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Sand-Smith v. Liberty Life Assurance Co.

United States District Court, D. Montana, Billings Division

September 20, 2017

THERESA SAND-SMITH, Plaintiff,
v.
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON, Defendant.

          OPINION AND ORDER

          SUSAN P. WATTERS, UNITED STATES DISTRICT JUDGE.

         Before the Court is Plaintiff Theresa Sand-Smith's motion for summary judgment (Doc. 36) and Defendant Liberty Life Assurance Company of Boston's cross-motion for summary judgment (Doc. 39). For the foregoing reasons, the Court GRANTS Sand-Smith's motion and DENIES Liberty Life's motion.

         I. Undisputed facts

         Liberty Life Assurance Company of Boston is an insurance company licensed to do business in Montana. (Doc. 6 at ¶ 2). In 2003, Liberty Life issued a group disability income plan (the Plan) to Fanners Group, Inc. (Doc. 32-2). The Plan obligated Liberty Life to "pay the Covered Person a Monthly Benefit" when it "receives Proof that a Covered Person is Disabled due to Injury or Sickness." (Doc. 32-2 at 12; Doc. 32-4 at 24). "Disability" meant the covered person is "unable to perform" his own occupation. (Doc. 32-2 at 5; Doc. 32-4 at 11). "Sickness" meant "illness, disease, pregnancy or complications of pregnancy." (Doc. 32-2 at 8; Doc. 32-4 at 18).

         Theresa Sand-Smith works as a claims adjuster for Farmers and resides in Billings, Montana. (Doc. 44 at 3). Liberty Life issued Sand-Smith a certificate of coverage under the Plan. (Doc. 44 at 3). The Plan's first policy (the 2003 Policy) contained the following provision:

Any provision of this policy which, on its Effective Date, is in conflict with the statutes of the governing jurisdiction of this policy is hereby amended to conform to the minimum requirements of such statute. (Doc. 32-2 at 28). The 2003 Policy listed California as the governing jurisdiction.

(Doc. 32-2 at 1). The 2003 Policy also contained a provision that reserved Liberty Life's right to change or modify the Plan unilaterally. (Doc. 32-2 at 25).

         In 2014, Sand-Smith became disabled due to her bipolar disorder. (Doc. 44 at 5). Sand-Smith applied for long term disability benefits under the Plan. (Doc. 44 at 3). On July 9, 2015, Liberty Life approved Sand-Smith's claim. (Doc. 32-5 at 1). Liberty Life determined Sand-Smith became disabled on December 6, 2014, and that she was eligible to receive long term disability benefits beginning June 15, 2015. (Doc. 32-5 at 2; Doc. 44 at 3). In its letter approving Sand-Smith's claim, Liberty Life notified Sand-Smith that the Plan contained a mental illness provision that limited her long term disability benefits to 24 months. (Doc. 32-5 at 1-2).

         On January 1, 2016, Liberty Life issued a renewed policy under the Plan (the 2016 Policy). (Doc. 32-4 at 4). The Plan's mental illness provision remained unchanged under the 2016 Policy. (Doc. 32-4 at 27). Different from the 2003 Policy, however, the 2016 Policy contained the following provision:

Any provision of this policy which, on its effective date, is in conflict with the statutes of the state in which the insured resides on such date is hereby amended to conform to the minimum requirements of such statutes

(Doc. 32-4 at 41).

         On June 24, 2016, Sand-Smith sent a letter to the Montana Insurance Commissioner, which stated:

Liberty Mutual Insurance Company, the long term disability insurance carrier, tells me my long term disability benefit ends after two years as I have a mental health disorder. It is my understanding there is no maximum term if it is a physical disability. I believe I am being discriminated against since I have a mental health disability as opposed to a physical disability. Is this discrimination legal? Thank you.

(Doc. 32-6 at 3). On June 27, 2016, the Montana Insurance Commissioner sent Liberty Life a letter inquiring about Sand-Smith's claim. (Doc. 32-6 at 1). Liberty Life responded that Sand-Smith's long term disability benefits were limited to 24 months due to the Plan's mental illness provision. (Doc. 32-7 at 1-2). Shortly after, Sand-Smith retained an attorney.

         On August 17, 2016, Sand-Smith's attorney sent Liberty Life a letter that claimed the mental illness provision was void under Montana's mental health parity law, Montana Code Annotated § 33-22-706. (Doc. 32-8 at 1-2). Sand-Smith's attorney requested a complete copy of Sand-Smith's policy. (Doc. 32-8 at 2). Liberty Life responded that Sand-Smith's long term disability benefits were limited to 24 months due to the Plan's mental illness provision. (Doc. 32-9 at 1-2). Liberty Life further indicated that Montana's mental health parity law was not applicable because the Plan was an employee welfare benefit plan governed by the Employee Retirement ...


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