Summary
noting that application of equitable estoppel involving oral interpretations of ERISA plans is an open question in the Fifth Circuit
Summary of this case from Loria v. Children's HospitalOpinion
Civil Action No. 3:99CV33-P-A
June 14, 2000
MEMORANDUM OPINION
This cause is before the Court on dispositive motions filed by both parties [10-1], [17-1], and [37-1]. The Court, having reviewed the motions and supporting materials, the authorities cited, and being otherwise fully advised in the premises, finds as follows, to-wit:
FACTUAL BACKGROUND
The facts giving rise to the instant litigation are as follows: William Earl Wright (hereafter "Wright") was employed by Expressions Furniture, Inc. (now known as Westwood Industries, Inc.) from 1980 until April 17, 1996. At the time his employment terminated, Wright accepted a severance benefits package which included a provision relating to insurance benefits. The agreement provided that Wright could maintain his current health insurance for a period of fifteen (15) weeks (the "Severance Period") after his termination by paying the normal contribution premium for company employees, said contribution to be deducted from his weekly income continuance payments provided for elsewhere in the severance agreement. Thereafter, the agreement provided that upon the expiration of the Severance Period, Wright would be eligible to purchase continuing healthcare coverage at a cost of 102% of the Company's cost for the insurance for a maximum period of eighteen (18) months pursuant to COBRA.
Effective May 1, 1996, Westwood provided insurance for its employees through a group medical insurance policy underwritten by Anthem Life Insurance Company of Indiana (hereafter Anthem). A certificate of insurance numbered 587018052 was issued to Wright by Anthem. Effective March 1, 1996, underwriting and administration of Westwood's group insurance was transferred to Anthem Health and Life Insurance Company (Anthem Health) with coverage continuing under the current benefit structure and rate level.
During the Severance Period, Wright paid the employee contribution premium as provided for in his severance agreement. At the expiration of said period, he completed a form electing to exercise his right to COBRA continuation coverage at a premium rate of $327.92 monthly. Wright remitted premium payments to Acordia of Mississippi, a company which acted as agent/administer for Anthem.
In late 1997 or early 1998, Mr. Wright (aware that his COBRA continuation coverage would soon expire) contacted Acordia to inquire concerning whether he needed to obtain alternative health insurance coverage or had the option of continuing coverage through Anthem. The Acordia representative advised him to continue remitting his premiums and that his coverage would be converted to an individual policy at the expiration of his COBRA coverage.
In reliance on the agent's representations, Mr. Wright continued to submit monthly premium payments to Acordia in the amount of $327.92 through August 1998. Said premium payments were accepted by Acordia, although the company never issued an individual policy to replace Wright's COBRA coverage. Anthem never provided Wright notice that his COBRA benefits had expired or that he was otherwise without coverage.
On April 17, 1998, Wright sustained serious injuries in an automobile accident. He was hospitalized for several days and incurred related medical expenses in excess of $85,000.00. On April 22, 1998 and April 24, 1998, Anthem issued letters certifying Wright for a hospital stay totaling nineteen (19) days. Wright submitted insurance claims to Anthem, which were denied on the ground that Wright was no longer insured pursuant to COBRA at the time of his hospitalization and treatment.
The letters contain limiting language in bold fact type: "Anthem's certification does not guarantee payment, health care benefits, or coverage. Claims are paid according to your health plan and the use of certain health care providers may be important under your plant. Questions regarding eligibility, coverage or other features of your plan should be directed to your plan administrator or claims payor."
Despite Anthem's denial of the claims, Wright's contact with North Mississippi Medical Center revealed that the hospital verified coverage with Michelle Johnson of Acordia on April 20, 1998; Johnson represented to the hospital that Wright's coverage began May 1, 1996 and was of continuing force and effect. Similarly, after denial of his claims Wright too contacted Anthem and was advised by Jason Allen that his coverage under the Anthem policy terminated effective May 1, 1998.
Wright's counsel, Cliff Easley, also contacted Anthem on or about August 7, 1998 and spoke with Beverly Pouncil, who informed him that Wright's coverage was in force and that, as best she could tell, it was good through January 1, 1999. In response to Easley's August 27, 1998 and October 28, 1998 letters to Anthem outlining said representations and requesting that the company review its claims decision, Anthem claims supervisor Terry McCarty wrote Easley on November 10, 1998 and again denied coverage on the ground that Westwood's group coverage with Anthem terminated on April 1, 1998 and suggesting that claims relating to Wright's April 1998 hospitalization and treatment be submitted to Westwood's new group carrier.
This representation likely stemmed from Easley's use of the group policy number and Wright's social security number as references in his correspondence to Anthem. These references were the only ones available to Wright because Anthem never sent him an individual conversion policy.
In February, 1999, Wright filed suit against Anthem Life Insurance Company of Indiana and Anthem Health Life Insurance Company in the Circuit Court of Calhoun County, Mississippi asserting a right to benefits allegedly due him under his oral contract for an individual conversion policy and further alleging a right to extracontractual and punitive damages based on the defendants' bad faith denial of benefits. Alternatively, Wright asserts his entitlement to conversion coverage based on the doctrine of equitable estoppel. He also asserts the alternative theory that he was entitled to extended COBRA benefits due to the fact that he became disabled for Social Security purposes shortly after leaving Westwood's employ. Defendants removed the cause to this Court on March 4, 1999 basing the removal on federal question jurisdiction and the preemptive effect of ERISA. Defendants subsequently filed an Answer denying liability.
In June 1999 defendants filed a Motion to Dismiss or For Partial Summary Judgment with regard to all state law claims asserted by ERISA, as well as the asserted remedies of extracontractual and punitive damages. Defendants likewise sought this Court's entry of an order striking plaintiff's jury demand. In July 1999, plaintiff reciprocated with a Motion for Partial Summary Judgment seeking a judgment ERISA does not have any preemptive effect on his claims and likewise seeking summary judgment as to the defendants' liability to pay benefits relative to his April 1998 hospitalization. Following the close of discovery, each of the parties filed supplemental motions for summary judgment. The Court has considered the motions and accompanying exhibits, as well as the briefs submitted by the parties, and is ready to rule.
Defendants also filed a Motion to Stay Proceedings Pending Determination of ERISA's Applicability and Completion of Discovery. The discovery deadline having expired on January 3, 2000, this issue is now moot.
STANDARD OF REVIEW
The Federal Rules of Civil Procedure, Rule 56(c), authorizes summary judgment where "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corporation v. Catrett, 477 U.S. 317, 322, 91 L.Ed.2d 265, 106 S.Ct. 2548 (1986). The existence of a material question of fact is itself a question of law that the district court is bound to consider before granting summary judgment. John v. State of La. (Bd. Of T. for State C. U., 757 F.2d 698, 712 (5th Cir. 1985).
A judge's function at the summary judgment stage is not himself to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial. There is no issue for trial unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L.Ed.2d 202, 106 S.Ct. 2505 (1986).
Although Rule 56 is peculiarly adapted to the disposition of legal questions, it is not limited to that role. Professional Managers, Inc. v. Fawer, Brian, Hardy Zatzkis, 799 F.2d 218, 222 (5th Cir. 1986). "The mere existence of a disputed factual issue, therefore, does not foreclose summary judgment. The dispute must be genuine, and the facts must be material." Id. "With regard to `materiality', only those disputes over facts that might affect the outcome of the lawsuit under the governing substantive law will preclude summary judgment. Phillips Oil Company, v. OKC Corporation, 812 F.2d 265, 272 95th Cir. 1987). Where "the summary judgment evidence establishes that one of the essential elements of the plaintiff's cause of action does not exist as a matter of law, . . . all other contested issues of fact are rendered immaterial. See Celotex, 477 U.S. at 323, 106 S.Ct. at 2552. Topalian v. Ehrman, 954 F.2d 1125, 1138 (5th Cir. 1992).
In making its determinations of fact on a motion for summary judgment, the Court must view the evidence submitted by the parties in a light most favorable to the non-moving party. McPherson v. Rankin, 736 F.2d 175, 178 (5th Cir. 1984).
The moving party has the duty to demonstrate the lack of a genuine issue of material fact and the appropriateness of judgment as a matter of law to prevail on his motion. Union Planters Nat. Leasing v. Woods, 687 F.2d 117 (5th Cir. 1982). The movant accomplishes this by informing the court of the basis of its motion, and by identifying portions of the record which highlight the absence of genuine factual issues. Topalian, 954 F.2d at 1131.
"Rule 56 contemplates a shifting burden: the nonmovant is under no obligation to respond unless the movant discharges [its] initial burden of demonstrating [entitlement to summary judgment]." John, 757 F.2d at 708. "Summary judgment cannot be supported solely on the ground that [plaintiff] failed to respond to defendants' motion for summary judgment," even in light of a Local Rule of the court mandating such for failure to respond to an opposed motion. Id. at 709.
However, once a properly supported motion for summary judgment is presented, the nonmoving party must rebut with "significant probative" evidence. Ferguson v. National Broadcasting Co., Inc., 584 F.2d 111, 114 (5th Cir. 1978). In other words, "the nonmoving litigant is required to bring forward `significant probative evidence' demonstrating the existence of a triable issue of fact." In Re Municipal Bond Reporting Antitrust Lit., 672 F.2d 436, 440 (5th Cir. 1982). To defend against a proper summary judgment motion, one may not rely on mere denial of material facts nor on unsworn allegations in the pleadings or arguments and assertions in briefs or legal memoranda. The nonmoving party's response, by affidavit or otherwise, must set forth specific facts showing that there is a genuine issue for trial. Rule 56(e), Fed.R.Civ.P. See also Union Planters Nat. Leasing v. Woods, 687 F.2d at 119.
While generally "[t]he burden to discover a genuine issue of fact is not on [the] court, (Topalian, 954 F.2d at 1137), "Rule 56 does not distinguish between documents merely filed and those singled out by counsel for special attention — the court must consider both before granting a summary judgment." John, 757 F.2d at 712, quoting Keiser v. Coliseum Properties, Inc., 614 F.2d 406, 410 (5th Cir. 1980).
LEGAL ANALYSIS
The Court will state the respective positions of the parties in summary fashion before engaging in a more exhaustive analysis of the issues presented for consideration. Defendants assert a right to dismissal of all claims arising under state law based on ERISA's broad preemptive provision. They argue that Wright's right to recovery relates to an employer welfare benefit plan as governed by ERISA and that all of his state law claims are therefore necessarily preempted. Based on the same reasoning, defendants likewise contend that Fifth Circuit precedent precludes a jury trial on plaintiff's ERISA claims.
Plaintiff responds by asserting that Westwood's plan falls within the safe harbor provisions of regulations adopted by the Secretary of Labor, therefore exempting the plan from the scope of ERISA. He likewise argues that, even assuming Westwood's benefit plan is a qualified plan under ERISA, his purchase of individual conversion coverage defeats preemption as to claims arising out of the administration and denial of benefits under the conversion policy. Wright's claim hinges largely on the viability of his claim that defendants are equitably estopped to deny coverage based on their agent's representations concerning conversion coverage. Analysis of each of these issues follows.
Coverage Under ERISA
Is It an ERISA Plan?
The Employee Retirement Income Security Act of 1974 (ERISA) governs employee pension and welfare plans which meet the specific criteria set forth in the Act and as further explained by the decisional law interpreting ERISA. An employee welfare benefit plan is defined at 29 U.S.C. § 1002(1) as:
any plan, fund or program which was heretofore or is hereinafter established or maintained by an employer or an employee organization, or by both, to the extent such plan, fund or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance of otherwise, (A) medical, surgical, or hospital care of benefits, or benefits in the event of sickness, accident, disability, death or unemployment.
Id. Broken down, the essential elements of such a plan are:
a plan, fund or program;
established or maintained;
by an employer or by an employee organization, or both;
for the purpose of providing medical, surgical, hospital care, sickness, accident, disability, death, unemployment or vacation benefits;
to participants or their beneficiaries.
Meredith v. Time Ins. Co., 980 F.2d 352, 355 (5th Cir. 1993); Suggs v. Pan American Life Ins. Co., 847 F. Supp. 1324, 1330-33 (S.D.Miss. 1994).
Fifth Circuit case law further provides that an ERISA plan has been established if "from the surrounding circumstances a reasonable person could ascertain the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits." Hansen v. Continental Ins. Co., 940 F.2d 971 (5th Cir. 1991); Memorial Hospital System v. Northbrook Life Ins. Co., 904 F.2d 236, 240 (5th Cir. 1990). In this case, each of the above elements are met. The intended benefits are for healthcare, the beneficiaries are Westwood employees, former employees and their dependents. The plan is funded by the purchase of a group insurance policy paid for by both employer and employee contributions. Finally, the procedure for receiving benefits is the submission of claims to the group insurer, Anthem.
Is It Exempted from ERISA by Virtue of the Safe Harbor Regulations?
Notwithstanding the foregoing, plaintiff asserts that the Westwood employee welfare benefits plan is nonetheless exempt from ERISA because the plan falls within safe harbor provisions adopted by the Department of Labor. A group insurance program otherwise covered is exempted from ERISA regulation if the following criteria are met:
1) No contributions are made by an employer or employee organization;
Participation in the program is completely voluntary for employees or members;
The sole function of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publish the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and
The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.29 C.F.R. § 2510.3-1(j). Each of these criteria must be satisfied before a benefit plan is exempt from ERISA regulation.
In the present case, the Court finds that the plan does not qualify for exempt status under the safe harbor regulations because it fails to satisfy the first and fourth requisites: i.e., that there be no contributions by the employer and that the employer not perform any administrative function with respect to the plan other than collection and remission of premium payments. The plan documents indicate that Westwood assumed responsibility for enrollment and providing updated information concerning membership and dependent changes, as well as performing duties associated with the notice required by COBRA concerning continuation coverage. These along with other duties not enumerated here suffice to demonstrate that Westwood played a substantial role in the administration of the welfare benefit plan at issue. Hence, the plan is not exempt from the regulatory and enforcement mechanisms of ERISA.
Civil Enforcement Mechanism Provided by 29 U.S.C. § 1132
Congress provided a civil enforcement mechanism for individuals with claims arising out of the administration and/or payment of benefits under ERISA plans. Title 29, section 1132(a)(1)(B) provides:
A civil action may be brought
(1) by a participant or beneficiary
. . .
(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.
Id. In addition to the relief provided for by the above-quoted section, subsection (a)(3) also permits actions by participants "to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or . . . to obtain other appropriate equitable relief . . . to redress such violations. . . . 29 U.S.C. § 1132(a)(3).
These are the only available mechanisms for a claimant seeking redress pursuant to ERISA. And, as defendants have so aptly pointed out, under Fifth Circuit precedent, neither extracontractual damages (as recompense for emotional suffering) nor punitive damages are authorized under ERISA's civil enforcement provisions. Corcoran v. United HealthCare, Inc., 965 F.2d 1321, 1335 (5th Cir. 1992). Hansen v. Continental Ins. Co., 940 F.2d 971, 979 (5th Cir. 1991); Ramirez v. Inter-Continental Hotels, 890 F.2d 760, 763-64 (5th Cir. 1989); Therefore, insofar as plaintiff grounds his right to recovery on his status as a qualified beneficiary entitled to continuing health coverage pursuant to COBRA, he is not entitled to the recovery of either extracontractual or punitive damages.
The same is not true, however, with respect to a recovery predicated on the defendants' failure to properly administer or pay benefits under an individual contract for conversion coverage, should the Court ultimately conclude that such a contract existed. This analysis will be set out more thoroughly in the Court's discussion of preemption at section B. supra.
ERISA Preemption of State Law Claims
Defendants next assert an entitlement to judgment as a matter of law as to all state law claims as plead by plaintiff. To reiterate, plaintiff's Complaint asserts a claim under Mississippi law for the bad faith denial of his insurance claim; in addition to payment of the benefits allegedly due under the policy, plaintiff also seeks compensatory and punitive damages.
ERISA contains a broad preemptive provision which reads: "Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. . . ." 29 U.S.C. § 1144 (a). A state law "`relates' to an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 77 L.Ed.2d 490, 103 S.Ct. 2890, 2899-2900 (1983).
Subsection (b)(2)(A) excludes from preemption "any law of any State which regulates insurance, banking, or securities." However, this "savings" clause as it is commonly called, is of no help to plaintiff because the United States Supreme Court has expressly held that Mississippi's law of bad faith is not a law which "regulates" insurance; instead, it has its roots in the common law of torts and contract. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 95 L.Ed.2d 39, 107 S.Ct. 1549 (1987).
Defendants contend that plaintiff's state law claims are wholly preempted inasmuch as his bad faith claim has its basis in an alleged entitlement to continuation benefits under the group insurance plan provided by Westwood to its employees. They likewise contend that Wright's claim to conversion coverage is preempted because any right or entitlement to such coverage must be determined by reference to terms of Westwood's plan. They extend their argument to encompass Wright's claim for the improper administration and denial of benefits under the broad umbrella of preemption as well.
Plaintiff concedes that his state law claims for benefits under the Plan are preempted. Nonetheless, Wright urges the Court to adopt the reasoning employed by numerous other courts in deciding the preemptive effect of ERISA on state law claims based on individual conversion contracts. These courts have recognized a distinction between "claims arising from the right to convert to an individual policy and claims arising from the conversion policy itself." Mimbs v. Commercial Life Insurance Company, 818 F. Supp. 1556, 1561 (S.D.Ga. 1993).
Plaintiff did argue that the group medical coverage afforded him through Westwood was not a part of an ERISA plan; he likewise argued that even if it constituted a plan, it fell within the Department of Labor's safe harbor regulations. These issues were resolved in favor of the defendants.
Claims arising from the right to convert to an individual policy are grounded in ERISA and are to be decided by reference to the terms of the ERISA plan. 29 U.S.C. § 1162(5). Therefore, Wright's claim that he contracted with defendants for an individual policy is preempted and must be determined in accordance with § 1162(5) and applicable principles of federal common law.
By contrast, the conversion coverage itself . . . is for an individual as opposed to a class of beneficiaries. There is no showing that the conversion coverage in this case contains the requisite elements of an ERISA plan. Furthermore, once conversion has occurred and the policy is in force, there is no longer any "integral connection" between the individual conversion policy and the ERISA plan that gave rise to the right to convert.
. . . The connection between a state-law breach-of-contract claim for verification of coverage and payment of benefits allegedly due under the conversion policy appears to be too "tenuous, remote, [and] peripheral" to warrant a finding that the claim under the conversion coverage relates to the ERISA plan and is pre-empted by ERISA.
Mimbs, 818 F. Supp. at 1561-62. Accord, Demars v. CIGNA Corp., 173 F.3d 443 (1st Cir. 1999); Barringer-Willis v. Healthsource North Caroline Inc., 14 F. Supp.2d 780 (E.D.N.C. 1998); Mizrahi v. Provident Life and Accident Ins. Co., 994 F. Supp. 1452 (S.D.Fla. 1998); Powers v. United Health Plans of New England, Inc., 979 F. Supp. 64 (D.Mass. 1997); Loudermilch v. New England Mut. Life Ins. Co., 942 F. Supp. 1434 (S.D.Ala. 1996); McCale v. The Union Labor Life Ins. Co., 881 F. Supp. 233 (S.D. W.V. 1995); Vaughn v. Owen Steel Co., 871 F. Supp. 247 (D.S.C. 1994). But see Nechero v. Provident Life Accid. Ins. Co., 795 F. Supp. 374 (D.N.M. 1992); Beal v. Jefferson-Pilot Life Ins. Co., 798 F. Supp. 673 (S.D.Ala. 1992); Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341 (11th Cir. 1994) (distinguishing Mimbs on basis of individual versus group conversion policy); Rasmussen v. Metropolian Life Ins. Co., 675 F. Supp. 1497 (W.D.La. 1987); Mays v. UNUM Life Ins. Co. of America, 1995 WL 317102 (N.D.Ill. 1995); Reynolds v. Massachusetts Casualty Ins. Co., 900 F. Supp. 915 (E.D.Tenn. 1995), rev'd. on other grounds, 113 F.3d 1450 (6th Cir. 1997).
The Fifth Circuit has yet to consider the preemptive scope of ERISA as to as causes of action arising out of the allegedly improper administration and processing of benefits claims under an individual conversion policy. Only two district courts within this circuit have had occasion to consider this split in authority, Gabner v. Metropolitan Life Ins. Co., 938 F. Supp. 1295 (E.D.Tex. 1996) and Rasmussen, supra. The Gabner court left the question open as it was not necessary to the disposition of the case before it. Rasmussen turned on an entirely different set of facts in that the plaintiff in that case sought to "lift" benefits out of an ERISA group policy and add them to an individual conversion policy purchased at the time Rasmussen's employment terminated. In this case, however, Wright merely seeks to enforce the terms of an alleged contract for conversion coverage; the extent of benefits available under such a policy has yet to be fully addressed. Furthermore, even should benefits under the conversion policy ultimately be determined to be coextensive with the benefits available under the employer's ERISA plan, the Court is of the firm conviction that this alone is insufficient to defeat plaintiff's state law claims.
After careful consideration, the Court finds the reasoning employed by the court in Mimbs to be the more persuasive line of authority and therefore reaches the same conclusion. As noted by the Massachusetts district court in Powers:
[I]t is desirable that in a constitutional arrangement based upon respect for dual sovereignty, a federal statute, even one with the most laudable of goals, have some definite boundaries. In searching out a delimiting principle in this context, the conversion event seems a practicable choice, on the one hand because it is temporally defined, and on the other, because it is the point at which the link between the former employee and [his] antecedent group plan is most likely to be severed.979 F. Supp. at 69-70.
The Court is aware that the parties have indicated a desire to waive a jury trial. However, recent review of the docket indicates that no pleadings to that effect have been filed. Therefore, out of an abundance of caution, the Court will also include a ruling on the motion to strike jury demand.
Defendants also moved to strike Wright's demand for a jury trial. Fifth Circuit precedent plainly speaks to this issue. There is no right to a jury trial in suits involving ERISA. Calamia v. Spivey, 632 F.2d 1235, 1237 (5th Cir. 1980). See also McDonald v. Provident Indemnity Life Ins. Co., 60 F.3d 234, 238 n. 22 (5th Cir. 1995). Therefore, plaintiff is not entitled to trial by jury as to his asserted right to extended COBRA benefits on the basis of disability existing at or after the commencement of his COBRA continuation coverage. Nor is he entitled to a jury trial insofar as his claim for relief might turn on the recovery of "make-whole" relief pursuant to 29 U.S.C. § 1132(a)(3). Finally, Wright is not entitled to a jury trial on his claim that he entered into a contract for the purchase of an individual conversion policy, including his claim that defendants are equitably estopped from denying coverage.
However, this Court follows the reasoning of the district court in Vaughn v. Owen Steel Co., Inc., 871 F. Supp. 247 (D.S.C. 1994).
Therefore, issues concerning the availability of a conversion policy, or continuation coverage, or the formation of an individual contract of insurance, are all preempted by ERISA. If the Court finds that . . . [Anthem] did contract with . . . [plaintiff] for an individual policy [or that defendants are estopped to deny coverage], then any further issues concerning a breach of that policy are not preempted by ERISA and shall be decided by a jury according to state law, with the court exercising supplemental jurisdiction.
Id. at 249. Should the Court find in plaintiff's favor as to the formation of a contract for conversion coverage, by estoppel or otherwise, plaintiff will be entitled to a jury trial on the alleged breach of said contract.
D. Plaintiff's Right to Continuation Benefits Under COBRA
Defendants are entitled to summary judgment inasmuch as plaintiff seeks to enforce a right to benefits pursuant to 29 U.S.C. § 1132(a)(1)(B), as discussed earlier. To the extent his claim is predicated on his eligibility for COBRA benefits either under the original eighteen months continuation coverage to which he was entitled, or under the extended eligibility provisions for disabled beneficiaries, plaintiff's claim must fail. His initial eligibility period for COBRA began to run no later than September, 1996 — thereby ending no later than the end of February 1998. And plaintiff has failed to adduce any evidence which tends to establish that he provided either Westwood or Anthem with notice of his disability within the period contemplated by the Act — therefore, he is ineligible for the eleven months continuation coverage extended to disabled individuals. 29 U.S.C. § 1162(2)(A)(v) and § 1166(a)(3). However, to the extent that the prior pleadings do not reveal a claim pursuant to § 1132(c), the plaintiff is precluded from resort to such a remedy at this late date.
However, the Court declines to foreclose the possibility of plaintiff offering proof and legal authorities at trial which support a claim for equitable relief under § 1132(a)(3), as discussed infra, to the extent of costs incurred as a result of the defendants' failure to give notice of the expiration of his COBRA eligibility. This would include any expenses incurred for medical care and treatment for the time period preceding notice to Wright that his coverage had terminated during which time Wright remitted, and Anthem accepted, premium payments.
E. Plaintiff's Cross-Motion for Summary Judgment
Wright asserts entitlement to summary judgment by way of a cross motion for summary judgment. The motion seeks a ruling determining the defendants' liability to pay benefits based on premiums paid and accepted, as well as urging the Court to apply the theory of equitable estoppel in order to prevent defendants from avoiding coverage pursuant to their agent's alleged oral agreement to convert plaintiff to an individual policy.
Title 29, section 1162(5) provides:
(5) Conversion option
In the case of a qualified beneficiary whose period of continuation coverage expires under paragraph (2)(A), the plan must, during the 180-day period ending on such expiration date, provide to the qualified beneficiary the option of enrollment under a conversion health plan otherwise generally available under the plan.
Id. Defendants seize on the phrase "otherwise generally available" and argue that the Anthem policy did not provide a "generally available" conversion option. They point to the provision in the policy which governs continuation coverage under the plan. It reads:
CONTINUATION OF COVERAGE
Members are entitled to continue coverage under this Contract if coverage would otherwise terminate due to termination of 1) active employment; or 2) membership in an eligible class or classes. . . .
Continuation of coverage is not available to Insureds:
. . .
4) who are eligible for continuation under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1987 (COBRA).
Continuation of coverage will end on the earliest of the following:
. . .
4) the date this Contract is terminated. The Corporation will offer Members conversion coverage after such termination.
Defendants' argument is two-fold. First, they argue that the conversion option is unavailable to Wright because he was ineligible to participate in the plan's continuation coverage due to his eligibility for continuation benefits under COBRA. This is precisely the type of specious, circular argument the language of § 1162(5) intended to foreclose i.e., it forbade discrimination against qualified COBRA beneficiaries with respect to the availability of a conversion policy.
As a second matter, defendants point out that the conversion option only applied in the event the "Contract" terminated. They urge that Wright's coverage had already expired before the Contract terminated, thereby nullifying any contextual basis for plaintiff's complaints concerning promised individual conversion coverage. However, defendants ignore the ambiguity engendered by utilizing a term left undefined in the policy. The policy doesn't define "terminate" in the context of the contract agreement. Given the complexity of insurance policies generally and this one in particular, Wright could have reasonably understood the plan to provide for conversion coverage inasmuch as the contract had terminated as to him.
Thus enters plaintiff's estoppel argument. The COBRA election form provided plaintiff included language similar to that of § 1162(5). The Model Statement provided to Wright, which explained a qualified beneficiary's continuation rights under COBRA, included a statement at the conclusion which read: "(The law also says that, at the end of the 18 months . . . continuation coverage period, you must be allowed to enroll in an individual conversion health plan if such a right is provided under your group health plan)."
In addition, the insurance booklet which operated as a summary of benefits under the plan contained the following provision:
For additional information:
Call the Customer Service Phone Number Listed Under The " Claims Forms" Provision.
Or, Write:
Acordia P.O. Box 6012 Ridgeland, MS 39158
Based on the information provided, Wright contacted defendants' agent, Acordia, and inquired concerning his eligibility to purchase an individual conversion policy once his COBRA coverage expired. His question was a legitimate one, inasmuch as he had already begun exploring alternative health insurance coverage — a negative response by Acordia personnel would have had no effect on his search for replacement coverage. In response to his inquiry, however, the Acordia representative informed him that conversion coverage was available and that he should simply continue to remit his premium payments as usual. Wright did so for at least six months after his COBRA benefits would have otherwise expired. Having satisfied himself that Anthem would continue to meet his health insurance needs, Wright abandoned the search for other individual coverage. He never received notice, written or otherwise, which alerted him that his coverage with Anthem had terminated. His first indication that there was a problem with his health benefits was Anthem's refusal to pay the claims associated with his April 1998 hospitalization when it was too late for him to obtain other coverage.
This is assuming that plaintiff's 18 months COBRA coverage began to run in September 1996, as opposed to April 17, 1996, the date of his termination from Westwood. COBRA provides for 18 months continuation coverage commencing with the date of the "qualifying event," in this case Wright's termination.
Defendants vociferously contend that the theory of equitable estoppel is without force or effect in the Fifth Circuit, citing to numerous cases which spurn claims predicated on oral modifications to an ERISA plan. Rodrique v. Western and Southern Life Ins. Co., 948 F.2d 969 (5th Cir. 1991); Degan v. Ford Motor Co., 869 F.2d 889 (5th Cir. 1989). Instead, they urge the Court to recognize that plaintiff's right to conversion coverage is to be determined solely by reference to the terms of the plan, which they argue, by its own terms does not provide a right to conversion coverage.
However, despite defendants' reference to Williams v. Bridgestone/Firestone, Inc., they ignore the narrow exception to the prohibition on oral modifications to the terms of an ERISA plan carved out by the panel in that case. 954 F.2d 1070 (5th Cir. 1992). While the Fifth Circuit studiously avoided deciding whether equitable estoppel might apply to cases involving oral interpretations of ambiguous plan terms, neither did it forswear the possibility. Id. at 1073. Finding such a determination unnecessary to its decision, the Court effected much the same result when it remanded the case to the trial court for consideration of whether the company in fact interpreted a plan provision in the manner represented to the plaintiff in that case. In view of this precedent and based on the facts and evidence currently before it, the Court finds that genuine issues of material fact preclude summary judgment on this issue
But even beyond that, the Court determines that this case is one which weighs in favor of the adoption of the equitable estoppel principles espoused in Kane v. Aetna Life Ins., 893 F.2d 1283 (11th Cir.), cert. denied, 489 U.S. 890, 112 L.Ed.2d 192, 111 S.Ct. 232 (1990). The facts of this case are on all fours with National Companies Health Benefit Plan v. St. Joseph's Hospital of Atlanta, 929 F.2d 1558 (11th Cir. 1991). In that case, Robert Hersh chose to resign his position with his employer and to begin his own business in January 1987. However, prior to making that decision he informed his employer of his desire to maintain dual family coverage and was told he would be eligible for continuation coverage. In reliance on that representation, Hersh elected to end his employment. He completed a continuation coverage form and made monthly premium payments for several months. In March 1987, Mrs. Hersh gave birth prematurely to a set of twins, both of whom required extensive medical care. In May 1987, Hersh's medical insurance company denied coverage retroactively to January 1987 based on his participation in his wife's group plan at the time of his separation from employment. Although the Court of Appeals recognized that the October 1986 amendments to COBRA permitted the "discrimination" employed by Hersh's insurer, it nonetheless held the company accountable for its representations concerning Hersh's eligibility for continuing coverage. The Court grounded its holding on the finding that an employer/insurer's representations concerning the meaning of COBRA and the amendments thereto were nothing less than an interpretation of the plan itself:
Even should the Court be found in error on this issue on appeal, the Court notes that Wright has a colorable claim pursuant to 29 U.S.C. § 1132(a)(3) "for other appropriate equitable relief." See Corcoran v. United Healthcare, Inc., 965 F.2d 1321 (5th Cir. 1992) (tacitly approving "make-whole" relief under § 1132(a)(3) designed to restore a claimant to the position he occupied before the trustee committed the breach of trust). See also Williams v. Jackson Stone Co., 867 F. Supp. 454 (S.D.Miss. 1994), affirmed, 85 F.3d 621 (5th Cir. 1996).
Hersh and his dependents were covered under his spouse's group plan at the time.
[S]ince continuation coverage is, by operation of law, part of every ERISA plan, an ERISA-plan sponsor's representations to its employees as to the meaning of COBRA's and the Tax Reform Act's amendments to ERISA is an interpretation of a provision of the plan itself. Thus, if the ERISA provider misinforms its employee about his rights to continuation coverage, and the employee relies on that misinformation to his detriment, the provider will be held liable under the equitable doctrine of estoppel.
Id. at 1566.
The above reasoning is equally applicable to cases concerning conversion coverage. COBRA also mandates that conversion options be afforded to all qualified beneficiaries if otherwise "generally available" under their group insurance plan. Beneficiaries are certainly apt to turn to either the employer or the insurance company administering plan benefits to assist them in interpreting the plan in order to determine whether conversion coverage is an option.
This case presents a wholly different set of facts from other cases repudiating claims based on oral representations concerning an ERISA plan. Wright didn't seek to modify or to extend provisions under the plan. See Rodrigue, 948 F.2d 969 (5th Cir. 1991) (rejecting estoppel where the policy expressly excluded coverage for the claimant's condition); Rasmussen, 675 F. Supp. 1497 (W.D.La. 1987) (rejecting estoppel argument where the claimant sought to extend benefits beyond those provided in policy). Instead, he merely sought a straightforward response regarding his rights under the plan — which can only be construed as a request for an interpretation of plan terms. Nor did he expect to receive something for nothing. He continued to remit premium payments, which were accepted and cashed! Compare Coker v. Trans World Airlines, Inc., 165 F.3d 579 (7th Cir. 1999) (rejecting claimant's estoppel claim for lack of reasonable reliance in view of fact that plaintiff paid no premium for conversion coverage). In the face of defendants' silence in the wake of the expiration of his COBRA coverage, a rational trier of fact could find Wright was entirely reasonable in concluding that his premium payments ensured him continued health coverage.
The Court has considered the defendants' statute of fraud argument and is unpersuaded by that argument as well.
Despite the Court's finding that this is an appropriate case in which to introduce the limited principles of equitable estoppel approved in Kane, supra, the Court declines to grant plaintiff's motion for summary judgment. There are unresolved issues of material fact concerning the elements of estoppel upon which plaintiff bases his right to recovery. Accordingly, the plaintiff's motion is not well-taken and should be denied.
The elements of equitable estoppel, as recited by the Eleventh Circuit, are:
1) the party to be estopped misrepresented material facts;
2) the party to be estopped was aware of the true facts;
3) the party to be estopped intended that the misrepresentation be acted on or had reason to believe the party asserting the estoppel would rely on it;
4) the party asserting the estoppel did not know, nor should it have known, the true facts; and
5) the party asserting the estoppel reasonably and detrimentally relied on the misrepresentation.St. Joseph's Hospital of Atlanta, 929 F.2d at 1572 .
CONCLUSION
Based on the foregoing facts and analysis, the Court finds that the benefits plan provided for Westwood is an employee welfare benefit plan subject to ERISA regulation and that the plan does not qualify for exemption pursuant to the safe harbor provisions of ERISA. The Court further finds that, to the extent that plaintiff seeks recovery of benefits based on COBRA continuation coverage, plaintiff's claim "relates to" an employee benefit plan and is therefore preempted by ERISA. In addition, the Court concludes that to the extent plaintiff's claim concerns the formation of a contract to provide individual conversion coverage, that claim too is preempted and must be determined according to ERISA's provisions and principles of federal common law, including principles of equitable estoppel. Should plaintiff ultimately prevail on his claim that he contracted with defendants for individual conversion coverage, any claims by plaintiff pertaining to the administration and improper denial of claims pursuant to the conversion policy will not preempted and will be determined according to controlling principles of state law concerning rights of recovery and damages.
Plaintiff is not entitled to a jury trial as to any claims governed by ERISA. However, plaintiff will be entitled to a jury trial as to any issues governed by state law — i.e., claims arising out of the administration and alleged improper handling of claims presented pursuant to an individual conversion policy.
With respect to plaintiff's cross-motion for summary judgment, there remain genuine issues of material fact which preclude the entry of summary judgment.
Appropriate orders will issue accordingly.