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Burton v. Colorado Access

Supreme Court of Colorado, En Banc

February 12, 2018

Caroline Burton, Petitioner
v.
Colorado Access, a/k/a Colorado Access Long Term Disability Plan. Respondent Brenda Olivar, Petitioner
v.
Public Service Employee Credit Union Long Term Disability Plan. Respondent

         Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 14CA1734, 14CA1734

          Attorneys for Petitioners: The Murphy Law Firm Brian A. Murphy, Adam B. Kehrli, Wheat Ridge, Colorado

          Attorneys for Respondents: Holland & Hart LLP Michael S. Beaver Greenwood Village, Colorado

          HOOD JUSTICE.

          ¶1 Caroline Burton and Brenda Olivar submitted claims for long-term disability benefits to insurance companies under employee-benefits plans set up by their employers ("the Plans"). Both Burton's and Olivar's employers created the Plans by purchasing long-term disability policies from insurance companies. The insurance companies denied Burton's and Olivar's claims. Burton and Olivar sued the Plans under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B) (2016), for benefits due to them under the insurance policies. But neither served the Plans. Rather, they each served complaints on the United States Department of Labor Secretary, relying on an ERISA provision allowing such service when a plan hasn't designated "an individual" as an agent for service of process. Id. § 1132(d)(1). In both cases, the Labor Secretary never forwarded the complaint to the Plans' designated agents for service of process, the Plans failed to answer, and Burton and Olivar obtained default judgments in their favor.

         ¶2 Eventually, the Plans moved to set aside the default judgments for improper service, which the trial courts granted in both cases. Later, the Plans moved for summary judgment, arguing the insurers, which were obligated to make all eligibility determinations and payments under the Plans' terms, were the only proper party defendants. The trial courts agreed, granting the Plans summary judgment. A division of the court of appeals affirmed.

         ¶3 In this opinion, we consider whether ERISA § 1132(d)(1)'s use of "individual" provides that service on the Labor Secretary is sufficient when an employee-benefit plan designates a corporation (instead of a natural person) as its administrator and agent for service of process. We think not. We hold "individual" in this context includes a corporation and service on the Labor Secretary is proper only when a plan fails to designate either a plan administrator or some other person as agent for service of process. We further hold that judgments void for lack of service may be set aside at any time. Finally, we address which party is the proper defendant in an ERISA claim for benefits due. We hold the insurer, not the Plan, is the only proper defendant in an ERISA claim for benefits due when the Plan's terms provide that only the insurer is obligated to pay and to determine eligibility for benefits.

¶4 Accordingly, we affirm.

         I. Facts and Procedural History

         ¶5 The Burton and Olivar cases concern ERISA claims for benefits filed against their employee-benefit plans under ERISA's civil-enforcement provision, 29 U.S.C. § 1132(a)(1)(B). And though the facts of these cases are quite similar, [1] for clarity we discuss them separately here.

         A. Facts in Burton v. Colorado Access

         ¶6 Caroline Burton's former employer, Colorado Access, offered an ERISA-governed plan that it created by purchasing a long-term disability insurance policy issued and administered by Unum Life Insurance Company of America ("Unum"). The policy was the Plan's governing instrument, and the summary plan description designated Colorado Access as the plan administrator and agent for service of process.

         ¶7 Burton collected disability benefits under the plan for almost two years before Unum terminated her benefits. After exhausting administrative remedies for Unum's benefits-denial decision, Burton filed a complaint in May 2007 against the Colorado Access Plan ("CA Plan") for benefits due under the long-term disability policy. 29 U.S.C. § 1132(a)(1)(B) (allowing beneficiaries to sue for benefits due under plans governed by ERISA). But she didn't serve Colorado Access the complaint. Rather, she served the complaint only on the United States Department of Labor Secretary ("Labor Secretary"), reasoning such service was proper under § 1132(d)(1).[2]

         ¶8 The Labor Secretary didn't forward the complaint to Colorado Access, so the CA Plan failed to file an answer. Thus, Burton sought and obtained a default judgment in May 2008 against the CA Plan for back benefits and interest, a monthly payment until Burton turned 65, and attorney fees.

         ¶9 Over four years after the trial court entered the default judgment, the CA Plan filed a motion to set aside and vacate the judgment under C.R.C.P. 60(b)(3). Because Burton failed to serve Colorado Access the complaint, it argued the trial court lacked personal jurisdiction over the CA Plan when entering judgment, which rendered the default judgment void. The trial court agreed and vacated the judgment.

         ¶10 The CA Plan then moved for summary judgment, reasoning that because Unum alone determined eligibility and was obligated to pay benefits under the plan's terms, only Unum could be held liable under § 1132(a)(1)(B). To support its motion, the CA Plan attached the Unum insurance policy and an affidavit from Colorado Access's Vice President of Administrative Services and Corporate Compliance Officer. Both documents confirmed the following: the CA Plan's only governing document was the insurance policy; any benefits approved were paid only by Unum; and the CA Plan played no role in determining or paying benefits.

         ¶11 The trial court granted the CA Plan summary judgment, finding it wasn't liable for any benefits Unum decided not to pay because the plan document didn't require the CA Plan to pay benefits or to determine eligibility for benefits. Burton appealed, arguing the trial court erred as follows: (1) that it improperly set aside the default judgment because service on the Labor Secretary was proper under § 1132(d)(1); and (2) that it erred in granting summary judgment because the CA Plan was liable to pay Burton benefits due under § 1132(a)(1)(B).

         ¶12 A division of the court of appeals affirmed. In a published, unanimous opinion, it concluded the following: (1) the trial court correctly set aside the default judgment, because service on the Labor Secretary under § 1132(d)(1) is proper only where the summary plan description fails to designate either a plan administrator or some other person as an agent for service of process; and (2) the trial court correctly granted the CA Plan summary judgment because it was not a proper defendant to Burton's ERISA benefits claim.

         B. Facts in Olivar v. Public Service Employee Credit Union

         ¶13 Brenda Olivar's former employer, Public Service Employee Credit Union ("PSCU"), offered an ERISA-governed plan that it created by purchasing a long-term disability insurance policy issued and administered by Standard Insurance Company ("Standard"). The policy was the Plan's governing instrument. The summary plan description under the policy designated PSCU as the plan administrator and listed the agent for service of process as "Plan Administrator." The summary plan description also required additional notice of legal process involving benefits claims be sent to Standard.

         ¶14 After a car accident and a separate incident in which she fell down some stairs, Olivar submitted a claim to Standard for disability insurance benefits, which it denied. Olivar appealed, exhausting all administrative remedies for benefits. After losing, she sued the Public Service Employee Credit Union Plan ("PSCU Plan") for benefits due under ERISA § 1132(a)(1)(B). Like Burton, Olivar didn't serve PSCU the complaint- instead, she served only the Labor Secretary, also relying on § 1132(d)(1). The Labor Secretary didn't forward the complaint, so the PSCU Plan never answered and the trial court eventually entered a default judgment against it. In 2011, the trial court ordered PSCU to pay the default judgment amount as garnishee, so PSCU paid Olivar back benefits and began making monthly payments to her.

         ¶15 About two years later (and over six years after the trial court entered the default judgment), the PSCU Plan filed a motion to set aside and vacate the default judgment against it as void under C.R.C.P. 60(b)(3) due to improper service of process. The trial court agreed and set aside the default judgment. Olivar then submitted a motion to reconsider setting aside the default judgment, which the trial court also rejected.

         ¶16 The PSCU Plan moved for summary judgment, raising essentially the same arguments as the CA Plan in Burton's case. The PSCU Plan also submitted the Standard insurance policy and an affidavit from PSCU's Senior Vice President and Chief Operating Officer. Both documents confirmed the following: the PSCU Plan's only governing document was the insurance policy; any benefits approved were paid only by Standard; and the PSCU Plan played no role in determining or paying benefits.

         ¶17 The trial court granted the PSCU Plan summary judgment, and Olivar appealed, raising the same issues Burton raised in her appeal. Relying largely on the division's analysis in Burton v. Colorado Access, 2015 COA 111, ¶¶ 25-35, P.3d, a different division of the court of appeals affirmed the trial court in Olivar's case.

         ¶18 Burton and Olivar petitioned this court for writs of certiorari, ...


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