Opinion
Case No. 07-CV-484.
August 21, 2008
ORDER
The plaintiffs, Terrance McGowan, et al ("McGowan"), filed for a declaratory judgment and injunctive and other equitable relief on May 25, 2007, seeking a declaration that the defendant, Walworth County Employee Health Benefit Plan ("Walworth" and hereinafter, "Walworth Plan") is liable for claims submitted by "Beneficiary X" to the Operating Engineers Local 139 Health Benefit Plan (hereinafter, "139 Plan"). The parties seek resolution of the dispute over which plan is primarily liable and which is secondarily liable for the period from March 1, 2005, until September 1, 2006, pursuant to the coordination of benefits rules for the two employee health programs. The parties filed cross-motions for summary judgment. For the following reasons, McGowan's motion for summary judgment will be granted and Walworth's motion will be denied.
"Walworth" refers to the defendant as a party and "Walworth Plan" refers to the employee benefit plan in which Beneficiary X was a participant.
BACKGROUND
The material facts are undisputed. The Walworth Plan is a "governmental" plan, as defined in ERISA, 29 U.S.C. § 1002(32), established to provide health care benefits for employees of Walworth County. (JSUF ¶ 3). Plan 139 is an "employee welfare benefit plan" and "welfare plan" within the meaning of ERISA, 29 U.S.C. § 1002(1), created to provide health benefits for employees represented by Local 139 of the International Union of Operating Engineers and their dependents. (JSUF ¶ 2). The beneficiary whose claims are at issue in this case, "Beneficiary X," enjoyed coverage under both plans during the period in question. (JSUF ¶ 6, 8).Beneficiary X worked for Walworth County from August 1, 1987, until she terminated the employment on March 1, 2005. (JSUF ¶ 5, 12). Beneficiary X had primary coverage through the Walworth Plan during her employment. (JSUF ¶ 12). Beneficiary X also had secondary coverage through the 139 Plan, beginning in 1996, because her husband was an employee/participant. (JSUF ¶ 7). Between March 1, 2005, and September 1, 2006, Beneficiary X continued her coverage under the Walworth Plan by making COBRA payments. (JSUF ¶ 9). After Beneficiary X's switch to COBRA, the Walworth Plan provided primary coverage to Beneficiary X until an audit determined that Beneficiary X was no longer actively employed by the County. (JSUF ¶ 12). The Walworth Plan then recovered from providers the difference between what the Plan paid as primary coverage and what it would have paid as secondary coverage for claims submitted between March 1, 2005, and September 25, 2005. (JSUF ¶ 12, 14). As of mid-September, 2005, the Walworth Plan stopped providing any primary coverage. (JSUF ¶ 21). Instead, the 139 Plan paid Beneficiary X's claims from March 1, 2005, forward as primary coverage. (PSUF ¶ 6). Approximately one year after the Walworth Plan ended its primary coverage, on September 1, 2006, Beneficiary X became ineligible for continued COBRA coverage. However, she became eligible for Medicare and began receiving supplemental Walworth Plan retiree coverage. (JSUF ¶ 16, 17). Under the retiree coverage, the Walworth Plan resumed primary coverage for Beneficiary X. (JSUF ¶ 17). On May 30, 2007, McGowan filed suit seeking declaratory, injunctive and other equitable relief regarding liability for Beneficiary X's claims from March 1, 2005, until September 1, 2006, the interim period between her active employment by the County and the end of her COBRA coverage.
ANALYSIS
Summary judgment is appropriate where the moving party establishes that there is no genuine issue of material fact and that the party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "Material facts" are those facts which "might affect the outcome of the suit," and a dispute about a material fact is "genuine" if a reasonable finder of fact could find in favor of the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Summary judgment is appropriate where a party has failed to make "a showing sufficient to establish the existence of an element essential to that party's case and on which the party will bear the burden of proof at trial." Celotex, 477 U.S. at 322-23. A party opposing summary judgment may not rest upon the mere allegations or denials of the adverse party's pleading, but must set forth specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e). Any doubt as to the existence of a material fact is to be resolved against the moving party. Anderson, 477 U.S. at 255. In considering cross-motions for summary judgment, the court is obliged to view all facts and draw all reasonable inferences in a light most favorable to the party against whom the motion under consideration is made. Bassiouni v. FBI, 436 F.3d 712, 721 (7th Cir. 2006) (quoting Gazarkiewicz v. Town of Kingsford Heights, Indiana, 359 F.3d 933, 939 (7th Cir. 2004).
1. Primary Coverage
McGowan filed for summary judgment asserting that the Walworth Plan is primarily liable for Beneficiary X's claims during the disputed period because Beneficiary X was covered as an "employee" by that plan. McGowan points to the "Eligibility" section of the Walworth Plan, which reads in relevant part:
You are eligible to apply for coverage in this Plan if you are: employed by Walworth County in a qualifying position, a County Board Supervisor, or a qualifying retiree of Walworth County, subject to County Personnel Policy and/or any applicable collective bargaining agreement. A county board supervisor, qualified retiree, or qualified beneficiary under continuation of coverage provisions is considered an " Employee " for purposes of this Plan only.
(emphasis added) (Ex. B, p. 37). McGowan asserts that Beneficiary X was a "qualified beneficiary under continuation of coverage provisions" because she was on COBRA coverage. From this eligibility language, plaintiffs conclude that Beneficiary X was an employee, thereby making the Walworth Plan primarily liable for her claims. In addition, McGowan argues that any ambiguities arising from various definitions of "employee" in the Walworth Plan must be construed against that plan according to state contract law. Finally, McGowan argues that the Walworth Plan must provide primary coverage because it covered Beneficiary X for a longer period of time.
In contrast, Walworth files its own summary judgment motion asserting that the 139 Plan is primarily liable for Beneficiary X's claims because she was a dependent of an active employee in the 139 Fund, but was not herself an "employee" under the Walworth Plan. Walworth points to the following definitions from the Walworth Plan to show that Beneficiary X was not an employee:
Active Status means performing on a regular, full-time basis all customary occupational duties, for 20 hours per week, at the employer's business locations or when required to travel for the employer's business purposes.
***
Employee means you, as an employee, when you are regularly employed and paid a salary or earnings and are in an active status at your employer's place of business.
(Ex. B, pp. 60, 62). Walworth asserts that Beneficiary X was not on "active status" at the employer's "place of business" after she terminated employment on March 1, 2005. From this language, Walworth concludes that Beneficiary X was not an employee of Walworth County between March 1, 2005, and September 1, 2006. Walworth further argues that since neither plan must provide primary coverage to Beneficiary X as an employee, then the analysis proceeds to determining which plan provides primary coverage to a non-employee. For this non-employee analysis, Walworth first points to the Walworth Plan language stating the following:
When a Member has coverage under more than one health care plan, this Plan determines its order of benefits using the first of the following rules which applies:
1. Non-Dependent/Dependent. The benefits of the plan which covers the person as an employee are determined before those of the plan which covers the person as a Dependent of an Employee.
(Ex. B, p. 51). Walworth also points to the Walworth Plan language stating: "When a member has health care coverage under more than one plan, this Plan is a secondary plan, unless . . ." and claims this phrase means the plan is secondary unless Beneficiary X is an active, laid-off, or retired employee. (Ex. B, p. 51). Based on this language, Walworth asserts that the 139 Plan provides primary coverage because Beneficiary X is a "dependent of an employee" in the 139 Plan, her husband, and not an "employee" or a "dependent" in the Walworth Fund.
A central issue in resolving coverage relative to the plaintiffs and the defendant is whether Beneficiary X was an "employee," as defined in the Walworth Plan, between March 1, 2005, and September 1, 2006. An affirmative answer to this question determines the plan which is primarily liable for her claims. Under the terms of both the Walworth Plan and the 139 Plan, the plan that covers the participant as an employee is the plan which provides primary coverage. (PSUF ¶ 1, 4). Therefore, the court finds that the Walworth Plan is primarily liable and the 139 Plan is secondarily liable for the disputed period because Beneficiary X was an employee under the coordination of benefits provision of the Walworth Plan.
ERISA does not provide guidance on how courts should resolve coordination of benefits disputes. Trustees of the Southern Illinois Carpenters Welfare Fund v. RFMS, Inc., 401 F.3d 847, 849 (7th Cir. 2005). Instead, the court interprets both competing ERISA plans and determines the coordination of benefits between the two when the coordination of benefits provisions do not conflict. Id. at 850. The court gives no deference to an ERISA plan administrator's determination of the coordination of benefits between two plans because the administrator has no discretion to interpret a second insurer's policy. See id ("While Trustees may interpret their own plan so long as that interpretation is neither arbitrary nor capricious, the Trustees' coordination-of-benefits argument requires, and directly relies on, the Trustees' interpretation of the RFMS plan. It is for us, and not the Trustees, to interpret that plan in relation to the Carpenters plan") (emphasis in original) ; see also Mutual of Omaha Ins. Co. v. Besse Forest Products Group Co., 2006 WL 1544146 at *3 (E.D.Wis. May 26, 2006).
The coordination of benefits in the instant case do not conflict because the court is able to simultaneously give effect to the plain language of both plans. The W alworth Plan and the 139 Plan both incorporate the "employer-first" rule directing that when two plans provide overlapping coverage to a beneficiary, the plan which covers the individual as an employee provides primary coverage. See McGurl v. Trucking Employees of North Jersey Welfare Fund, Inc., 124 F.3d 471 (3rd Cir. 1997) (holding that two ERISA plans were "mutually repugnant" because they each had "always secondary" provisions, thereby requiring application of a federal common law rule that the benefits of the plan which covers the person as an employee are determined before those of the plan which covers the person as a dependent).
The court must interpret the coordination of benefits provisions in the Walworth Plan and the 139 Plan to determine the order of payment for Beneficiary X's claims. Each plan states that if a participant also has coverage through a second plan that does not contain a coordination of benefits provision, then that second plan is primarily liable for the beneficiary's claims. (JSUF ¶ 1, 4). However, both the Walworth Plan and the 139 Plan contain coordination of benefits provisions. Therefore, the court must interpret the respective coordination of benefits provisions to determine primary and secondary liability.
The coordination of benefits provision in both the 139 Plan and the Walworth Plan directs that the plan which covers the beneficiary as an employee must provide primary coverage. The 139 Plan directs that if one of the two plans covering an individual covers that person as an "employee," then that plan "is primary over a plan that covers an individual as a dependent." (Ex. A, p. 78). Similarly, the Walworth Plan directs that when the participant has coverage under multiple health care plans, the "plan determines its order of benefits using the first of the following rules which applies." (Ex. B, p. 51). The first rule, "Rule 1: Non-dependent/Dependent," mandates that the benefits of the plan "which covers the person as an employee are determined before those of the plan which covers the person as a Dependent."
(Ex. B, p. 51). As a result, if Beneficiary X was an "employee" of Walworth County under the terms of its plan, then both the 139 Plan and Walworth's own plan directs that the Walworth Plan must provide primary coverage. Therefore, the court begins by interpreting "employee" under the Walworth Plan.
The court uses federal common law rules of contract interpretation to determine the meaning of the terms of an employee benefit plan. Andersen v. Chrysler Corp., 99 F.3d 846, 857 (7th Cir. 1996). Despite the Walworth Plan's provision that it is to be construed under the laws of Wisconsin, "parties may not contract to choose state law to govern an ERISA plan." Pisek v. Kindred Healthcare, Inc. Disability Ins. Plan, 2007 WL 2068326 at *10 n. 4 (S.D.Ind. 2007) (quoting Prudential Ins. Co. of Am. v. Doe, 140 F.3d 785, 791 (8th Cir. 1998). McGowan asserts that Wisconsin state contract law applies to the interpretation of the plan and urges this court to apply the Wisconsin state law doctrine of contra proferentum. However, the state law doctrine is inappropriate. Instead, the court applies the doctrine of contra proferentum articulated under federal common law.
The doctrine of contra proferentum dictates that the court should construe ambiguities in a contract against the drafter. Phillips v. Lincoln Nat'l Life Ins. Co., 978 F.2d 302, 306 (7th Cir. 1992). The court may apply the doctrine to resolve ambiguities in ERISA contractual terms. Ruttenberg v. U.S. Life Ins. Co. in City of New York, 413 F.3d 652, 665 (7th Cir. 2005). The term "employee" in the Walworth Plan creates ambiguity about whether the term applies to those former employee participants, such as Beneficiary X, who are under COBRA continuation coverage. The Plan's "Eligibility" rule explicitly states that a "qualified beneficiary under continuation of coverage is considered an `employee' for purposes of this plan." However, the "Definitions" section defines the term "employee" as an individual in an "active status" at the "employer's place of business" who performs job duties for 20 hours per week (Ex. B, pp. 60, 62). Therefore, reasonable minds may disagree about whether the Walworth Plan applies to an individual on COBRA coverage when it mandates that the "benefits of the plan which covers the person as an employee" provide primary coverage (Ex. B, p. 51).
Given the ambiguities created by the Walworth Plan, this court applies contra proferentum to determine that Beneficiary X was an "employee" under the plan. The Walworth Plan's "Eligibility" rules state that a "qualified beneficiary on continuation coverage" is an "`Employee' for purposes of this Plan." Beneficiary X was on continuation coverage based on her COBRA payments. Therefore, Beneficiary X was an employee under the Walworth Plan. The Walworth Plan and the 139 Plan both state that the plan covering an individual as an employee provides primary coverage. As a result, the Walworth plan provides primary coverage for Beneficiary X.
Under contra proferentum, Beneficiary X was an employee and the Walworth Plan must, therefore, provide primary coverage under the terms of both plans. Despite this resolution of primary and secondary liability, the court also addresses the remaining arguments from the parties, starting with McGowan. McGowan argues that the Walworth Plan is primarily liable under its own Rule 6 because the Plan provided coverage to Beneficiary X for a longer period of time. However, this rule is irrelevant. When interpreting plans regarding order of benefit determinations, the court applies the Rules sequentially until the order of benefit determination is resolved. Johnson V. Chicago Plastering Inst. Health Welfare Fund, 341 F.Supp.2d 1011, 1020-21 (N.D.Ill. 2004) (adopting the use of Section 5D of the NAIC Model Regulations for making an order of benefits determination). This court applies Rule 1 of the Walworth Plan, "Non-dependant/Dependant," to determine the order of benefits. Therefore, the court does not reach Rule 6 in its sequential application of the rules before making the determination that the Walworth Plan provides primary coverage.
Walworth's remaining argument contends that Beneficiary X did not fall into a category for which the 139 Plan limited itself to secondary coverage because she did not qualify as an employee, dependent of a Walworth employee, or a laid-off or retired employee. Walworth argues that the 139 Fund accepts primary coverage for Beneficiary X based on the following language:
"If a[nother] plan covers an individual as an employee, then that plan is primary over a plan that covers an individual as a dependent or laid-off or retired employee . . ."
(Ex. A, p. 78). Walworth asserts that since Beneficiary X is not among the individuals listed, the 139 Plan does not limit itself to secondary coverage for her. As a result, Walworth argues that since the 139 Plan does not limit its secondary coverage for Beneficiary X, logically it must provide primary coverage. However, the court need not interpret this plan language to refer only to a dependent of a Walworth employee. Instead, the language merely refers to a dependent. If Beneficiary X was not an "employee," not a "laid-off employee," and not a "retired employee," as the defendant asserts, then she was merely a "dependent" of her husband. As a result, she occupies a category for which the 139 Plan does limit itself to secondary coverage.
2. Remedies
McGowan seeks the following relief: a declaration that the 139 Plan was secondarily liable for Beneficiary X's claims through the date her COBRA coverage terminated, restitution putting the 139 Plan in the position it would have been as of March 1, 2005, costs and attorneys' fees, and "all other relief as the Court deems just and necessary." In particular, McGowan urges the court to issue an order requiring the Walworth Plan to act in compliance with a declaration that it is primarily liable for Beneficiary X's claims so that the Walworth Plan would have to pay claims as primary retroactive to March 1, 2005, through the present. Walworth, however, seeks a declaratory ruling determining that the Walworth Plan was secondarily liable and that the 139 Plan was primarily liable for Beneficiary X from March 1, 2005, until her retirement in September, 2006.
Equitable relief is the only remedy available to ERISA fiduciaries. Johnson, 341 F.Supp. 2d at 1022. The court cannot order an injunction that seeks the transfer of funds between fiduciaries because the relief is legal, not equitable. Id. (citing Great-West Life Annuity Ins. Co. v. Knudson, 534 U.S. 204, 209-11 (2002). In Johnson, the court determined primary and secondary liability between two ERISA funds for a period of overlapping coverage. Id. at 1023. The court found that it could not order the primary coverage plan to pay restitution to the secondary coverage plan because restitution does not constitute equitable relief. Id. at 1022. However, the court did make a declaration of primary and secondary liability and directed the parties to "act in compliance with this declaration." Id. at 1023. This court will do likewise.
The court declares the Walworth Fund is primarily liable for payment of Beneficiary X's claims from March 1, 2005, until September 1, 2006, and the 139 Fund is secondarily liable. The Walworth Fund shall act in compliance with this declaration.
Finally, the court may award attorneys' fees to either party under ERISA. Herman v. Central States Southeast and Southwest Areas Pension Fund, 423 F.3d 684, 695 (7th Cir. 2005). However, there is only a `modest presumption' in favor of awarding fees to the prevailing party. Id. (quoting Senese v. Chicago Area Int'l Bhd. of Teamsters Pension Fund, 237 F.3d 819, 826 (7th Cir. 2001)). The decision to award fees and costs depends on whether the court finds the losing party's position substantially justified and taken in good faith, or whether the party was simply trying to harass its opponent. Id. at 696. The court finds that Walworth's position that it was not primarily liable because Beneficiary X was not an "employee" during the disputed period was substantially justified and taken in good faith. Therefore, the court awards no fees or costs.
Accordingly,
IT IS ORDERED that the defendant's motion for summary judgment (Docket #19) be and the same is hereby DENIED;
IT IS FURTHER ORDERED that the plaintiffs' motion for summary judgment (Docket #22) be and the same is hereby GRANTED.
The Clerk is directed to enter judgment accordingly.