Opinion
No. C98-0079
July 30, 1999
ORDER
This matter comes before the court pursuant to defendant's March 12, 1999 motion for summary judgment (docket number 20). Plaintiffs filed a motion for summary judgment and a resistance to defendant's motion for summary judgment on March 15, 1999 (docket numbers 25 and 31, respectively). For the reasons set forth below, defendant's motion for summary judgment is denied. Plaintiff's motion for summary judgment is granted.
The plaintiffs in this case, the Mercados, claim that the defendant violated the written trust agreement by failing to pay infertility benefits and improperly amending the plan to eliminate coverage for fertility treatment. The defendant in this case, Hy Vee and Affiliates' Benefit Plan Trust (Hy Vee), contends that summary judgment is appropriate because it is undisputed that Hy Vee notified the Mercados that the plan was being amended to exclude reimbursement for infertility treatment. Hy Vee also argues that summary judgment is warranted because the Mercado's claim is a breach of fiduciary duty claim, which is barred by the applicable three-year statute of limitations. The Mercados claim that their motion for summary judgment should be granted because Hy Vee improperly amended the terms of their health plan and failed to notify the Mercados of its intent to amend the plan to exclude coverage for infertility treatments. Moreover, the Mercados argue that their claim is based upon an alleged breach of a written contract, thereby invoking the 10 year statute of limitations. Finally, the Mercados contend that Hy Vee is estopped from denying them coverage now for services it covered in the past.
Summary Judgment
A motion for summary judgment may be granted only if, after examining all of the evidence in the light most favorable to the nonmoving party, the court finds that no genuine issues of material fact exist and that the moving party is entitled to judgment as a matter of law. Kegel v. Runnels, 793 F.2d 924, 926 (8th Cir. 1986). Once the movant has properly supported its motion, the nonmovant "may not rest upon the mere allegations or denials of [its] pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). "To preclude the entry of summary judgment, the nonmovant must show that, on an element essential to [its] case and on which [it] will bear the burden of proof at trial, there are genuine issues of material fact." Noll v. Petrovsky, 828 F.2d 461, 462 (8th Cir. 1987), cert. denied, 484 U.S. 1014 (1988) (citing Celotex Corp. v. Catrett, 477 U.S. 317 (1986)). Although "direct proof is not required to create a jury question, . . . to avoid summary judgment, `the facts and circumstances relied upon must attain the dignity of substantial evidence and must not be such as merely to create a suspicion.'" Metge v. Baehler, 762 F.2d 621, 625 (8th Cir. 1985), cert. denied, 474 U.S. 1057 (1986) (quoting Impro Prod., Inc. v. Herrick, 715 F.2d 1267, 1272 (8th Cir. 1983), cert. denied, 465 U.S. 1026 (1984)).
Statement of Material Facts Not in Dispute
Edgardo Mercado began working for Hy Vee in 1992 and was employed by Hy Vee until April or May of 1996. Mr. Mercado and his wife, Linda were covered by Hy Vee's health care plan during his employment. In 1993, the Mercados wrote a letter inquiring whether infertility treatments were covered under Hy Vee's health care plan. Because the infertility treatments were necessary due to a physical condition and not due to a prior sterilization procedure, the Mercados were told that the treatments would be covered. Hy Vee paid benefits for the all of Mercado's infertility treatments in 1993 and 1994. Effective January 1, 1995, Hy Vee changed the terms of its plan to exclude coverage for infertility treatments, regardless of causation. Hy Vee did not cover the infertility treatments the Mercados received in 1995. The Mercados originally filed suit in the Small Claims Division in Iowa District Court for Linn County on May 12, 1998. The case was removed to United States District Court for the Northern District of Iowa.
Under the terms of the agreement, infertility treatments were not covered if the claimant had previously undergone a voluntary sterilization procedure.
CONCLUSIONS OF LAW ERISA — Notice Requirement
Hy Vee claims that it notified Mr. Mercado of the impending changes in November of 1994 when it showed all of its employees a video outlining the terms of the group health care plan that would be effective January 1, 1995. Mr. Mercado argues that neither he, nor his wife ever watched such a video, and were unaware of the changes until they had undergone a fertility treatment in January of 1995 and coverage for the procedure was denied. Based upon these theories, both parties claim they are entitled to summary judgment.
It is undisputed that under ERISA insurance benefits may be amended, added, or deleted. However, plan administrators must notify those affected of any changes in a "timely and understandable manner." Wilson v. Group Hospitalization Med. Servs., Inc., 791 F. Supp. 309, 311 (D.D.C. 1992). At issue is whether Hy-Vee, as plan administrator, notified the Mercados of the amendment to their health care plan which eliminated coverage for all infertility treatments, in a timely manner.
If there is a modification or change described in section 1022(a)(1) of this title that is a material reduction in covered services or benefits provided under a group health plan . . . a summary description of such modification or change shall be furnished to participants and beneficiaries not later than 60 days after the date of the adoption of the modification or change.29 U.S.C. § 1024(b)(1).
"[A] `material reduction in covered services or benefits' means any modification to the plan or change in the information required to be included in the summary plan description that, independently or in conjunction with other contemporaneous modifications or changes, would be considered by the average plan participant to be an important reduction in covered services or benefits under the plan." 29 C.F.R. § 2520.104b-3(d)(3)(i). Hy Vee does not dispute that the elimination of coverage of infertility treatments was a "material reduction in covered services or benefits."
Hy Vee claims that in November of 1994 it notified all of its employees of changes to be made to the employee health care plan, which would be effective January 1, 1995. The Mercados claim they were unaware of any changes until they underwent an infertility treatment in early 1995 and their health insurance refused to cover the procedure. Viewing all evidence in a light most favorable to the Mercados, there does exist a factual dispute whether timely notice of the reduction in benefits was provided. However, "an amendment to a welfare benefit plan is valid despite a beneficiary's lack of personal notice, unless the beneficiary can show active concealment of the amendment, or `some significant reliance upon, or possible prejudice flowing from' the lack of notice." Godwin v. Sun Life Assur. Co. of Canada, 980 F.2d 323, 328 (5th Cir. 1992) (quoting Govoni v. Bricklayers, Masons Plasterers Int'l Local No. 5 Pension Fund, 732 F.2d 250, 252 (1st Cir. 1984)). See also, Henne v. Allis-Chalmers Corp., 660 F. Supp. 1464, 1474 (E.D. Wis. 1987) (noting that award of money damages based on disclosure violations requires a showing of "active concealment or of some significant reliance upon or possible prejudice"); Sophie v. Lincoln Nat'l Life Ins. Co., 1997 WL 603890, at *5 (N.D. Ill. 1997) (same).
The Mercados contend that they would not have undergone the fertility treatment in early 1995 had they known their insurance would not cover it. While there is no evidence of active concealment on Hy Vee's part, it is arguable that the Mercados significantly relied upon the fact that their insurance company had previously covered their fertility treatments. Therefore, Hy Vee's motion for summary judgment is denied on this basis.
Statute of Limitations
Hy Vee claims that it is entitled to summary judgment because the Mercado's cause of action is based upon a breach of fiduciary duty, and the three year statute of limitation, as set forth in 29 U.S.C. § 1132(2), has expired. The Mercados claims for benefits were denied in early 1995. Suit was not commenced in the Small Claims Division in and for the Iowa District Court for Linn County until May 12, 1998. The Mercados counter that the appropriate statute of limitations is the ten year Iowa statute of limitation for breach of a written contract. See Iowa Code § 614.1(5). The court agrees with the Mercados.
There is no federally-mandated statute of limitations for ERISA claims. Therefore, courts look to the most analogous state limitations period in determining the appropriate statute of limitations to apply. Johnson v. State Mut. Life Assurance Co. of America, 942 F.2d 1260, 1261-1262 (8th Cir. 1991). However, characterizing a plaintiff's claim for statute of limitations purposes is a question of federal law. Id. at 1262. Unless a breach of an ERISA trustee's fiduciary duties is alleged, benefit claims should be characterized as a contract action for statute of limitations purposes. Id. at 1263.
The Mercados claim alleges that Hy Vee refused to pay claims it should have paid and improperly reduced their coverage under the plan. No breach of fiduciary duty has been alleged. Therefore, the Iowa ten year statute of limitations applies. Hy Vee's motion for summary judgment on this basis is denied.
Improper Amendment of the Plan
The Mercados claim that they are entitled to summary judgment because Hy Vee improperly amended their health care plan to eliminate coverage for infertility treatments. Hy Vee contends that it acted properly in amending the Mercados health plan because under the terms of the plan, it retained unfettered discretion to amend any of the plan's provisions. In support of its argument, Hy Vee relies on section 10.01 of the plan, which provides, in relevant part:
Subject to provisions of Section 10.02 of this Article X, the Company may at any time and from time to time, by action of its Board of Directors, amend any of the provision [sic] of this Agreement; provided, however, that no amendment shall change substantially the powers, duties, or liabilities of the Trustees, without the approval of the Trustees.
However, section 10.02 provides, in relevant part:
No amendment shall be made to this Agreement which shall result in the forfeiture or reduction of the amount of life, income, medical or dental benefits payable on the account of the sickness of a Member or Dependent Member that occurred prior to the date of such amendment; provided, however, that nothing herein contained shall restrict the right to amend the provisions hereof relating to the administration of the Plan and Trust.
The Mercados claim that Mrs. Mercado's infertility is a "sickness," and therefore reducing coverage for fertility treatments that arise "on the account of the sickness" violates the express terms of the agreement. The court agrees.
"ERISA does not create any substantive entitlement to employer-provided health benefits or any other kind of welfare benefits. Employers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans." Curtiss-Wright Corp. v. C. Schoonejongen, 514 U.S. 73, 78, 115 S. Ct. 1223, 1228 (1995). However, whether reducing welfare benefits is proper depends on the language contained in the plan. Howe v. Varity Corp., 896 F.2d 1107, 1109 (8th Cir. 1990). "Welfare benefits may be modified or terminated absent the employer's contractual agreement to the contrary." Id. See also Anderson v. Alpha Portland Indus., Inc., 836 F.2d 1512 (8th Cir. 1988) cert. denied, 489 U.S. 1051 (1989); Ravenscraft v. Hy-Vee Employee Benefit Plan Trust, 85 F.3d 398 (8th Cir. 1996); DeGeare v. Alpha Portland Indus., Inc., 837 F.2d 812 (8th Cir. 1988), vacated on other grounds, 489 U.S. 1049 (1989) (same). Therefore, the issue becomes one of contract interpretation. Id.
As previously noted, the plain language of the plan provides that the plan will not be amended in a manner which would reduce the amount of medical benefits payable on account of a sickness occurring prior to the date of the amendment. See Section 10.02 of the plan. Furthermore, section 11.07 of the plan provides, in relevant part: "this Agreement, as amended from time to time, shall be administered, construed, and enforced according to the laws of the State of Iowa and in courts situated in that state."
The Iowa Supreme Court has addressed the issue of whether infertility constitutes a sickness and found that it does. Witcraft v. Sundstrand Health Disability Group Benefit Plan, 420 N.W.2d 785 (Iowa 1988). Therefore, the court finds that there exists no genuine issue of material fact as to whether Hy Vee amended its employee health care plan in violation of the agreement. Furthermore, Hy Vee's reliance on Ravenscraft, supra, is misplaced. At issue in Ravenscraft was an amendment to the plan which eliminated coverage for infertility treatments if the claimant had previously undergone a voluntary sterilization procedure. The plaintiff in Ravenscraft sought infertility treatments as a result of a prior tubal ligation sterilization procedure, not because her reproductive organs were diseased. The plan still provided that no amendments would be made that would eliminate coverage for a pre-existing sickness. Mrs. Mercado's treating physician has provided an affidavit attesting that she suffers from severe tubal disease and has for several years.
Upon the foregoing,
IT IS ORDERED
Defendant's motion for summary judgment is denied. Plaintiff's motion for summary judgment is granted. Defendant is ordered to pay plaintiffs the full amount of coverage due under the plan.