Donald A. Turner v. Unum Provident Corporation

* The Honorable Walter Herbert Rice, United States District Judge for the Southern District
of Ohio, sitting by designation.
NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 06a0185n.06
Filed: March 15, 2006
No. 04-2168
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
DONALD A. TURNER,
Plaintiff-Appellant,
v.
UNUM PROVIDENT CORPORATION,
Defendant-Appellee.
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ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF MICHIGAN
Before: CLAY and COOK, Circuit Judges; and RICE, District Judge. *
COOK, Circuit Judge. Donald Turner appeals a district court’s order denying his motion for
summary judgment and dismissing his claim that UnumProvident Corporation (“Unum”) breached
a disability insurance policy (“Policy”) issued by Paul Revere Life Insurance Company (“Paul
Revere”), a wholly-owned subsidiary of Unum, by incorrectly computing the Cost of Living
Allowance (“COLA”) in its monthly disability payments to him. Finding no error in the district
court’s decision, we affirm.
I

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In a prior action, Turner, an attorney claiming to be disabled from the practice of law, sued
Paul Revere alleging that it improperly denied him disability-income insurance benefits under the
Policy. The district court agreed with Turner that he was entitled to benefits under the Policy and
directed him to submit a proposed judgment for entry. Turner’s proposed entry calculated damages
as past-due annual benefits plus an annually-compounded seven-percent COLA. Unum challenged
the proposed judgment’s interest calculation, but not the compounding of the COLA. The district
court entered judgment against Unum consistent with the entry Turner submitted. Paul Revere
satisfied that judgment and has since paid Turner’s monthly benefit, including annual COLA
increases, but not a seven percent compounding increase.
The present action concerns the same policy, with Turner alleging that since the time of the
prior judgment, Unum has breached the Policy’s COLA rider by not compounding annually the
seven-percent COLA. Turner moved for summary judgment, maintaining that Unum, by agreeing
to a damages figure in the original judgment that calculated unpaid COLA on a compounded basis,
was barred by res judicata from re-litigating that issue. Unum, in turn, moved to dismiss or,
alternatively, for summary judgment, and Turner responded with a cross-motion for summary
judgment. The district court considered the arguments supporting the various motions and dismissed
Turner’s claim, ultimately concluding that, as a matter of law, the COLA rider entitled Turner to just
the seven percent annual adjustment, not compounding of that adjustment. On appeal, Turner
challenges the district court’s decision to deny his motion and cross-motion for summary judgment.

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II
We review de novo the district court’s decision to dismiss Turner’s complaint. Turner
alleges that Unum breached the Policy by failing to compound his COLA payments, contending that
because the prior judgment for past years’ unpaid benefits included an annually-compounded
COLA, res judicata (claim preclusion) should prevent Unum from litigating whether the Policy
requires the COLA be compounded. The district court rejected the argument, first deciding that
Turner’s argument was “more properly dealt with as a matter of issue preclusion” and then
concluding that Turner “fails to show that at any point in the prior lawsuit the parties litigated and
this Court decided the issue of whether COLA should be compounded,” a prerequisite to issue
preclusion (collateral estoppel). Noting that the “original litigation focused exclusively on whether
[Turner] was disabled and therefore entitled to receive disability benefits,” the court concluded that
“collateral estoppel or issue preclusion does not apply” and thus “Plaintiff is not entitled to judgment
as a matter of law.”
Turner argues that the district court erred by treating his argument as one advancing issue
preclusion and “by failing to perform a proper ‘claim preclusion’ analysis.” We disagree. We find
instead that the district court appropriately differentiated between the doctrines of claim and issue
preclusion and correctly found the latter inapt.
The doctrine of claim preclusion establishes that a judgment in a prior suit between the same
parties is final not only as to all matters offered and received to sustain the claim, but also as to

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matters that might have been offered for that purpose. Mitchell v. Chapman, 343 F.3d 811, 819 (6th
Cir. 2003). Its purpose generally is to prevent parties from “claim splitting.” Turner contends that
res judicata should bar Unum from asserting a claim here that it should have asserted in the prior
action. Yet Unum did not assert any claim in the prior action—it was a defendant—and thus claim
preclusion does not apply, as the district court observed. And it is only claim preclusion that aids
Turner’s cause. His argument concerns claims that could have been raised, and with issue
preclusion, only claims actually litigated warrant preclusive effect. Turner did not litigate the
compounding method of COLA computation in the prior litigation, so no preclusive effect attends
that issue here. Issue preclusion dictates that “once an issue is actually and necessarily determined
by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on
a different cause of action involving a party to the prior litigation.” Montana v. United States, 440
U.S. 147, 153 (1979). Although the parties compounded the COLA for purposes of the prior
judgment, the issue was not judicially resolved and thus remains a proper subject of litigation in a
later suit. The district court correctly determined that issue preclusion did not foreclose Unum
raising defenses to Turner’s COLA-compounding claim, and that claim preclusion did not apply.
III

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Turning to the merits of his claim, Turner contends that the terms of the Policy’s COLA
rider plainly require Unum to compound the COLA and that Unum, by failing to compound the
COLA, breached the Policy. The rider provides in relevant part that the COLA
benefit will start on the 366th day of the Disability. This benefit will be paid
monthly. The amount We will pay starts at 7 percent of the Base Amount. The Base
Amount is the monthly amount of the Total or Residual Disability benefit payable
under Your Policy. . . . We will later add 7 percent of the Base Amount to the
monthly amount of this benefit. We will do this on each anniversary of Your
Disability, after the first, while it continues.
Turner argues that the word “starts” implies that the COLA will increase on a compounded basis.
The district court correctly concluded that the Policy does not require Unum to compound
the COLA, entitling Unum to judgment as a matter of law on Turner’s breach-of-contract claim.
By its plain language, the Policy instructs Unum to add seven percent of the Base Amount—“the
monthly amount of the total or residual disability benefits payable under the policy”—to the Base
Amount on each anniversary of the disability, excluding the first. The word “starts” indicates the
COLA begins at seven percent of the Base Amount in the first year in which the COLA becomes
payable. In each succeeding year, Unum must increase the COLA amount by another seven percent
of the Base Amount. “Base Amount” is a defined term, and no language suggests that it should
increase year-to-year. The district court reasonably read the word “starts” as corresponding to the
benefit thereafter increasing annually. The total benefits increase, but only by fixed increments.

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The word “starts” did not persuade the district court that the COLA must be compounded, and we
are not persuaded that the district court erred.
IV
Because Unum did not breach the Policy by failing to compound the COLA, we affirm the
district court’s dismissal of this suit. And since Turner did not move for judgment as a matter of
law, we determine that the only logical conclusion to be drawn from the wording of the court’s
decision is that it sustained Unum’s FED . R. CIV . P. 12(b)(6) motion, finding Turner unentitled to
compounding as a matter of law.
AFFIRMED

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