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Susan Lorenzi v. Prudential Insurance Co. of

April 26, 2013

SUSAN LORENZI, PLAINTIFF,
v.
PRUDENTIAL INSURANCE CO. OF
DEFENDANT.



The opinion of the court was delivered by: Robert C. Jones United States District Judge

ORDER

This case arises out of an alleged underpayment of life insurance benefits. Pending before the Court is Plaintiff's Motion for Attorney's Fees (ECF No. 56). For the reasons given herein, the Court grants the motion in part.

FACTS AND PROCEDURAL HISTORY

Plaintiff Susan Lorenzi is a Nevada citizen and an employee of non-party Microsoft, Inc. Compl. ¶¶ 3--4, 7, Apr. 18, 2011, ECF No. 1-2). In March 2009, Microsoft offered Plaintiff group life insurance with Defendant Prudential Insurance Company of America ("Prudential") number G-43994 (the "Policy"). (Id. ¶¶ 5, 8). The Policy is between Prudential and Microsoft, with Plaintiff as a third-party beneficiary. (Id. 5:5--6). The Policy does not provide for employer contributions, and Microsoft has never made any contributions to the Policy's premiums, thereby exempting the Policy from ERISA coverage pursuant to 29 U.S.C. § 1321(a)(5). (Id. ¶¶ 6, 21). Under the Policy, Plaintiff could elect to insure the life of her husband Rodney A. Lorenzi for 20% to 50% of the amount her own life was insured; in Plaintiff's case, this was between $89,000 and $223,000. (See id. ¶ 9). Plaintiff chose to insure her husband's life for the maximum possible amount of $223,000 ("full coverage"), with Plaintiff as the beneficiary. (Id. ¶¶ 9, 13). However, Microsoft only deducted premiums from Plaintiff's paychecks as if she had chosen to insure Mr. Lorenzi for $89,000 ("partial coverage"), and Prudential therefore only insured his life for that amount. (See id. ¶¶ 9--11).

Shortly after entering into the Policy, Plaintiff received an email message from Defendant an "Evidence of Insurability" ("EOI") form, but she ignored the email because it was marked as "low priority" by her email program. (See id. ¶ 12). Mr. Lorenzi died unexpectedly on 1, 2009. (Id. ¶ 14). On May 6, 2009, Plaintiff received another email from Prudential,

not yet aware of Mr. Lorenzi's death, indicating that Prudential needed more information about Mr. Lorenzi before it would extend full coverage. (See id. ¶ 15).*fn1 Plaintiff

ignored this email, as well, because it was marked as "low priority" by her email program, but she eventually reviewed it on June 1, 2009. (See id. ¶¶ 16, 18). The second email contained Defendant's request that she complete an EOI form for her husband. (Id. ¶ 18).

after receiving the email ("at about the same time"), Plaintiff submitted her husband's death certificate to Defendant. (See id. ¶ 17). Plaintiff filled out the EOI and returned it by fax on June 4, 2009, signing it as "surviving spouse." (Id. ¶ 19). Beginning in May (2009? 2010?), Microsoft began deducting full coverage premiums from Plaintiff's paychecks, retroactive to the date Plaintiff entered into the Policy, and continued to deduct full premiums until June 30, 2010.

¶ 20).*fn2 Defendant accepted these premium payments. (Id. ¶ 22).

On July 17, 2009, Defendant informed Plaintiff that it had denied her claim in part. (Id.

¶ 30). Defendant paid Plaintiff only $89,000, explaining that an EOI form had to be completed before an insured died in order for Defendant to extend full coverage. (Id. ¶ 31). Plaintiff notes that the second email indicated the EOI form for her husband was not due until June 6, 2009, but

based on Defendant's assumption that the insured was still alive, as Plaintiff notes have sent Defendant her husband's death certificate after she received the second See id. ¶¶ 15--18, 31). Plaintiff demanded that Defendant pay the difference between partial and full coverage ($134,000), but Defendant refused and denied her two appeals. (See id.

Plaintiff sued Defendant in state court on four causes of action: (1) breach of contract; (2)

implied covenant of good faith and fair dealing; (3) negligence; and (4) negligent misrepresentation. Defendant removed based upon complete preemption under ERISA and moved for summary judgment based upon ERISA preemption. The Court ruled that the Policy was not an ERISA plan, but that Defendants had also removed based upon diversity. The Court noted that it would await cross motions for summary judgment on the state law claims. The parties filed those motions. Plaintiff asked for a judgment of $134,000 plus interest, etc., and Defendant requested that the Plaintiff take ...


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