Opinion
Case No. 1:99-CV-439.
Date: February 22, 2000.
ORDER
In accordance with the opinion entered this date, IT IS HEREBY ORDERED that the Plaintiff's Motion for Summary Judgment (Docket # 15) is DENIED.
IT IS FURTHER ORDERED that the Defendant's motion for summary judgment (Docket #16) is GRANTED.
JUDGMENT is entered in FAVOR of the Defendant, Celia Corporation Employee Benefit Plan.
OPINION
The Plaintiff, Farm Bureau Mutual Insurance Company of Michigan ("Farm Bureau") is a Michigan no-fault insurer who provided automobile insurance to Clayton Carlson and paid his medical expenses arising from injuries sustained in an automobile accident. The Plaintiff commenced this action against the Defendant, Celia Corporation Employee Benefit Plan ("Celia Corp. plan"), a self-funded employee welfare plan governed by the Employee Retirement Income Security Act ("ERISA") that provided Carlson with health insurance benefits. Farm Bureau seeks reimbursement and a determination that the Celia Corp. plan is primary. Before the Court are the parties' cross motions for summary judgment. Having reviewed the briefs, exhibits and relevant case law, the Court concludes that the Farm Bureau no-fault policy is primary. Accordingly, Farm Bureau's motion for summary judgment is denied and Celia Corp. plan's motion for summary judgment is granted.
I
No facts are in dispute. On December 3, 1998, Carlson was injured in a single car automobile accident in Kent County, Michigan. At the time of the accident, Carlson was the spouse of Patricia Carlson, an employee of the Celia Corporation, the sponsor of the Celia Corp. plan. Carlson had health insurance benefits under this plan. He was also insured under a Farm Bureau automobile insurance policy. M.C.L. § 500.3109(a) of the Michigan Automobile No-Fault Act mandates that no-fault carriers offer coordination of benefits at reduced premiums when the insured has other health and accident coverage. Carlson elected this type of coverage. Thus, his Farm Bureau automobile policy provided no-fault benefits with a coordination of benefits ("COB") clause that states that it will not pay personal injury protection benefits if its insured has other individual or group health care coverage.
The Farm Bureau COB provision provides in pertinent part:
In consideration of the reduction of premium
1. When `Excess Medical Payment' is indicated in the declarations, the Company shall not be liable to the extent any Personal Protection Insurance allowable expenses benefits are available, paid, payable, or required to be provided to or on behalf of the person named in the policy, their spouse or any relative of either domiciled in the same household under the provisions of any valid and collectible:
a. individual, blanket or group accident disability, health maintenance organization, hospitalization or similar insurance or health plan;
b. medical, surgical, or similar reimbursement plan;
c. worker's disability compensation or disability laws of a similar nature or any other state or federal government law; or
d. automobile or premises insurance affording medical expenses benefits.
Section IV Limits of Liability, ¶ B.
The Celia Corp. plan contained a COB clause and an exclusion of benefits for auto-related expenses. The parties agree that the Celia Corp. plan's COB language is not applicable to this dispute because the Celia Corp. plan only coordinates coverage with "other plans," defined as "plan coverage by group, blanket or franchise insurance or other arrangement of coverage for individuals in a group." A personal automobile insurance policy is not an "other plan" and therefore Celia's COB provision does not apply. Accordingly, should the contested exclusionary language not apply, the Celia Corp. plan would then be primary coverage.
Pl's Reply Br. in Support of Motion for Summary Judgment (Dkt # 19) at 1.
Thus, the dispositive issue before the Court is whether a clause in an ERISA plan excluding coverage arising from automobile accidents in a no-fault insurance state is enforceable. The parties agree that the issue presented is to be decided by applying federal common law.
Although the contested provision in the Celia Corp. plan appears under the title "General Exclusions," it is more accurately referred to as an "escape clause." An escape clause provides that a plan does not provide coverage if other insurance exists. This is distinguishable from an exclusion which denies benefits without regard to the existence of other insurance.
The relevant Celia Corp. language provides that it does not pay for any expense or portion of any expense:
For injuries received in an accident involving a car or other motor vehicle which is owned or leased by a Covered person or any member of his immediate family or involving any car or other motor vehicle for which there is in effect, or is required to be in effect, any policy of no-fault insurance. This does not apply to expenses not paid by any policy of no-fault insurance as a result of state required policy deductibles or maximums. . . .
Celia Corp. plan at 57.
The clause excludes health insurance benefits for auto-related expenses in states with no-fault insurance laws. In states which do not have no-fault insurance or a financial responsibility law, the Celia Corp. plan provides a coordination of benefits clause.
The relevant provision states in pertinent part:
Coordination with other Automobile Liability Insurance
If your state has neither a no-fault automobile requirement nor a "Financial Responsibility Law," this will be considered secondary and will coordinate payment for covered services with your automobile insurance coverage or with any other party who may have liability for medical expenses.
If you or your dependant are involved in an automobile accident, this plan may advance payment in order to prevent any financial hardship. You will be asked to sign a Right of Recovery Agreement and to provide this plan with information concerning your automobile insurance and automobile coverage of any other person involved. Any payment advanced by this plan that is covered by your automobile insurance or by any other automobile insurance or which may be obtained through legal action, must be refunded to this plan.
Celia Corp. plan at 33.
Farm Bureau asserts that the Celia Corp. plan escape clause is invalid because it contravenes public policy and relies onNortheast Dept. ILGWU v. Teamsters Local Union No. 229, 764 F.2d 147 (3d Cir. 1985) as support.
In ILGWU, Ruth Fazio was a participant in the ILGWU fund. Her husband was employed in an industry covered by the Teamsters fund, and he enrolled Mrs. Fazio as a beneficiary of the Teamsters fund. The Teamsters fund provided that if an individual was covered under more than one plan, the plan covering the individual as an employee was primary. Accordingly, under the Teamsters fund provision, the ILGWU fund was primary for Mrs. Fazio. The ILGWU fund, however, had an escape clause under which it had no liability where a participant or beneficiary is covered by a spouse's group insurer. Thus, the ILGWU fund purported to not provide any coverage for Mrs. Fazio because of the coverage under the Teamsters fund. The Third Circuit held the ILGWU fund's escape clause unenforceable as a matter of law because it deprived Mrs. Fazio of coverage she reasonably anticipated. Id. at 163. The Third Circuit concluded that the incorporation of the escape clause reflected arbitrary and capricious conduct by the plan's trustees in violation of their fiduciary duties under ERISA § 404.Id. In so holding, the court emphasized that
one very important policy underlying ERISA is that employees enrolled in a benefit plan should not be deprived of compensation that they reasonably anticipate under the plan's purported coverage. Escape clauses, however, risk just such a result . . . . [U]nlike plans with excess clauses, a plan with an escape clause does not provide participants who receive less in benefits from the other plan with the opportunity to return to the first plan for the difference. As a result, a participant of a plan with an escape clause, who thinks that he is covered by that plan and who expects to recover medical expenses with the terms of that plan, automatically loses his coverage in the presence of another insurance plan, even if the benefits he is entitled to receive under the other plan are much less favorable than those of his own.Id. The Third Circuit reiterated its holding in ILGWU in McGurl v. Trucking Employees of North Jersey Welfare Fund. Inc., 124 F.3d 471, 477 (3d Cir. 1997).
The Sixth Circuit has not adopted ILGWU's conclusion that it is impermissible for the trustees of a multi employer plan to adopt an escape clause because it reflected "arbitrary and capricious conduct" by the trustees.
The district court in Musto v. American General Corp., 615 F. Supp. 1483 (M.D.Tenn. 1985) considered an amendment to an ERISA plan that added an escape clause whereby a retiree who was eligible for medical coverage under another employer's plan was not eligible under the defendant's plan. The escape clause applied even if a retiree or spouse elected not to be covered by the other employer's insurance. Id. at 1491. The district court, relying solely on ILGWU as authority, concluded that the escape clause was unenforceable as a matter of law. Id. at 1503.
However, on appeal, the Sixth Circuit rejected this conclusion and reversed the district court. The Sixth Circuit determined that the company did not breach its fiduciary responsibility by adopting an escape clause, reasoning that "[i]f it would not have been illegal for the company to terminate medical coverage for everyone, whether covered elsewhere or not, we do not believe that it was illegal to terminate coverage only for early retirees who could get coverage through another employer." Musto v. American General Corp., 861 F.2d 897, 912 (6th Cir. 1988). The court expressly stated that it disagreed with ILGWU's holding that escape clauses are automatically invalid. Id.
This Court declines Farm Bureau's invitation to follow the Third Circuit, which stands alone among the courts of appeals in considering escape clauses in ERISA plans as per se invalid. The clause in the Celia Corp. plan declining coverage where a state has a no-fault insurance requirement is valid and enforceable. Because the ERISA plan expressly disavows coverage, the Farm Bureau policy is primary.
The Court notes that despite the unavailability of health insurance benefits under the Celia Corp. plan, Carlson selected coordinated coverage and presumably the no-fault insurer accordingly charged a lower premium rate.
An order and judgment consistent with this opinion will be entered.