Opinion
No. 1712 C.D. 2014
06-26-2015
Jane Tallon, Daniel Oliver Tallon and Brandon Cole Tallon, Appellants v. Montour School District
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE P. KEVIN BROBSON, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE COHN JUBELIRER
Jane Tallon, Daniel Oliver Tallon, and Brandon Cole Tallon (collectively "Appellants") appeal from the August 20, 2014 Order of the Court of Common Pleas of Allegheny County (trial court) granting Montour School District's (School District) Motion for Summary Judgment (Motion) and dismissing with prejudice Appellants' action for declaratory judgment (Complaint). Appellants sought a declaration that the School District remained obligated to continue to pay for Appellants' family health insurance coverage following the death of their husband/father Daniel Oliver Tallon (Decedent). The School District filed Preliminary Objections to Appellants' Complaint, which were denied. Following discovery, which included interrogatories and requests for production of documents, the trial court granted the School District's Motion. On appeal, Appellants argue that: (1) the trial court improperly construed the School District's Act 93 Compensation Plan (Act 93 Plan) as authorizing the termination of Appellants' family health insurance coverage upon the death of Decedent; (2) the trial court improperly granted the School District's Motion where a genuine issue of material fact exists regarding promises made by the School District to Decedent that existing family health insurance coverage would continue after Decedent's death; and (3) the trial court erred in not directing further discovery. Because we conclude that Appellants do not have a right to continued health insurance coverage under the Act 93 Plan and that there is no genuine issue of material fact in this matter, we affirm.
I. BACKGROUND
Appellants are the surviving heirs of Decedent, who passed away on February 15, 2012. (Trial Ct. Op. at 1.) Decedent was married to Appellant Jane Tallon prior to his death. (Trial Ct. Op. at 1.) Decedent was employed by the School District for over 33 years until he retired on June 30, 2006. (Trial Ct. Op. at 1.) At the time of his retirement, Decedent was the School District's Director of Transportation and had worked in that capacity for about 18 years. (Trial Ct. Op. at 1.) Because he was the Director of Transportation, Decedent was considered a "school administrator" pursuant to Section 1164 of the Public School Code of 1949. (Trial Ct. Op. at 1.) Under Section 1164, school districts are required to adopt Act 93 Plans for school administrator employees. 24 P.S. § 11-1164(d). At the time of Decedent's retirement, an Act 93 Plan was in place for School District school administrators. (Trial Ct. Op. at 2.) The Act 93 Plan, which applied to Decedent when he retired, was in effect from July 1, 2002 until June 20, 2006 and stated, in relevant part, that:
Act of March 10, 1949, P.L. 30, as amended, added by Section 4 of the Act of June 29, 1984, P.L. 438, 24 P.S. § 11-1164. Section 1164 provides, in relevant part, as follows:
(a) As used in this section, the following words will have the following meanings:
"Administrative compensation" shall mean administrator salaries and fringe benefits and shall include any board decision that directly affects administrator compensation such as administrative evaluation and early retirement programs.
"School administrator" shall mean any employe of the school entity below the rank of district superintendent, executive director, director of vocational-technical school, assistant district superintendent or assistant executive director, but including the rank of first level supervisor, who by virtue of assigned duties is not in a bargaining unit of public employes as created under the act of July 23, 1970 (P.L. 563, No. 195), known as the "Public Employe Relations Act." However, this definition shall not apply to anyone who has the duties and responsibilities of the position of business manager or personnel director, but not to include principals.
. . . .
(d) School employers shall be required to adopt written administrator compensation plans which shall apply to all eligible school administrators, as provided in this section, and which shall continue in effect until a time specified in the compensation plan, but in no event for less than one school year.
I. Retirement
Under this Plan, each retiring employee will receive the same level of health care coverage received prior to retirement (i.e. family, spouse,
individual, etc.) until the employee is eligible for federal assisted health care. Then, for the following five (5) years, the district will provide the employee with Security Blue Supplemental [B]enefits at the [School D]istrict's expense.(Act 93 Plan, § V, ¶ I, R.R. at 16a.)
As alleged in the Complaint, Decedent was concerned that his existing health insurance coverage might not be available to him after retirement; accordingly, he met with representatives of the School District and was repeatedly assured that health insurance would continue to be available for him and his family after retirement. (Complaint ¶ 11, R.R. at 8a-9a.) The Complaint further alleges that, based on the assurances of the School District's representatives that health insurance benefits would remain available for Decedent and his family after retirement, Decedent retired on June 30, 2006. (Complaint ¶ 12, R.R. at 9a.)
Following Decedent's retirement, the School District continued to pay for Decedent's and his family's health insurance until Decedent's death in 2012. (Trial Ct. Op. at 2.) After Decedent's death, however, the School District's Director of Human Resources advised Appellant Jane Tallon in a letter that:
[u]nder the terms of the agreement in which [Decedent] retired, 'Each retiring employee will receive the same level of health care coverage received prior to retirement until the employee is eligible for federal assisted health care.' Unfortunately the benefit plan is not extended to the spouse or children after the employees' death.(Complaint at Ex. B, R.R. at 20a (alteration added) (emphasis in original) (quoting Act 93 Plan).) Appellants averred in their Complaint that, because the Act 93 Plan did "not explicitly deny coverage to family members upon an employee or retiree's death, benefits should remain available to" Appellants. (Trial Ct. Op. at 3.)
The School District did, however, offer Appellants continued health insurance coverage for 18 months at Appellants' own expense, pursuant to the Consolidated Omnibus Budget Reconciliation Act (COBRA), 29 U.S.C. §§ 1161-1169. (Complaint at Ex. B, R.R. at 20a.)
The trial court determined that resolution of the School District's Motion seeking summary judgment "require[d] only a simple reading of the clear, express and unambiguous language of the Act 93 Plan." (Trial Ct. Op. at 3.) The trial court concluded that, notwithstanding the language in the Act 93 Plan permitting retirees to maintain family and spousal coverage, the Act 93 Plan only covered the retiring employee and did "not purport to provide any benefits directly to any other individual." (Trial Ct. Op. at 3.) Therefore, the trial court determined that, following Decedent's death, the School District's "obligations under the Act 93 Plan were extinguished." (Trial Ct. Op. at 3.)
Moreover, despite the alleged discussions that occurred between Decedent and the School District representatives prior to Decedent's retirement, the trial court concluded that Appellants did "not appear to allege that any school administrator expressly indicated that the Decedent Tallon's family would continue to receive health insurance benefits following the death of Decedent." (Trial Ct. Op. at 3.) The trial court also concluded that even if such assurances had been made, it was unclear how such statements could obligate the School District "in the face of the otherwise clear and unambiguous language of the Act 93 Plan" or even be found admissible or persuasive given "that the identit[ies] of the allegedly involved school administrator[s] [were] unknown." (Trial Ct. Op. at 3 (second alteration in original).) Lastly, the trial court determined that Appellants lacked privity of contract with the School District, were not identified as third-party beneficiaries in the Act 93 Plan and, thus, had no right to continued health insurance coverage under the Act 93 Plan. (Trial Ct. Op. at 3.) Accordingly, the trial court granted the School District's Motion.
II. DISCUSSION
On appeal, Appellants argue that the trial court improperly construed the Act 93 Plan by determining that the absence of contractual language terminating health insurance coverage for Appellants upon Decedent's death authorized the termination of their family coverage. Appellants also contend that the trial court improperly granted summary judgment because a genuine issue of material fact exists regarding promises made by the School District to Decedent that existing family health insurance coverage would continue after Decedent's death. Finally, Appellants argue that the trial court erred in not directing further discovery regarding ambiguous provisions of the Act 93 Plan and the promises and assurances made by the School District to Decedent.
This Court's scope of review over a trial court's grant of summary judgment "is limited to determining if the trial court committed an error of law or a manifest abuse of discretion." Hall v. Acme Markets, Inc., 532 A.2d 894, 895 (Pa. Cmwlth. 1987). "A motion for summary judgment may properly be granted when the moving party has established that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law." Id. --------
1. Whether the trial court improperly construed the Act 93 Plan by determining that the absence of contractual language terminating health insurance coverage for Appellants upon Decedent's death authorized the termination of their coverage.
Appellants argue that, under the plain language of the Act 93 Plan, they retained a right to health insurance coverage following Decedent's death. The Act 93 Plan states that, upon the employee's retirement, "each retiring employee will receive the same level of health care coverage received prior to retirement (i.e. family, spouse, individual, etc.) until the employee is eligible for federal assisted health care." (Act 93 Plan, § V, ¶ I, R.R. at 16a.) Appellants contend that this language expresses a clear and unambiguous intent to continue family coverage after the death of the retired employee. Moreover, under the Act 93 Plan, the only terminating event for health insurance coverage is federal health care eligibility. Appellants maintain that, because the Decedent never became eligible for federal health care assistance, the School District's obligation under the Act 93 Plan never extinguished. Appellants further argue that the trial court erred by interpreting the absence of a contractual provision regarding the death of the retiree as an authorization to terminate coverage. There is no language that would terminate family health care coverage upon Decedent's death. Because there is only one termination event in the Act 93 Plan, i.e. eligibility for federal health care insurance, the Act 93 Plan expresses a clear intention to maintain family health care coverage for all other events, including the death of the Decedent.
In contrast, the School District contends that the Act 93 Plan only covered administrative employees and that Appellants did not have a right to health insurance coverage that was independent of the Decedent. The School District argues that there is nothing in the Act 93 Plan to indicate that Appellants are third-party beneficiaries with a right to continued health insurance coverage after Decedent's death.
"The fundamental rule in construing a contract is to ascertain and give effect to the intention of the parties." Sun Company, Inc. (R&M) v. Pennsylvania Turnpike Commission, 708 A.2d 875, 878 (Pa. Cmwlth. 1998). Moreover,
[t]he intent of the parties to a written agreement is embodied in the writing itself. Courts do not assume a contract's language was chosen carelessly, nor do they assume the parties were ignorant of the meaning of the language employed. When contractual language is clear and unequivocal, its meaning must be determined by its contents alone. We may not modify the plain meaning of the contract under the guise of interpretation.Crawford Central School District v. Commonwealth, 888 A.2d 616, 623 (Pa. 2005) (citation omitted). In addition, "[t]he language of a contract is unambiguous if a court is able to determine its meaning without any guide other than knowledge of the basic facts on which the contract's meaning depends." Black v. Jamison, 913 A.2d 313, 318 (Pa. Cmwlth. 2006). A contract contains ambiguous terms where "the terms are reasonably or fairly susceptible of different constructions and are capable of being understood in more than one sense." Id. (quotation omitted).
Regarding third-party beneficiaries, our Supreme Court has adopted the Restatement (Second) of Contracts test for determining whether one is an intended third-party beneficiary. Guy v. Liederbach, 459 A.2d 744, 751 (Pa. 1983). Our Supreme Court has explained that under Section 302 of the Restatement,
a party becomes a third[-]party beneficiary only where both parties to the contract express an intention to benefit the third party in the contract itself, unless, the circumstances are so compelling that recognition of the beneficiary's right is appropriate to effectuate the intention of the parties, and the performance satisfies an obligation of the promisee to pay money to the beneficiary or the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.Scarpitti v. Weborg, 609 A.2d 147, 150-51 (Pa. 1992) (emphasis in original) (citations omitted). In McGaffic v. City of New Castle, 74 A.3d 306, 312 (Pa. Cmwlth. 2013), this Court explained that "whether a contract contemplates enforcement by third-parties is a matter of contract construction" and that, where the contract does not explicitly create third-party beneficiary rights, the principles of Section 302 of the Restatement should be used to determine the parties' intentions.
In the instant case, the Act 93 Plan states that its purpose is to "set for[th] the wages, benefits, and conditions of employment for the Employees who are in said unit." (Act 93 Plan, § II, R.R. at 13a.) The unit is defined as all administrative employees, including the Director of Transportation. (Act 93 Plan, § I, R.R. at 13a.) With respect to retirement, the Act 93 Plan states that: "[u]nder this plan, each retiring employee will receive the same level of health care coverage received prior to retirement (i.e. family, spouse, individual, etc.) until the employee is eligible for federal assisted health care." (Act 93 Plan, § V, ¶ I, R.R. at 16a (emphasis added).) Because the Act 93 Plan states that "each retiring employee" is eligible to receive health insurance coverage following retirement, its plain and unambiguous language indicates that only employees, such as Decedent, were entitled to receive health insurance coverage. Non-employees, such as Appellants, are not covered by the Act 93 Plan. Although the Act 93 Plan allowed Decedent to maintain family and spousal health insurance coverage following his retirement, there is no language in the Act 93 Plan which created a separate and independent legal right for Appellants to retain coverage after Decedent's death. Accordingly, because Appellants had no independent right to coverage, once Decedent died Appellants' coverage naturally terminated.
Further, under the Restatement (Second) of Contracts test, Appellants have not demonstrated that they are third-party beneficiaries. First, as discussed above, there was no language in the contract expressing an intention for the Act 93 Plan to directly benefit Appellants. Second, there is no evidence that the parties intended for the Act 93 Plan to provide benefits to third parties, that the School District had an obligation to provide benefits directly to Appellants, or that the School District intended for Appellants to benefit directly from its promise to Decedent. Scarpitti, 609 A.2d at 150-51. Appellants only received health insurance coverage by virtue of Decedent's election of family coverage and there is nothing in the Act 93 Plan to demonstrate that Appellants were intended as third-party beneficiaries. Accordingly, under the plain language of the Act 93 Plan, Appellants did not retain a right to continued health insurance coverage following Decedent's death.
2. Whether a material issue of fact remains regarding the alleged assurances made by the School District representatives to Decedent such that the trial court erred in granting the Motion for Summary Judgment.
Next, Appellants argue that, even if the Act 93 Plan expressly terminated Appellants' coverage following Decedent's death, a genuine issue of fact remains regarding the assurances made by the School District to Decedent that his family would continue to receive health insurance after Decedent's demise. Appellants contend that Decedent chose to retire in 2006 based upon the assurances and promises made by the School District that family health insurance coverage would remain "fixed" and available for Decedent and his family. (Appellants' Br. at 22.) According to Appellants, the existence of these assurances and Decedent's reliance upon them are genuine issues of material fact, which precluded the trial court's granting of summary judgment. Appellants also maintain that, due to the School District's assurances, the School District is equitably estopped from denying Appellants continued health insurance coverage. Equitable estoppel requires two essential elements: the inducement to act and justifiable reliance upon the inducement. Novelty Knitting Mills, Inc. v. Siskind, 457 A.2d 502, 503 (Pa. 1983). Appellants argue that the School District's assurances that it would continue to pay for Appellants' health insurance coverage upon Decedent's retirement and demise induced Decedent's retirement. Rather than view this evidence in the light most favorable to Appellants, the trial court erred as a matter of law by disregarding it.
Conversely, the School District argues that as a matter of law, under Section 1164 of the Public School Code representations made by school administrators cannot bind school boards to provide additional benefits. In addition, the School District contends that there is no evidence that school administrators actually made assurances to Decedent that his family would retain coverage following his death.
Section 1164 of the Public School Code states, in relevant part, that "School employers shall be required to adopt written administrator compensation plans which shall apply to all eligible school administrators." 24 P.S. § 11-1164(d) (emphasis added). "School employer" is defined as "a board of school directors, the area vocational-technical school board of directors or the intermediate unit board of school directors." 24 P.S. § 11-1164(a). Although the Complaint and Appellants' response to the School District's interrogatories aver that "School District representatives" or "School District officials" assured Decedent that health insurance coverage would remain fixed and continue to be available for Appellants, there are no allegations that the School Board adopted a written, modified Act 93 Plan for Decedent as would be required under Section 1164. (Complaint ¶ 11, R.R. at 8a-9a; Appellants' Answers to School District's Interrogatories ¶ 3, R.R. at 111a-12a.) Thus, as a matter of law, any assurances made by School District officials or representatives to Decedent could not have bound the School District. Further, because School District representatives did not have the authority to modify the Act 93 Plan, any reliance by Decedent on the alleged assurances was not "justifiable" so as to equitably estop the School District from denying coverage. Novelty Knitting Mills, Inc., 457 A.2d at 503.
Moreover, even if School District officials did have the authority to modify Act 93 Plans, there is no genuine issue of material fact regarding whether Appellants are entitled to receive continued health insurance coverage. Although Appellants conducted discovery, they have not produced any evidence of the alleged meetings that took place between School District representatives and Decedent regarding the continuation of health insurance coverage post-retirement or post-death. For example, Appellants have not demonstrated when and where the meetings took place, which School District representatives made the assurances, and the School District has never confirmed that the meetings took place. Appellants have also not demonstrated any other instances in which family members of a school administrator retained an independent right to health insurance coverage following the death of a covered school administrator. Finally, Appellants do not allege—in either the Complaint or their answers to the interrogatories— that the School District representatives actually made assurances to Decedent that Appellants would retain coverage following his death, but merely that the health insurance coverage that he received during his employment would remain the same during his retirement. It is undisputed that the School District did pay for Appellants' health insurance coverage during Decedent's retirement up until his death.
Pursuant to Pennsylvania Rule of Civil Procedure 1035.2(2), summary judgment is appropriate:
if, after the completion of discovery relevant to the motion, including the production of expert reports, an adverse party who will bear the burden of proof at trial has failed to produce evidence of facts essential to the cause of action or defense which in a jury trial would require the issues to be submitted to a jury.Pa. R.C.P. No. 1035.2(2). Following the completion of discovery, Appellants have not produced any evidence that they were entitled to continued health insurance coverage following Decedent's death. Thus, the trial court did not err in granting the School District's Motion.
3. Whether the trial court erred in not directing further discovery as to (1) ambiguous provisions of the Act 93 Plan; and (2) promises or assurances made by the School District to Decedent that family health insurance would continue upon the death of the retiree.
Appellants argue that, because the Act 93 Plan allows administrative employees to "receive other benefits and incentives . . . even though such benefits and incentives may not be referenced in this agreement," (Act 93 Plan, § V, ¶ G, R.R. at 15a), the trial court erred in not ordering further discovery with regard to the alleged incentives offered to Decedent by the School District officials prior to Decedent's retirement. Moreover, the trial court erred in not directing further discovery as to ambiguities in the contract.
"Discovery matters are within the discretion of the trial court and the appellate court employs an abuse of discretion standard of review." Luckett v. Blaine, 850 A.2d 811, 818 (Pa. Cmwlth. 2004). As discussed, Appellants did not produce any actual evidence that the School District made assurances to Decedent that Appellants would retain health care coverage following Decedent's death. Moreover, the Act 93 Plan is not ambiguous; based on the plain language of the Act 93 Plan, Appellants did not retain a right to continued health insurance coverage following Decedent's death. Therefore, it was unnecessary for the trial court to direct additional discovery in order to determine the parties' intentions for Decedent's Act 93 Plan. There is also nothing in the record to indicate that Appellants requested further discovery. Thus, because the trial court had no reason to believe that additional discovery would produce any evidence of value, it did not abuse its discretion in not directing further discovery.
Accordingly, for the foregoing reasons, the Order of the trial court is affirmed.
/s/ _________
RENÉE COHN JUBELIRER, Judge ORDER
NOW, June 26, 2015, the Order of the Court of Common Pleas of Allegheny County, entered in the above-captioned matter, is AFFIRMED.
/s/ _________
RENÉE COHN JUBELIRER, Judge