United States District Court, W.D. North Carolina, Charlotte Division
D. Whitney Chief United States District Judge.
MATTER is before the Court following a bench trial held
before the undersigned on June 4, 2019. Plaintiffs, Eric
Kinsinger and Denise Kinsinger, brought seven claims for
relief: (1) failure to pay wages under the North Carolina
Wage and Hour Act, (2) breach of contract, (3) wrongful
denial of benefits under ERISA, (4) breach of fiduciary duty
under ERISA, (5) legal and equitable relief on account of
breach of fiduciary duty, (6) statutory penalties under ERISA
§ 502 for failure to provide documents, and (7)
attorney's fees, interest and such other relief as proper
under ERISA and North Carolina Law. (See generally
Doc. No. 33). Pursuant to Rule 52(a)(1) of the Federal Rules
of Civil Procedure, the following constitutes the Court's
findings of fact and conclusions of law.
Findings of Fact
Court makes the following factual findings based upon the
testimony of Eric Kinsinger at trial, Plaintiff's trial
exhibits, and undisputed facts submitted by the parties. The
Court notes that in preparation for trial, parties submitted
extensive stipulations of fact.
William H. Winn Jr. (“Winn”) was President of
SmartCore, LLC (“SmartCore”). (Doc. No. 109, p.
Steven Matthew Good (“Good”) was a principal of
and Winn were the only members (owners) of SmartCore, were
its sole managers, and controlled all management,
operational, and employment aspects of SmartCore.
Id. at 3-4.
and Winn hired employees of SmartCore, including Eric
Kinsinger, who was hired as a full-time employee of SmartCore
in October 2014. Id. at 4.
and Winn bargained with, and set terms and conditions of
employment, for employees of SmartCore. Id.
and Winn made the decision for SmartCore to cease active
business activities. Id.
Plan Organization and Funding
SmartCore adopted a group health plan that provided payment
for major medical benefits called the SmartCore, LLC Group
Health Plan (“Plan”) on December 18, 2015, with
an effective date of December 1, 2015. Id.; (Pl. Ex.
A-I, p. 1).
SmartCore was the Plan Sponsor and Plan Administrator. (Doc.
No. 109, p. 3). Under the plan, SmartCore, would evaluate the
costs of the Plan based on projected Plan expenses and would
determine the amount to be contributed by the covered
employees. (Pl. Ex. A-I, p. 9); (Pl. Ex. B, p. 8). The
contributions received from “Eligible Employees”
were to be used to cover Plan costs. (Pl. Ex. A-I, p. 9);
(Pl. Ex. B, p. 8). SmartCore was to pay “Plan benefits
and administration expenses directly from [SmartCore's]
general assets.” (Doc. No. 109, p. 4); (Pl. Ex. A-I, p.
SmartCore withheld wages from Plaintiff and other employees
to cover the costs of the Plan. (Doc. No. 109, p. 6);
(See Pl. Ex. G).
SmartCore entered into an administrative services agreement
with Starmark, Inc. (“Starmark”). As the initial
claims fiduciary for the Plan, Starmark determined
eligibility benefits under the Plan. (Doc. No. 109, p. 4);
(Pl. Ex. B., p. 2).
SmartCore also purchased stop-loss insurance from Trustmark
Life Insurance Company (“Trustmark”). Under that
agreement, Trustmark reimbursed SmartCore for a certain
portion of the “reasonable and customary fee actually
paid by [SmartCore] for eligible benefits under the
Plan” in exchange for monthly premiums. (Doc. No. 109,
p. 4); see also (Pl. Ex. C) (“The Employer
[SmartCore] is entitled to the reimbursement determined in
this Contract if the Employer is eligible for insurance under
the provision of this Contract.”).
SmartCore agreed to pay Trustmark monthly premiums for (1)
Trustmark's stop-loss insurance policy, (2) benefits paid
under the plan administered by Starmark, and (3)
Starmark's services (collectively, “Health Plan
Expenses”). (Doc. No. 109, p. 4-5); (Pl. Ex. B, p. 5);
(Pl. Ex. C, p. 4).
SmartCore, LLC, under the direction of Defendants Good and
Winn, stopped paying the premiums necessary to fund the
Health Plan Expenses and benefits. (Doc. No. 109, p. 6).
SmartCore, Good, and Winn instead used their employee's
withholdings for other purposes. Id.
or about February 5, 2016, Starmark notified SmartCore it was
cancelling the stop-loss insurance and its administrative
services contract with SmartCore because SmartCore failed to
make payments as required for Health Care Expenses.
Id.; (Pl. Ex. E).
Eric Kinsinger was a participant in the Plan because of his
employment with SmartCore. (Doc. No. 109, p. 5).
Denise Kinsinger was a participant in the Plan as a dependent
of her husband, Eric. Id.
Eric and Denise Kinsinger were covered under the
“Plan” from its effective date of December 1,
2015, until Eric Kinsinger's resignation on or about
February 29, 2016. Id.
of December 31, 2015, there were eighty-nine participants in
the plan, fifty-seven of whom were employees while thirty-two
of whom were dependents of employee participants.
Id.; (Pl. Ex. D).
Medical Treatment Incurred by Denise and Medical
December 9, 2015, Dr. Pillai diagnosed Denise with
Menorrhagia and Adenomyosis, and recommended she be treated
with a hysterectomy. (Doc. No. 109, p. 5); (Pl. Ex. Q, p.
Starmark, acting on behalf of the Plan, had Dr. Matthew
Zawelinski, review Denise's claim. (Doc. No. 109, p. 5).
Dr. Zawelinski determined that the procedure was medically
necessary and eligible for benefits under the Plan.
Id.; (Pl. Ex. O, p. 22).
January 8, 2016, Starmark granted pre-authorization for the
procedure and notified Denise, Eric, and Carolina Healthcare
System (“CHS”) of their decision. (Doc. No. 109,
p. 6); (Pl. Ex. A-iii).
that same date, Denise received the hysterectomy. (Doc. No.
109, p. 6).
or about January 21, 2016, CHS billed the Plan $39, 931.45
for the hysterectomy and related treatment. Id.;
(Pl. Ex. F). The Plan did not pay the bill. (Doc. No. 109, p.
SmartCore's handling of Plaintiffs' Medical
February 19, 2016, SmartCore sent a letter to Eric Kinsinger,
regarding “Cancellation of Medical Insurance
Policy.” Id. The letter stated: “As you
may know, our insurance was cancelled effective 1/1/2016 for
non-payment. We were not made aware of this until 2/8/2016.
We have made every effort to secure the funds to reinstate
the insurance; however, at this time, we have not been able
to do so.” Id. The letter did not provide
information specific to Plaintiffs' claim, nor did it
indicate whether the claim was denied. (Pl. Ex. J).
the end of February, SmartCore sent an undated letter to Eric
Kinsinger and other participants, stating, “SmartCore
intends to pay for any medical expense or benefit under the
Medical Plan for which the services were provided between
January 1, 2016 and February 29, 2016. (Pl. Ex. K).
March 31, 2016, SmartCore's Benefits Committee sent a
letter to Eric wherein it identified itself as the Plan
Administrator. (Pl. Ex. A-vii).
Benefits Committee consisted of Good and Winn. (Doc. No. 109,
p. 7). Good and Winn were jointly the Plan Administrator on
and after March 31, 2016 and were responsible for both
evaluating and paying claims under the Plan. Id. at
March 31 letter stated, “[t]he Benefit Committee
believes that the surgery provided . . . to the Plan
Participant [(Denise)], was not pre-certified as required
under the Plan.”. (Pl. Ex. A-vii). The Committee then
requested Plaintiffs to provide “information required
for pre-certification” before it rendered a final
June 3, 2016, Eric Kinsinger, through counsel, wrote the
Benefits Committee and requested documents for the Plan.
(Doc. No. 109, p. 8); (Pl. Ex. A-ix).
Specifically, Eric Kinsinger requested the following
documents in writing:
• The plan document (including any insurance
• The latest updated ...