansky ("HR Director"). Based on his decision to elect an additional $320,000 of coverage in excess of $100,000 NMI amount, Evidence of Insurability was required. To satisfy this requirement, decedent completed the Statement of Health ("SOH") included in the enrollment packet. The SOH requested a brief medical history and authorized MetLife to conduct further inquiries as to the applicant's health history if deemed necessary.*fn5
B. Effective Date of Coverage
The parties dispute the effective date of coverage for the policy. The Knopicks contend the effective date for all benefits was April 1, 2008. MetLife argues NMI coverage was effective April 1, 2008, but coverage in excess of that was not in effect until they stated so in writing. Under the Plan section titled Eligibility Provisions: Insurance for You, the effective date is defined:
Rules for Contributory Insurance
If You request Contributory Insurance within 31 days of the date You become eligible for such insurance, such insurance will take effect as follows:
* If You are not required to give evidence of Your insurability, such insurance will take effect on the later of:
* the date You become eligible for such insurance; and
* the date You enroll provided you are Actively at Work on that date.
* if You are required to give evidence of Your insurability and We determine that You are insurable, such insurance will take effect on the date We state in Writing, provided You are Actively at Work on that date.
C. MetLife's Review of Plaintiffs' Claim for Benefits
Decedent died on April 8, 2008, just one week after he completed the enrollment documents described above. As previously mentioned, decedent was actively at work on both April 1, 2008, the date he completed the enrollment documents, and on April 8, 2008, on the day he died. Plaintiffs each completed a Claimant's Statement dated May 10, 2008. Adspace's HR Director thereafter filed a group life insurance claim on behalf of the beneficiaries. MET 0011-0014. The claim was for $50,000 of basic life insurance and $420,000 of supplemental life insurance. The HR Director then mailed the claim materials*fn6 to MetLife on June 4, 2008. MET 007-0031.
MetLife's records*fn7 show that an initial claim for benefits was entered into the MetLife system on June 5, 2008. MET 006. On June 17, 2008, MetLife employee Robert Gondek e-mailed fellow employee Lauren Leverenz*fn8 inquiring about the beneficiaries' claim for $420,000. MET 0047. Mr. Gondek's notes indicate that MetLife's database*fn9 showed optional coverage of $100,000 but that Adspace claimed $420,000. Id. He then notified Adspace's HR Director about the discrepancy between the amount claimed and the coverage reflected in MetLife's database. MET 005. They agreed MetLife would pay the $50,000 basic policy and the $100,000 optional. Id. On or about June 18, 2008, MetLife authorized payment of the NMI amount of $100,000 and the undisputed $50,000 policy. MET 004. The plaintiffs were each issued their respective shares of the benefits.
On June 18, 2008, Ms. Leverenz notified Mr. Gondek that she was looking into the issue and it appeared Adspace submitted a SOH to MetLife for the full $420,000 but that MetLife did not send the SOH to underwriting for review. MET 0048. A June 20, 2008, entry on MetLife's system shows Ms. Leverenz advised Mr. Gondek that the benefit requested was $420,000 but because the SOH was not received until almost a month after the decedent died, at that time, only $100,000 of the optional coverage and the undisputed $50,000 policy should be paid out. MET 003.
It appears from the record that at some point during Fall 2008*fn10 plaintiffs' attorney, Daniel L. Seiden, made a demand on MetLife for his clients' portion of the supplemental coverage--$224,000, or seventy percent (70%) of the $320,000 MetLife denied. MET 0049-0056. On December 6, 2008, the matter was referred to a MetLife employee for review.*fn11
MET 0059-0060. The referral form stated:
CLAIM PAID IN FULL FOR APPROVED AMOUNTS OF BLI/OLI ON 6/19/08. THE OLI WAS SUBMITTED FOR $420,000 HOWEVER A SOH WAS REQUIRED AND NOT RECD UNTIL AFTER THE EE'S DEATH SO ONLY THE GUARANTEED issue amount OF $100,000 WAS ISSUED. I DO NOT SEE WHERE A DENIAL FOR THE DIFFERENCE WAS EVER SENT, WE ARE NOW RECEIVING A DEMAND FROM AN ATTY FOR THE BENE'S TO ISSUE THE DIFFERENCE.
MET 0059. The "Suggested Handling" portion of the referral stated "AGREE TO PREPARE DENIALS BASED ON SOH REQUIRED AND NOT PROVIDED PRIOR TO DEATH?" MET 0060. The "Course of Action" provided by the referring employee was: "Agree to draft denial letter. I have the certificate at my desk and can advise as to some of the information we should put in our letter." Id. The computer entry for the ...