Opinion
Case No. C-3-98-89.
July 21, 1999.
This litigation stems from Plaintiff Michael Rittenhouse's loss of coverage under an employee welfare benefit plan provided by his former employer, Defendant Professional Micro Systems, Inc. ("PMS"). After being informed that his eligibility for coverage had expired, Rittenhouse filed suit against PMS, alleging: (1) breach of contract; (2) equitable estoppel; (3) wrongful discharge in violation of public policy; (4) breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq.; and (5) failure to comply with the notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). (Amended Complaint, Doc. #24). Defendant PMS, in turn, has filed a third-party Complaint against Community Insurance Company, dba Anthem Blue Cross and Blue Shield ("Anthem"). (Doc. #6). In its third-party Complaint, PMS seeks contribution or indemnification from Anthem for any liability that it may incur as a result of Rittenhouse's lawsuit. Pending before the Court are Motions for Summary Judgment filed by PMS with respect to Rittenhouse's amended Complaint (Doc. #34), and by Anthem with respect to PMS' amended third-party Complaint (Doc. #31). Also pending before the Court is a Motion to Strike Jury Demand (Doc. #32) filed by Anthem.
The Plaintiff initially filed a three-count complaint in state court, alleging equitable estoppel, breach of contract, and wrongful discharge in violation of public policy. Defendant PMS removed the action to this Court pursuant to 28 U.S.C. § 1441, asserting ERISA preemption under 29 U.S.C. § 1001, et seq. (Doc. #1). Thereafter, the Plaintiff filed his amended Complaint (Doc. #24), adding his COBRA notification claim and his breach of fiduciary duty claim under ERISA.
PMS filed an "amended" third-party Complaint on November 20, 1998. (Amended Complaint, attached to Doc. #26, at 4). In that filing, PMS merely incorporated by reference the allegations contained in its April 2, 1998, third-party Complaint against Anthem.
For purposes of ruling on PMS' Motion for Summary Judgment, the Court will construe the facts, and all reasonable inferences drawn therefrom, in a light most favorable to Rittenhouse, who is the non-moving party. In its substantive analysis, infra, the Court will recite additional pertinent facts, again construing those facts and all reasonable inferences most strongly in favor of Rittenhouse.
While working for PMS in 1995, Michael Rittenhouse applied for, and obtained, health insurance coverage for himself and his dependent sons through the company's employee welfare benefit plan. (Doc. #40, Rittenhouse affidavit, at ¶ 3). PMS had purchased the group health insurance coverage from Anthem, and the policy took effect July 1, 1995. Rittenhouse last worked for PMS, however, on June 30, 1995, which was a Friday. (Rittenhouse depo. at 129, 169). After returning home from work that day, he coughed and experienced pain and numbness in his back and limbs. (Rittenhouse affidavit at ¶ 4). He was diagnosed with transverse myelitis, and he subsequently obtained long-term disability benefits from a private disability insurance carrier. (Id. at ¶ 4-5). Those disability benefits were awarded retroactively to early July, 1995. (Id. at ¶ 5). Rittenhouse also applied for Social Security disability benefits, but he failed to qualify due to a lack of credits under the Social Security system. (Rittenhouse depo. at 24).
Rittenhouse subsequently spoke with PMS President Anthony Pflum by telephone in February, 1996, concerning his coverage under the Anthem employee welfare benefit plan. (Rittenhouse affidavit at ¶ 6). Pflum advised Rittenhouse, who still could not work, that he could remain covered under the Anthem plan throughout the term of his disability, provided that he (Rittenhouse) began making his own premium payments. (Id.). Pflum did not mention COBRA or inform Rittenhouse that he was being placed on "continuation" coverage under COBRA. (Id.). Following this telephone conversation, Rittenhouse received a February 26, 1996, letter from Pflum confirming their discussion. (Id.). Among other things, the letter stated: "I feel that we can no longer assume the cost of your insurance. We can, however, keep you on the policy for as long as you are disabled if you pay the premium for the coverage." (Rittenhouse affidavit, at Exh. A). At that point, Rittenhouse began paying his own Anthem premiums. (Rittenhouse depo. at 48). Because he understood that he would receive coverage under the Anthem plan indefinitely, he did not obtain insurance elsewhere. (Rittenhouse affidavit, at ¶ 6). No Anthem representative ever informed Rittenhouse that his coverage would continue indefinitely, however. (Rittenhouse depo. at 58).
In September or October, 1997, Pflum happened to mention Rittenhouse's situation to Jeffery Reeves, a Cincinnati insurance agent. (Pflum depo. at 41). Reeves informed Pflum that "there had to be a time frame on [Rittenhouse's] benefits. . . ." (Id.). Reeves also advised Pflum to contact Anthem representative Kevin Hinkle concerning the issue. (Id. at 41-42). Shortly thereafter, Hinkle told Pflum that a disabled employee could remain on the Anthem plan for six months after becoming disabled. According to Hinkle, the employee then would become eligible for eighteen months of COBRA coverage, with the possibility of receiving another eleven months if the Social Security department made a disability determination. (Id. at 46-47).
In October, 1997, Rittenhouse discovered that he needed a liver transplant as a result of cirrhosis. (Rittenhouse depo. at ¶ 61). In order to be placed on a transplant list, he was required to demonstrate the ability to pay for his transplant and anti-rejection medication. (Rittenhouse affidavit, at ¶ 8). As a result, Rittenhouse obtained a letter from Anthem confirming the availability of benefits for his transplant. (Id. at Exh. C). The letter included a caveat, informing Rittenhouse that "your insurance coverage must remain active for benefits to be provided." (Id.).
On approximately October 27, 1997, Pflum called Rittenhouse and informed him that he might not be covered under the Anthem plan. (Rittenhouse affidavit at ¶ 9). As a result of this conversation, Rittenhouse contacted Anthem and received a November 3, 1997, letter confirming that he remained covered under the plan. (Rittenhouse affidavit at ¶ 10, Exh. D). In relevant part, the letter stated: "Per your request this letter is to inform you that as of November 3, 1997, 8:50 a[.]m[.], your coverage with Anthem Blue Cross and Blue Shield is active with no termination date. We find no record of transfer to Cobra benefits. Coverage began on 7/1/95. There has been no break in coverage and no change of employer. Professional Micro [S]ystems[,] Inc.[,] is the only employer shown in our system." (Id.).
Shortly after his conversation with Kevin Hinkle, Pflum contacted other Anthem representatives regarding Rittenhouse's eligibility for benefits. In particular, he spoke with Anthem representatives Louise Vulgamore and Tammy Dalton. (Pflum depo. at 52-54). Vulgamore first advised him that Rittenhouse could be placed on COBRA continuation coverage immediately, with eighteen months of coverage available. (Id. at 53, 56). Dalton then informed him that Rittenhouse's COBRA coverage could be extended eleven more months if he provided Anthem with written proof of his disability. (Id. at 63). Pflum then spoke with Hinkle again, and Hinkle stated that Rittenhouse was not eligible for an eleven-month extension of his COBRA benefits. (Id. at 67). Finally, on November 21, 1997, Sharon Conochalla, Anthem's Director of Operations, advised Rittenhouse via a letter that his plan coverage had terminated effective September 1, 1997. (Rittenhouse affidavit, at Exh. E). The letter stated:
I understand that our Customer Service and Membership staff verified your eligibility status in error. Your eligibility for coverage and benefits terminated 9/1/97. The group plan covers active employees. Once an employee is unable to work due to disability, COBRA coverage may be selected for a maximum of 18 months. This 18 month eligibility period expired on 9/1/97.
This letter is being issued to clarify your status and to correct any erroneous information contained in the letters from Cheryl Burch, Louise Vulgamore or other associate[s].
(Id.).
In a separate letter, Anthem also advised Rittenhouse of his ability to convert his group health care coverage to an individual policy. (Rittenhouse affidavit, at Exh. F). He failed to obtain a conversion policy, however, because he lacked the money to pay for it. (Rittenhouse depo. at 61). Thereafter, Rittenhouse obtained medical coverage through the Veterans Administration. (Id. at 62-63). His VA benefits will cover the cost of a liver transplant, and the benefits also will cover the cost of his various medications. (Id. at 65, 67). Rittenhouse's children are now covered under a separate policy provided by their mother. (Rittenhouse affidavit at 15). After his coverage with Anthem lapsed, Rittenhouse incurred unpaid medical expenses of at least $18,823.59 for himself and his children. (Id.).
II. Summary Judgment Standard
The Court first will set forth the parties' relative burdens once a motion for summary judgment is made. Summary judgment must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
Of course, [the moving party] always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact.Id. at 323. See also Boretti v. Wiscomb, 930 F.2d 1150, 1156 (6th Cir. 1991) (The moving party has the "burden of showing that the pleadings, depositions, answers to interrogatories, admissions and affidavits in the record, construed favorably to the non-moving party, do not raise a genuine issue of material fact for trial[,]" quoting Gutierrez v. Lynch, 826 F.2d 1534, 1536 [6th Cir. 1987]). The burden then shifts to the non-moving party who "must set forth specific facts showing that there is a genuine issue for trial."Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (quoting Fed.R.Civ.P. 56(e)). Thus, "[o]nce the moving party has met its initial burden, the nonmoving party must present evidence that creates a genuine issue of material fact making it necessary to resolve the difference at trial." Talley v. Bravo Pitino Restaurant, Ltd., 61 F.3d 1241, 1245 (6th Cir. 1995). Read together, Liberty Lobby and Celotex stand for the proposition that a party may move for summary judgment by demonstrating that the opposing party will not be able to produce sufficient evidence at trial to withstand a motion for judgment as a matter of law under Fed.R.Civ.P. 50. Street v. J.C. Bradford Co., 886 F.2d 1472, 1478 (6th Cir. 1989).
Once the burden of production has shifted, the party opposing summary judgment cannot rest on its pleadings or merely reassert its previous allegations. It is not sufficient to "simply show that there is some metaphysical doubt as to the material facts."Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). See also Michigan Protection and Advocacy Service, Inc. v. Babin, 18 F.3d 337, 341 (6th Cir. 1994) ("The plaintiff must present more than a scintilla of evidence in support of his position; the evidence must be such that a jury could reasonably find for the plaintiff"). Rather, Rule 56(e) "requires the non-moving party to go beyond the [unverified] pleadings" and present some type of evidentiary material in support of its position. Celotex Corp., 477 U.S. at 324. Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Summary judgment shall be denied "[i]f there are . . . 'genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.'" Hancock v. Dodson, 958 F.2d 1367, 1374 (6th Cir. 1992). Of course, in determining whether a genuine issue of material fact exists, a court must assume as true the evidence of the nonmoving party and draw all reasonable inferences in the favor of that party.Anderson, 477 U.S. at 255 (emphasis added). If the parties present conflicting evidence, a court may not decide which evidence to believe, by determining which parties' affiants are more credible; rather, credibility determinations must be left to the fact-finder. 10A Charles Alan Wright, et al., Federal Practice and Procedure § 2726.
In ruling on a motion for summary judgment (in other words, in determining whether there is a genuine issue of material fact), "[a] district court is not . . . obligated to wade through and search the entire record for some specific facts that might support the nonmoving party's claim." Interroyal Corp. v. Sponseller, 889 F.2d 108, 111 (6th Cir. 1989), cert. denied, 494 U.S. 1091 (1990). See also, L.S. Heath Son, Inc. v. ATT Information Systems, Inc., 9 F.3d 561 (7th Cir. 1993); Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915 n. 7 (5th Cir.) ("Rule 56 does not impose upon the district court a duty to sift through the record in search of evidence to support a party's opposition to summary judgment. . . ."), cert. denied, 506 U.S. 832 (1992). Thus, a court is entitled to rely, in determining whether a genuine issue of material fact exists on a particular issue, upon only those portions of the verified pleadings, depositions, answers to interrogatories and admissions on file, together with any affidavits submitted, specifically called to its attention by the parties.
III. Analysis of Defendant PMS' Motion for Summary Judgment (Doc. #34)
In his Memorandum opposing PMS' Motion for Summary Judgment, Rittenhouse has withdrawn his state-law wrongful discharge (Count I) and breach of contract (Count II) claims, conceding that they are preempted by ERISA. (Doc. #40 at 2 n. 2). Consequently, the Court will begin its analysis with a review of Count III, which presents an equitable estoppel claim against PMS.
Count III of the Plaintiff's amended Complaint states, in relevant part:
"33. Defendant represented to Plaintiff that it would keep Plaintiff on its health insurance policy while he was on disability, provided that Plaintiff paid the premiums.
"34. Defendant's representations were made to induce Plaintiff to remain on Defendant's group health insurance policy and/or Defendant knew that the representations would induce Plaintiff to remain on Defendant's group health insurance policy.
"35. Relying on Defendant's representations, Plaintiff did not attempt to obtain any other health insurance.
"36. Relying on Defendant's representations, Plaintiff continued to pay the applicable insurance premiums.
"37. Plaintiff's reliance on Defendant's promises was reasonable and justifiable.
"38. Despite Defendant's representations, in November of 1997, Plaintiff was advised that he was no longer covered by Defendant's group health insurance policy, causing a gap in insurance coverage for Plaintiff and his family.
"39. As a result of Defendant's failure to fulfill its promises, Plaintiff has been injured in an amount to be proven at trial, but in excess of $25,000."
(Doc. #24 at ¶ 33-39).
A. Equitable Estoppel (Count III)
In Sprague v. General Motors Corp., 133 F.3d 388, 403 (6th Cir. 1998), the court recognized that "equitable estoppel may be a viable theory in ERISA cases, at least in regard to welfare plans." See also Armistead v. Vernitron Corp., 944 F.2d 1287, 1298-1300 (6th Cir. 1991) (noting that federal common law promissory estoppel may be applied in ERISA welfare benefit cases). The elements of an equitable estoppel claim under federal common law are: (1) conduct or language amounting to a representation of material fact; (2) the party to be estopped must be aware of the true facts; (3) the party to be estopped must intend for the representation to be acted upon, or the party asserting estoppel must reasonably believe that the party to be estopped so intends; (4) the party asserting estoppel must be unaware of the true facts; and (5) the party asserting estoppel must reasonably or justifiably rely on the representation to his detriment. Sprague, 133 F.3d at 403, citing Armistead, 944 F.2d at 1298.
After reviewing the record and applicable case law, the Court finds PMS entitled to summary judgment on Rittenhouse's equitable estoppel claim for several reasons. First, a review of Rittenhouse's amended Complaint reveals that Count III asserts a state-law equitable estoppel claim against PMS. See Plaintiff's Amended Complaint, Doc. #24 at ¶ 3 ("This Court has jurisdiction over Counts IV and V pursuant to 29 U.S.C. § 1132 and supplemental jurisdiction over Plaintiff's state law claims."). Nothing in Rittenhouse's amended Complaint suggests that Count III invokes federal common law, and the Sixth Circuit has long recognized that ERISA preempts state law promissory and equitable estoppel claims.See Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272, 1276 (6th Cir. 1991).
Additionally, the Court finds PMS entitled to summary judgment on Count III, even if it is construed as arising under federal common law. In reaching this conclusion, the Court notes that estoppel "cannot be applied to vary the terms of unambiguous plan documents; estoppel can only be invoked in the context of ambiguous plan provisions." Sprague, 133 F.3d at 404, citing Fink v. Union Central Life Ins. Co., 94 F.3d 489, 492 (8th Cir. 1996);Hudson v. Delta Air Lines, Inc., 90 F.3d 451, 458 n. 12 (11th Cir. 1996). In Sprague, the Sixth Circuit articulated two reasons why a plaintiff cannot invoke estoppel principles when a benefit plan contains clear language. First, a plaintiff must demonstrate reasonable or justifiable reliance upon an erroneous representation, and "reliance can seldom, if ever, be reasonable or justifiable if it is inconsistent with the clear and unambiguous terms of plan documents available to or furnished to the party." Sprague, 133 F.3d at 404. Second, "to allow estoppel to override the clear terms of plan documents would be to enforce something other than the plan documents themselves. That would not be consistent with ERISA." Id.
Other circuit courts also have recognized that estoppel principles cannot be invoked to change unambiguous plan language.Singer v. Black Decker Corp., 964 F.2d 1449, 1452 (4th Cir. 1992) ("[R]esort to federal common law generally is inappropriate when its application would . . . threaten to override the explicit terms of an established ERISA benefit plan."); Cinelli v. Security Pacific Corp., 61 F.3d 1437, 1444 (9th Cir. 1995) ("Consistent with the ERISA's strong preference for the written plan, we do not allow an estoppel claim to lie where it would contradict the written terms of the plan."); Plumb v. Fluid Pump Service, Inc., 124 F.3d 849, 856 (7th Cir. 1997) ("Mr. Plumb included an estoppel claim in his complaint. He alleged that, after Kyle was hospitalized, a Starmark representative said over the telephone that Kyle's expenses would be covered under the Starmark plan. Mr. Plumb's estoppel claim is foreclosed in this circuit. . . . Here, the terms of the Starmark plan did not entitle Mr. Plumb to benefits. . . . The oral representations that his son's injuries would be covered therefore contradicted the plain terms of the contract. Under these circumstances, Mr. Plumb cannot recover a benefit to which his plan did not entitle him."); Greany v. Western Farm Bureau Life Ins. Co., 973 F.2d 812, 822 (9th Cir. 1992) ("A plaintiff cannot avail himself of a federal ERISA estoppel claim based upon statements of a plan employee which would enlarge his rights against the plan beyond what he could recover under the unambiguous language of the plan itself."). The principle that estoppel cannot be utilized when misrepresentations flatly contradict ERISA plan language has been applied to both oral and informal written misrepresentations. Miller v. Coastal Corp., 978 F.2d 622, 624 (10th Cir. 1992); Slice v. Sons of Norway, 34 F.3d 630, 634 (8th Cir. 1994); Law v. Ernst Young, 956 F.2d 364, 367-368 (1st Cir. 1992).
In the present case, Rittenhouse bases his equitable estoppel claim upon a February 26, 1996, letter that he received from PMS President Anthony Pflum. The letter advised Rittenhouse, who had been unable to work for many months, that PMS would stop paying his Anthem premiums, due to his extended absence. It also advised him, however, that he could keep his Anthem coverage "for as long as you are disabled if you pay the premium for the coverage." (Pflum depo. at Exh. 1). This promise, however, conflicts with the unambiguous language of Anthem's plan documents. For example, the Anthem plan administration manual unambiguously permits a covered employee who becomes disabled to remain covered for only six consecutive months, with the possibility of receiving continuation coverage under COBRA thereafter. (Pflum depo. at Exh. 19, p. 7). The administration manual also unambiguously defines the duration of an eligible individual's continuation coverage under COBRA, limiting that coverage to eighteen, twenty-nine, or thirty-six months, depending upon the circumstances. (Id. at 6). The potential availability and duration of continuation coverage also were explained in Rittenhouse's Anthem summary plan description ("SPD"). (Doc. #40 at Exh. B, p. 44-45). Likewise, the Master Group Contract between PMS and Anthem limited eligibility under the Anthem plan to employees who are "actively at work." It also provided: "If an employee is not actively at work at any time after coverage becomes effective due to a medical leave of absence such employee shall be deemed actively at work for purposes of continued eligibility for a maximum period of six (6) months after such individual leaves active work." (Pflum depo. at Exh. 15). Under no circumstances do any of the plan documents suggest that a disabled employee might be permitted to remain covered under the Anthem plan indefinitely.
In support of his estoppel claim, Rittenhouse recognizes that equitable estoppel does not apply when plan provisions are unambiguous. Nevertheless, he contends the plan documents at issue are ambiguous in two ways: (1) the summary plan description ("SPD") "says nothing indicating to Plaintiff that he would be required to apply for COBRA if his hours were reduced"; and (2) "the Certificate [SPD] requires only that Plaintiff be actively at work on the day immediately preceding the day coverage began, while other plan documents may suggest something different." (Doc. #40 at 18).
The Court will address these two perceived ambiguities in reverse order. In his second argument, Rittenhouse suggests that his SPD conflicts with other plan documents concerning hisinitial eligibility for coverage under the Anthem plan. In particular, Rittenhouse relies upon language in the Anthem SPD which states:
When your coverage starts
Coverage starts on the Effective Date unless on the day preceding that date the Certificate Holder [Rittenhouse] is not actively at work or a Dependent is an inpatient.
If a Certificate Holder is not actively at work on the day preceding the Effective Date, coverage starts for that person on the date that such person returns to active work.
(Doc. #40 at Exh. B, p. 4-5).
PMS' Anthem plan administration manual, however, appears to impose different requirements for determining when an individual's coverage starts. It provides that "[i]f the employee is not actively-at-work on the date coverage would become effective, the effective date will be postponed until the date the employee returns to work." (Pflum depo. at Exh. 17, p. 2).
In the present case, Rittenhouse last worked for PMS on Friday, June 30, 1995. (Doc. #40, at Rittenhouse affidavit, ¶ 4). The Anthem plan took effect the following day, July 1, 1995. Therefore, under the terms of the SPD, Rittenhouse qualified as a covered participant, because he was actively at work on June 30, 1995, the day preceding the policy's effective date. Under Anthem's plan administration manual, however, Rittenhouse apparently never qualified as a covered participant, because that document required him to be actively at work on the plan's effective date.
For purposes of Rittenhouse's equitable estoppel claim, however, this apparent conflict does not inure to his benefit. Although the conflict may estop PMS from asserting that Rittenhouse never qualified as a plan participant, PMS has advanced no such argument. More importantly, the conflict has absolutely nothing to do with Pflum's misstatement about Rittenhouse continuing his Anthem coverage indefinitely. In short, the Court cannot discern why an apparent conflict or ambiguity about Rittenhouse's initial eligibility for coverage should estop PMS from relying upon unambiguous plan language concerning the subsequent termination of his coverage, due to disability, and his subsequent eligibility for continuation coverage under COBRA. As set forth above, the Anthem plan documents unambiguously identify the circumstances under which a participant's coverage may terminate, and under which a participant may be entitled to COBRA benefits. Rittenhouse simply cannot rely upon a conflict or ambiguity concerning initial eligibility to estop PMS from relying upon unrelated, and unambiguous, plan language concerning coverage termination and continuation under COBRA.
In Edwards v. State Farm Mut. Auto Ins. Co., 851 F.2d 134, 136 (6th Cir. 1988), the court recognized that language in a summary plan description may prevail over conflicting language in the full plan, notwithstanding the existence of a disclaimer to the contrary. See also Lake v. Metropolitan Life Ins. Co., 73 F.3d 1372, 1379 (6th Cir. 1996) (recognizing that "[l]anguage in a plan summary may, under certain circumstances, control inconsistent terms in the plan").
In his other argument, Rittenhouse contends the SPD is silent regarding his need to apply for COBRA benefits after extended disability leave resulting in reduced work hours, whereas PMS' plan administration manual requires participants to obtain COBRA coverage after six months of disability absence. After reviewing the documents at issue, the Court finds this argument unpersuasive. Although the summary plan description does not provide the same level of detailed information found elsewhere in Anthem's plan documents, it does include a section discussing continuation coverage under COBRA. (Doc. #40 at Exh. B p. 44-45). That section states, inter alia:
The 18 month continuation option [i.e. COBRA] applies to employees and their Dependents when coverage would otherwise end due to:
1. reduction in work hours
2. voluntary termination
3. lay-off for economic reasons
4. discharge for misconduct (other than gross misconduct)
(Id. at 45).
Contrary to Rittenhouse's suggestion, the summary plan description does address the issue of continuation coverage after a reduction in work hours. Furthermore, nothing about the SPD's treatment of the COBRA issue conflicts with the other plan documents or creates any ambiguity. Rittenhouse cannot establish an ambiguity, for purposes of invoking equitable estoppel, by pointing out that other plan documents provide more detailed COBRA information than the plan summary. It is axiomatic that no plan summary can include every detail about coverage and still remain a "summary." Indeed, "[l]arding the summary with minutiae would defeat that document's function: to provide a capsule guide in simple language for employees." Herman v. Cencom Cable Assocs., Inc., 978 F.2d 978, 984 (7th Cir. 1992).
As set forth above, the Anthem plan documents at issue unambiguously define the contours of Rittenhouse's right to obtain benefits under the plan, including the duration of his coverage. Consequently, he cannot invoke principles of estoppel to override the express terms of the Anthem plan. Permitting Rittenhouse to do so "would be to enforce something other than the plan documents themselves. That would not be consistent with ERISA." Sprague v. General Motors Corp., 133 F.3d 388, 404 (6th Cir. 1998). Because equitable estoppel does not represent a viable theory of recovery, the Court finds PMS entitled to summary judgment on Count III of Rittenhouse's amended Complaint.
Having found estoppel unavailable in the present case, the Court need not engage in an element-by-element analysis of Rittenhouse's equitable estoppel claim. See Greany v. Western Farm Bureau Life Ins. Co., 973 F.2d 812, 822 n. 9 (9th Cir. 1992) ("A plaintiff must first establish that the plan provision in question is ambiguous and the party to be estopped interpreted this ambiguity. If these requirements are satisfied, the plaintiff may proceed with the equitable estoppel claim by satisfying the [elements of the claim].").
B. Breach of Fiduciary Duty (Count IV)
In Count IV of his amended Complaint, Rittenhouse alleges that PMS breached its fiduciary obligations under ERISA by misinforming him about the duration of his coverage under the Anthem plan. In support of his claim, Rittenhouse once again relies upon Pflum's February 26, 1996, letter, which stated that he could remain covered indefinitely under the Anthem plan. In light of this inaccurate statement, Rittenhouse contends that PMS, as the plan administrator, breached its fiduciary duties under ERISA. After reviewing pertinent case law, the Court finds PMS entitled to summary judgment on this claim. Even assuming,arguendo, that PMS did breach a fiduciary duty by providing Rittenhouse with inaccurate information regarding benefit eligibility, he cannot obtain the relief that he seeks.
In Allinder v. Inter-City Products Corp., 152 F.3d 544 (6th Cir. 1998), the court recently recognized that individual plan participants may bring an ERISA claim for breach of fiduciary duty under 28 U.S.C. § 1132(a)(3)(B). However, such individual capacity claims provide limited relief to aggrieved plan participants, who may obtain only "appropriate equitable relief."Id. at 551-552. In Mertens v. Hewitt Associates, 508 U.S. 248 (1993), the Court defined "appropriate equitable relief" under § 1132(a)(3)(B) as including only those types of relief "that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)." Id. at 256. As the Supreme Court explained in Mertens:
Claims for breach of fiduciary duty under ERISA also are cognizable under 29 U.S.C. § 1132(a)(2). Under that provision, however, claims must be brought on behalf of the plan as a whole. A participant may not bring an individual action to obtain relief under § 1132(a)(2). Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 140 (1985).
Petitioners maintain that the object of their suit is "appropriate equitable relief" under § 502(a)(3). . . . They do not, however, seek a remedy traditionally viewed as "equitable," such as injunction or restitution. . . . Although they often dance around the word, what petitioners in fact seek is nothing more than compensatory damages monetary relief for all losses their plan sustained as a result of the alleged breach of fiduciary duties. Money damages are, of course, the classic form of legal relief. . . . And though we have never interpreted the precise phrase "other appropriate equitable relief," we have construed similar language of Title VII of the Civil Rights Act of 1964 . . . to preclude "awards for compensatory or punitive damages."Id. at 255 (internal citations omitted); see also Allinder, 152 F.3d at 552 ("Accordingly, although Allinder may bring a claim for breach of fiduciary duty in her individual capacity, we nonetheless hold that the district court properly dismissed Allinder's action because the form of remedy sought [compensatory damages] is not available to her as a matter of law."); Rogers v. Hartford Life and Acc. Ins. Co., 167 F.3d 933, 944 (5th Cir. 1999) (rejecting plaintiff's attempt to recover medical expenses under ERISA, reasoning that the statute does not permit a compensatory damages remedy calculated to make the plaintiff whole); McLeod v. Oregon Lithoprint, Inc., 102 F.3d 376, 378 (9th Cir. 1996) ("The relief which McLeod seeks is not `equitable relief.' She does not seek an injunction, mandamus, or restitution. . . . The basis of [the plaintiff's] complaint is that the fiduciaries failed to notify her in a timely manner of her right to elect cancer coverage. This is the essence of a negligence claim, for which she seeks to be made whole through an award of money damages equal in amount to the benefits that she would have been paid and compensation for her emotional distress.").
In the present case, Rittenhouse contends that PMS breached its fiduciary obligations by: (1) not advising him that he would eventually lose coverage under the Anthem group health policy; (2) not advising him that he would be required to utilize COBRA for continuation coverage; and (3) erroneously advising him that he could remain covered under the Anthem plan indefinitely. (Amended Complaint, Doc. #24, at ¶ 42). Rittenhouse also alleges that PMS' actions resulted in a temporary lapse in coverage after his COBRA benefits expired. As a result, he seeks to recover from PMS "all losses incurred as a result of that lapse of coverage." (Id. at ¶ 43, 45).
Although Rittenhouse did not raise the issue in his Complaint, he suggests in his Memorandum opposing summary judgment that PMS also breached a fiduciary duty by misleading him into believing that he was initially covered under the Anthem plan. As noted, supra, this argument relies upon an apparent contradiction between Anthem's SPD and its plan administration manual. Under the former document, Rittenhouse's initial eligibility to participate in the Anthem plan depended upon him working on June 30, 1995, the day before the plan's July 1, 1995, effective date. Anthem's plan administration manual, however, provides that an individual must be actively at work on the plan's effective date in order to be eligible to participate. In any event, Rittenhouse cannot establish a breach of fiduciary duty based upon this discrepancy, because the record is devoid of evidence suggesting that PMS ever has disputed his initial eligibility to participate in the Anthem plan.
In his Memorandum opposing summary judgment, however, Rittenhouse disputes PMS' contention that his Complaint seeks compensatory damages. In so doing, Rittenhouse first concedes that he is not entitled to any additional coverage under the terms of the Anthem plan. (Doc. #40 at 12). He argues instead that his breach of fiduciary duty claim is intended to place him "in the position he would have been in had the misrepresentations not occurred." (Id.). He insists that "to seek reimbursement for costs incurred as a result of Defendant PMS's misconduct, thus putting Plaintiff into the position he would have been in but for the wrongful conduct, is equitable in nature." (Id.).
The Court cannot agree with Rittenhouse's assertion. Notably, compensatory damages are generally intended to place a plaintiff in a position similar to the one he would have occupied had the defendant's actions not occurred. Cunningham v. City of Overland, 804 F.2d 1066, 1069 (8th Cir. 1986), citing Memphis Community School Dist. v. Stachura, 477 U.S. 299 (1986). In the present case, Count IV of Rittenhouse's amended Complaint seeks nothing more than compensatory money damages for expenses he allegedly incurred after his Anthem coverage lapsed. Just as the plaintiff did in Mertens, Rittenhouse "dances around" the word, but what he "seeks is nothing other than compensatory damages — monetary relief for all losses [he] sustained as a result of the alleged breach of fiduciary duties." Mertens, 508 U.S. at 255. Such monetary relief, however, is unavailable under ERISA.
In opposition to this conclusion, Rittenhouse seeks to draw an analogy between the present case and Varity Corp. v. Howe, 516 U.S. 489 (1996). The plaintiffs in Varity, however, sought reinstatement as participants in their employer's ERISA plan. Upon review, the Supreme Court concluded that reinstatement is an equitable, not compensatory, remedy. Id. at 515. In the present case, Rittenhouse admits that he is not entitled to additional coverage under the Anthem plan. (Doc. #40 at 12). Instead, he seeks money damages for expenses that he has incurred as a result of PMS' alleged breach of fiduciary duty. Consequently, the Court finds Varity distinguishable.
Rittenhouse also relies upon the Sixth Circuit's ruling inSchwartz v. Gregori, 45 F.3d 1017 (6th Cir. 1995). In Schwartz, the court determined that front pay and back pay are equitable remedies under ERISA. In reaching this conclusion, the court recognized that front pay typically is awarded in lieu of reinstatement, which is an equitable remedy. Id. at 1023. The court also reasoned that back pay may constitute an equitable remedy under ERISA when it is awarded to a victim of retaliatory discharge. Id. at 1022; see also United States v. Burke, 504 U.S. 229, 238 (1992) (recognizing that a back pay award under Title VII constitutes equitable relief).
In the present case, however, Rittenhouse is not seeking front or back pay. Rather, he seeks money damages to compensate him for expenses that he incurred after his plan coverage lapsed. He insists that he would have obtained alternative coverage, prior to the lapse, if PMS had properly informed him about the duration of his eligibility. Consequently, he seeks to recover from PMS for "all losses incurred as a result of that lapse." (Amended Complaint, Doc. #24 at 45). Such damages, however, are more akin to compensatory damages than they are to restitution, and they are not available under 28 U.S.C. § 1132(a)(3)(B).
In a final argument, Rittenhouse suggests that PMS' purported breach of fiduciary duty entitles him to injunctive relief, namely an order directing PMS to reimburse him for any liability that he ultimately may incur to Anthem. (Doc. #40 at 12). The Court finds this argument unpersuasive for at least two reasons. First, Rittenhouse did not seek such an order in his amended Complaint.Second, and more importantly, Rittenhouse's concern about potential liability to Anthem is purely speculative at this time, because Anthem has not asserted any claims against him.
For the foregoing reasons, PMS is entitled to summary judgment on Count IV of Rittenhouse's amended Complaint (Doc. #24). Construing the facts and all reasonable inferences in a light most favorable to Rittenhouse, the Court finds no genuine issue of material fact with respect to his breach of fiduciary duty claim against PMS.
C. Failure to Provide COBRA Notice (Count V)
In Count V of his amended Complaint, Rittenhouse contends that PMS violated COBRA by failing to notify him of his right to obtain continuation coverage under the Anthem plan. In fact, Rittenhouse asserts that he first discovered his COBRA rights after exhausting his eligibility for such coverage. As a result, he maintains that PMS deprived him of the opportunity to make alternative arrangements for health insurance prior to the exhaustion of his continuation coverage under COBRA. In response, PMS advances several arguments. First, it contends that Rittenhouse received legally adequate notice of his COBRA rights.Second, it asserts that he received more continuation coverage than COBRA requires. Third, it argues that per diem statutory penalties are inappropriate in the present case, even if Rittenhouse did receive inadequate notice of his right to COBRA coverage. Before addressing the merits of Rittenhouse's COBRA claim, the Court briefly will review the statute's key provisions.
Count V of Rittenhouse's amended Complaint states, in relevant part:
"47. Under ERISA, Defendant had an obligation to provide Plaintiff with notification of his COBRA right to the continuation of coverage under the group health plan within a limited period of time following his separation of employment with the Defendant.
"48. Despite its obligation to do so, Defendant has failed and continues to fail to provide the statutorily-mandated COBRA notification.
"49. As a result of Defendant's failure to provide the statutorily-mandated COBRA notification, Plaintiff has been damaged.
"50. As a result of Defendant's misconduct, Plaintiff is entitled to injunctive relief in the form of an Order requiring Defendant to provide Plaintiff with COBRA notification and, pursuant to 29 U.S.C. § 1132, Plaintiff is entitled to $100.00 per day for each day Defendant has failed and continues to fail to provide Plaintiff with the statutorily-mandated COBRA notification."
(Doc. #24 at ¶ 47-50).
Congress enacted COBRA in 1986 in the wake of "reports of the growing number of Americans without any health insurance coverage and the decreasing willingness of our Nation's hospitals to provide care to those who cannot afford to pay." H.R. Rep. No. 241, 99th Cong., 2d Sess. 44, reprinted in 1986 U.S.C.C.A.N. 42, 579, 622. "COBRA compels employers that sponsor certain group health plans to provide `qualified beneficiaries' with the option of receiving self-paid `continuation coverage,' at no more than 102% of group rates, for eighteen or thirty-six months after the occurrence of a `qualifying event' which would otherwise result in a termination of coverage." Gaskell v. Harvard Cooperative Society, 3 F.3d 495, 498 (1st Cir. 1993), citing 29 U.S.C. § 1161(a), § 1162(2)((A). Providing appropriate notice of the right to continuation coverage is "a key requirement" under COBRA.McDowell v. Krawchison, 125 F.3d 954, 957 (6th Cir. 1997). The failure to provide a qualified beneficiary with notice of his or her rights under COBRA may compel the employer to provide continuation coverage. Id., quoting Lincoln Gen. Hosp. v. Blue Cross/Blue Shield, 963 F.2d 1136, 1139 (8th Cir. 1992). Furthermore, a District Court may, in the exercise of its discretion, impose per diem penalties upon an employer/administrator for failure to provide proper COBRA notification. 29 U.S.C. § 1132(c).
As a means of analysis, the Court first must determine when a "qualifying event" occurred, thereby triggering Rittenhouse's right to receive notice of eligibility for continuation coverage under COBRA. In so doing, the Court looks initially to the Master Group Contract entered into by Anthem and PMS. In relevant part, that document states: "If an employee is not actively at work at any time after coverage becomes effective due to a medical leave of absence such employee shall be deemed actively at work for purposes of continued eligibility for a maximum period of six (6) months after such individual leaves active work." (Pflum depo. at Exh. 15). Likewise, Anthem's plan administration manuals provide that if a covered employee becomes disabled, he is entitled to remain covered under the plan for six consecutive months. Thereafter, the employee may be eligible for a period of COBRA continuation coverage. (Pflum depo., Exh. 17 at 6; Exh. 19 at 7).
In the present case, Rittenhouse last worked for PMS on June 30, 1995. (Rittenhouse depo. at 169). Therefore, as set forth,supra, he qualified as a plan participant under the terms of his SPD. Rittenhouse became disabled immediately thereafter, however, and he never returned to work for PMS. As a result, pursuant to the Anthem Master Group Contract, Rittenhouse must be deemed to have been "actively at work for purposes of continued eligibility for a maximum period of six (6) months" after July 1, 1995. (See Master Group Contract, Pflum depo. at Exh. 15). Under the terms of his Anthem plan, then, Rittenhouse's eligibility to participate in the plan as an active employee expired on or about January 1, 1996, which is six months after the onset of his July 1, 1995, disability.
The Anthem SPD provides:
"Coverage starts on the Effective Date unless on the day preceding that date the Certificate Holder [Rittenhouse] is not actively at work or a Dependent is an inpatient.
If a Certificate Holder is not actively at work on the day preceding the Effective Date, coverage starts for that person on the date that such person returns to active work."
(Doc. #40 at Exh. B, p. 4-5).
As set forth, supra, the effective date of the Anthem plan was July 1, 1995. Because Rittenhouse was actively at work on the preceding day, his coverage started on July 1, 1995.
In light of the foregoing facts, the Court finds that a qualifying event occurred on or about January 1, 1996, thereby triggering Rittenhouse's right to notification of his eligibility for continuation coverage under COBRA. This conclusion is consistent with 29 U.S.C. § 1163(2), which identifies a "qualifying event" an employee's reduction in work hours, if that reduction would result in a loss of coverage but for the availability of continuation coverage under COBRA. In the present case, Rittenhouse was "deemed" actively at work through approximately January 1, 1996, pursuant to the Anthem Master Group Contract. Thereafter, he failed to work any hours for PMS. Consequently, but for the availability of COBRA coverage, Rittenhouse was ineligible to participate in the Anthem plan after approximately January 1, 1996. See Anthem Group Administration Manual, Pflum depo., Exh. 17 at 1 ("To be eligible [for coverage] an employee must be working 25 or more hours a week on a regular basis . . .").
Parenthetically, the Court notes that Rittenhouse's "qualifying event" would have been his July 1, 1995, commencement of disability leave if the Anthem plan documents had not treated him as actively employed for an additional six months thereafter. Pursuant to 29 U.S.C. § 1163(2), an employee's "reduction of hours" constitutes a "qualifying event." Rittenhouse's work hours were reduced to zero after June 30, 1995, because of his physical inability to work. Nevertheless, as set forth above, the Anthem plan documents expressly extended Rittenhouse's eligibility for six months by "deeming" him to have been actively at work. "It is the terms of the plan that matter in defining the appropriate [qualifying event] `trigger'; thus, [a plaintiff's] reduction in hours is not a `qualifying event' if it is not so designated in the plan, even if it might have been designated as such, and regardless of the fact that it may ultimately have led to the eventual occurrence of a `qualifying event' which was so designated." Gaskel1, 3 F.3d at 501.
In its Motion for Summary Judgment, however, PMS contends that Rittenhouse's "qualifying event" was his termination of employment. (Doc. #34 at 12). According to PMS, Rittenhouse's termination occurred on June 30, 1995, because he never returned to work after that date. (Id.). Notably, this assertion is contradicted by a letter from PMS President Anthony Pflum to Rittenhouse. The letter is dated March 4, 1996, and it states, in relevant part:
Dear Mike,
It has now been eight months since you became disabled and have been put on unpaid disability leave. . . .
Several times we had hoped that your disability was coming to an end through treatment, however that has not happened. We are now reaching a critical point where we need a full time person in the slot that you occupied and are removing you from leave status.
We have started actively looking for a new employee to fill this slot. When you become available to work again, we will consider our situation at that time and consider you for re-employment . . . We do state that you have been a valuable employee[,] and we have kept your position open for as long as possible in the hope that you would be returning.
Construing this letter most strongly in Rittenhouse's favor, as the Court must given his status as the non-moving party, the Court concludes that PMS did not terminate his employment until March 4, 1996. Consequently, the Court finds unpersuasive PMS' argument that his June 30, 1995, "termination" constituted a "qualifying event" under ERISA.
Given that Rittenhouse's "qualifying event" occurred on or about January 1, 1996, the Court next must determine whether PMS provided him with adequate and timely notice of his continuation rights under COBRA. In particular, the Court must determine whether PMS complied with 29 U.S.C. § 1166(a)(4)(A). That provision obligates a plan administrator to notify a "qualified beneficiary" of the occurrence of a "qualifying event," such as a reduction in work hours. It also obligates the administrator to notify the qualified beneficiary of his or her rights under COBRA.
PMS does not appear to contest its status as an "administrator"under § 1166(a)(4). (Pflum depo. at 81).
The parties do not dispute Rittenhouse's status as a "qualified beneficiary" under ERISA. See 29 U.S.C. § 1167(3)(B) ("In the case of a qualifying event described in section 1163(2) of this title [reduction in hours as a `qualifying event'], the term `qualified beneficiary' includes the covered employee.").
In the present case, PMS argues that Rittenhouse's SPD provided him with adequate notice of his COBRA rights. The Court finds this argument unpersuasive. Although an SPD conceivably could provide an individual with adequate notice of his rights under COBRA, the Court concludes that Rittenhouse's SPD did not provide legally sufficient notice. A fundamental flaw with PMS' argument is that Rittenhouse appears to have received the SPDprior to the occurrence of his January 1, 1996, qualifying event. Indeed, in its Motion for Summary Judgment, PMS itself asserts that Rittenhouse received the SPD "at the inception of the Anthem plan" and "shortly after July 1, 1995." (Doc. #34 at 3). If Rittenhouse received the document prior to January 1, 1996, however, it cannot have provided the notification required by 29 U.S.C. § 1166(a)(4)(A). An employer must notify an ERISA plan administrator of the occurrence of a qualifying event within thirty days of such an event. 29 U.S.C. § 1166(a)(2). The plan administrator then has fourteen days in which to notify a qualified beneficiary of his right to elect continuation coverage, retroactive to the date of the qualifying event. 29 U.S.C. § 1166(a)(4), § 1166(c). Consequently, as the Plaintiff's "employer" and "plan administrator," PMS is not entitled to summary judgment on his COBRA claim, based upon his receipt of an Anthem SPD prior to the occurrence of his "qualifying event."
Rittenhouse is unable to recall when he received the SPD. In deposition testimony, he expressed his belief that he received the SPD and other documents in July, 1995. (Rittenhouse depo. at 45, 114-115). In an affidavit accompanying his Memorandum opposing summary judgment, Rittenhouse states only that he received the SPD sometime before February, 1996. In any event, construing the evidence in a light most favorable to Rittenhouse, a trier of fact reasonably could find that he received the SPDprior to the occurrence of his January 1, 1996, "qualifying event" under COBRA. As a result, the Court cannot sustain PMS' Motion for Summary Judgment on the basis that it provided proper COBRA notification after the occurrence of Rittenhouse's "qualifying event."
Furthermore, the Anthem SPD is substantively deficient as well. Although COBRA itself does not prescribe the contents of the required notice, the Sixth Circuit has held that such notice "must be sufficient to allow the qualified beneficiary to make an informed decision whether to elect coverage." McDowell, 125 F.3d at 959. With respect to continuation coverage under COBRA, the Anthem SPD provides, in relevant part:
Federal law requires that individuals covered by certain employer group health plans with more than 20 employees be given an option to continue group coverage for up to 18 months or 36 months beyond the date coverage would otherwise end. . . .
The 18 month continuation option applies to employees and their Dependents when coverage would otherwise end due to:
1. reduction in work hours
2. voluntary termination
3. lay-off for economic reasons
4. discharge for misconduct (other than gross misconduct)
The 18 month continuation option may be extended for up to 29 months for disabled employees or disabled Dependents.
Persons eligible for continuation of group coverage have 60 days from the date coverage would otherwise end or the date that they are notified of their continuation option, whichever is later, to elect such coverage. Individuals who choose to continue group coverage may be required by their employer to pay the monthly contribution. You should contact your Employer to determine if this law applies to your group health care plan.
(Doc. #40 at Exh. B, 44-45) (Emphasis in original).
After reviewing the foregoing language, the Court concludes that PMS failed to provide Rittenhouse with appropriate notice of his rights under COBRA for several reasons. First, the SPD itself suggests that some additional notice of a participant's COBRA rights was intended. Indeed, the SPD states that "[p]ersons eligible for group coverage have 60 days from the date coverage would otherwise end, or the date they are notified of their continuation option, whichever is later, to elect such coverage."Second, the SPD did not inform Rittenhouse how much continuation coverage would cost. In fact, it failed to state with certainty whether he or PMS would be required to pay for the coverage. See Doc. #40, Exh. B. at 45 ("Individuals who choose to continue group coverage may be required by their employer to pay the monthly contribution."). Third, the SPD failed to state with certainty whether continuation coverage even applied to Rittenhouse's Anthem plan, and it directed him to contact his employer to obtain this information. Id. (" You should contact your Employer to determine if this law applies to your group health care plan."). Fourth, following Rittenhouse's receipt of the Anthem SPD, PMS President Anthony Pflum informed him that his Anthem coverage could continueindefinitely, which is inconsistent with COBRA and inconsistent with the continuation coverage information set forth in the SPD. This fact militates against a finding that the SPD adequately placed Rittenhouse on notice of his need to utilize the continuation coverage provided by COBRA.
Notwithstanding this conclusion, the Court finds persuasive PMS' second argument, namely that it has provided Rittenhouse withmore coverage than COBRA requires. As noted, supra, the Sixth Circuit has reasoned that a plan administrator's failure to provide proper notice under COBRA may obligate the administrator to provide appropriate continuation coverage. McDowell, 125 F.3d at 957. In the present case, however, PMS did not terminate Rittenhouse's coverage upon the occurrence of his January 1, 1996, "qualifying event." Rather, Rittenhouse remained covered under the Anthem plan for an additional twenty months, until September 1, 1997. Given that COBRA only entitled him to eighteen months of continuation coverage, Rittenhouse actually has received more coverage than COBRA requires, despite PMS's failure to notify him of his statutory right to a continuation of benefits. As a result, Rittenhouse is not entitled to any additional coverage under COBRA, even if PMS did violate its obligation to provide the requisite notice. This conclusion is supported by pertinent case law. See Gaskell, 3 F.3d at 498-502 (reasoning that the eighteen-month COBRA continuation period begins to run immediately upon the occurrence of a "qualifying event," regardless of when an individual's benefits actually cease, and notwithstanding an employer's failure to provide proper COBRA notification); Mlsna v. Unitel Communications, Inc., 41 F.3d 1124, 1128 n. 1 (7th Cir. 1994) (agreeing with the 1st Circuit's reasoning in Gaskell); Burgess v. Adams Tool Engineering, Inc., 908 F. Supp. 473, 478-479 (W.D.Mich. 1995) ("An employer's lack of notice is not a basis for extending COBRA's 18-month continuation coverage period, but may result in the assessment of damages or civil penalties. . . . In this case, the plaintiffs were provided with health care coverage for 18 months under terms more favorable than required by COBRA.").
In his Memorandum opposing summary judgment, Rittenhouse recognizes that he has received all of the coverage to which he is entitled under the Anthem plan. (See Doc. #40 at 12) ("Plaintiff acknowledges that under the Plan, Plaintiff is not entitled to health insurance coverage beyond the 18 month COBRA period. Accordingly, Plaintiff has not sued Defendant Anthem for benefits.").
As in the present case, the employer in Burgess continued providing the plaintiff with plan benefits, even after the plaintiff failed to qualify as an eligible employee, but failed to inform the plaintiff that he was eligible for continuation coverage under COBRA. In light of these facts, the District Court cited Gaskell and reasoned:
[The employer] Adams'Group Health Plan provides that employee health care coverage terminates 30 days from the date when an employee ceases active full-time employment. Adams did not terminate plaintiffs' coverage as specified in the Plan when Mr. Burgess ceased full-time employment. Instead, Adams continued to provide coverage under the Plan on the same basis as if Mr. Burgess continued to serve as a full-time employee.
In Gaskell v. Harvard Co-op. Soc., 3 F.3d 495 (1st Cir. 1993), the court considered whether COBRA continuation coverage ran from the date of the event triggering an employee's loss of benefits under the terms of an employer's health insurance plan or from the date of the loss of benefits. [footnote omitted]. The court noted that COBRA's statutory language `offers no explicit guidance in determining the relevant `qualifying event' where, as here, the employee's termination or reduction in hours does not coincide with the loss of coverage under the plan.' Id. at 499. As a result of the ambiguous language of the statute, the First Circuit reviewed the legislative history and concluded `that Congress intended an employee's eighteen-month period of continuation coverage to commence with the event leading, under the terms of the plan, to loss of coverage, rather than upon the loss of coverage itself." Gaskell, 3 F.3d at 499 (emphasis in original).
This Court's independent review of the legislative history comports with the First Circuit's findings in Gaskell. Accordingly, the Court finds that Mr. Burgess' reduction of hours was a qualifying event triggering COBRA continuation coverage. The fact that Adams continued the plaintiff's coverage after the date when the Plan provides that benefits terminate does not affect this determination.
Even when the facts are construed in the light most favorable to plaintiffs [footnote omitted] and June 30, 1992[,] is deemed the date of the `qualifying event,' the Burgess' health care coverage would have terminated on July 30, 1992, and the 18-month `continuation coverage' obligation would have expired on January 31, 1994. The Burgesses were actually covered by Adams' health care plan on the same terms as eligible employees from July 31, 1992[,] through January 31, 1994. [footnote omitted]. Thus, the coverage provided to the Burgesses comports with COBRA's statutory requirements. . . .Burgess, 908 F. Supp. at 476-477.
The sole remaining issue, then, is whether PMS is entitled to summary judgment on Rittenhouse's claim for per diem penalties, pursuant to 29 U.S.C. § 1132(c). In support if its Motion for Summary Judgement, PMS contends (1) that Tony Pflum attempted to help Rittenhouse, acting in good faith at all times, and (2) that Rittenhouse has not been prejudiced by his purported lack of COBRA notice. (Doc. #34 at 14). As a result, PMS suggests that Rittenhouse "seeks [a] penalty for a foul which produced no harm." (Doc. #41 at 3). PMS also cites Bartling v. Fruehauf Corp., 29 F.3d 1062 (6th Cir. 1994), for the proposition that per diem penalties under ERISA ordinarily should be imposed only if a court finds bad faith by the employer or prejudice to the plaintiff.
29 U.S.C. § 1132(c)(1) provides, inter alia, that any administrator who fails to comply with COBRA's notice requirements may be liable, in the Court's discretion, "in an amount of up to $100 a day from the date of such failure[,]" and the Court "may in its discretion order such other relief as it deems proper."
In Bartling, however, the Sixth Circuit merely recognized that many courts have refused to impose a penalty pursuant to § 1132(c) absent a showing of prejudice or bad faith. Id. at 1068. The court also noted, however, that "the statute expressly grants a district court discretion in imposing penalties. . . ." Id. Notably, in Daniel v. Eaton Corp., 839 F.2d 263, 268, (6th Cir. 1988), the court affirmed an award under § 1132(c), even absent evidence of bad faith by the defendant or prejudice to the plaintiff.
Moreover, the record contains evidence from which a trier of fact may conclude that Rittenhouse's failure to receive timely COBRA notice resulted in some prejudice. In an affidavit accompanying his Memorandum opposing summary judgment, Rittenhouse avers that he first learned on November 21, 1997, that his COBRA eligibility had expired on September 1, 1997. (Doc. #40, Rittenhouse affidavit, at ¶ 11). He also avers that he experienced a lapse in insurance coverage and incurred non-reimbursed medical expenses as a result of his failure to receive proper COBRA notification. (Id. at ¶ 12,15). If Rittenhouse establishes these claims at trial, a trier of fact reasonably could conclude that PMS's actions resulted in prejudice. In any event, the Court cannot conclude, as a matter of law, that Rittenhouse is not entitled to some recovery under § 1132. The Court can best exercise its discretion in this matter after hearing evidence on the issue at trial.
For the foregoing reasons, the Court concludes that PMS is not entitled to summary judgment on Count V of Rittenhouse's amended Complaint. Construing the evidence and all reasonable inferences in a light most favorable to Rittenhouse, the Court cannot say, as a matter of law, that a per diem award under 29 U.S.C. § 1132(c) is unwarranted.
IV. Analysis of Anthem's Motion for Summary Judgment (Doc. #31)
Also pending before the Court is a Motion for Summary Judgment filed by third-party Defendant Anthem (Doc. #31). In its Motion, Anthem seeks summary judgment on PMS' amended third-party Complaint, which seeks indemnity and contribution for any liability that PMS may incur as a result of Rittenhouse's lawsuit.
Given the Court's determination, supra, that PMS is entitled to summary judgment on Counts I through IV of Rittenhouse's amended Complaint, it need not consider Anthem's potential liability to PMS under those Counts. The only remaining issue is whether PMS may be entitled to indemnification or contribution from Anthem, if PMS is subjected to per diem penalties for failing to provide proper COBRA notification.
With respect to that issue, Anthem contends the plan documents unambiguously imposed responsibility for providing proper COBRA notification upon PMS. After reviewing those documents, the Court agrees with Anthem's assertion. The Anthem plan administration manual, which was provided to Pflum, states: "COBRA continuation is available only if the application and premium payment requirements of the law are met. It is the employer's responsibility to notify the employee of these requirements and the availability of coverage." (Pflum depo. at Exh. 19, p. 6). Likewise, PMS' "Employer Agreement" with Anthem states that PMS agrees "to provide notice of conversion rights and rights to continue health care coverage under COBRA to eligible employees if any, and eligible dependents." (Pflum depo. at Exh.13).
The foregoing plan documents are consistent with the statutory language of COBRA, which requires group health plansponsors or administrators to notify qualified beneficiaries of their right to receive continuation coverage. 29 U.S.C. § 1161(a), § 1166(4). Under ERISA, PMS qualified as Rittenhouse's "plan sponsor" because it was his employer. 29 U.S.C. § 1002(16)(B). PMS also served as the "plan administrator." Finally, imposing upon PMS the obligation to provide Rittenhouse with COBRA notification is consistent with applicable case law. Cf. Geissal v. Moore Medical Corp., 118 S.Ct. 1869, 1873 (1998) ("The amendments to ERISA require an employer who sponsors a group health plan to give the plan's `qualified beneficiaries' the opportunity to elect `continuation coverage' under the plan when the beneficiaries might otherwise lose coverage upon the occurrence of certain `qualifying events'. . . ."); Lee v. Burkhart, 991 F.2d 1004, 1010 (2d Cir. 1993) (noting that "[u]nless the plan sponsor . . . designates another party to provide the [COBRA] disclosure mandated by ERISA, the duty to make such disclosure is on the plan administrator"); Hamilton v. Mecca, Inc., 930 F. Supp. 1540, 1553 (S.D.Ga. 1996) ("Thus, Mecca, as Mr. Hamilton's employer and as the `sponsor' and `administrator' of the Provident group health insurance policy, had the exclusive duty of providing Mr. Hamilton with notice of his rights under COBRA. . . ."). Consequently, PMS, rather than Anthem, bore the obligation to provide Rittenhouse with statutorily sufficient notice of his COBRA rights.
In an effort to avoid this inescapable conclusion, PMS advances several arguments. After reviewing PMS' Memorandum opposing Anthem's Motion for Summary Judgment, the Court discerns three general arguments related to the issue of COBRA notification: (1) that PMS had no obligation to inform Rittenhouse of his COBRA rights until after Anthem exercised its discretion and determined his COBRA eligibility; (2) that Pflum relied upon the advice of Anthem representative Judy Grimes regarding Rittenhouse's coverage eligibility and benefits; and (3) that Anthem had actual knowledge of Rittenhouse's disability and, as a result, should have modified its records to reflect that change in status.
PMS also argues at some length in support of its contention that indemnification and contribution are viable claims against Anthem, which is purportedly a fiduciary under ERISA. For purposes of the present Motion for Summary Judgment, the Court will assume, arguendo, the validity of PMS' assertions.
The Court finds these arguments unpersuasive. Although Anthem did reserve the discretion to make eligibility determinations, the Court finds no support for PMS' argument that Rittenhouse possessed no right to receive COBRA notice until after Anthem made a final determination of his eligibility. This argument is refuted by the COBRA statute and pertinent case law. As set forth in detail, supra, the occurrence of a "qualifying event," such as a reduction in an employee's work hours or termination, triggers the employee's statutory right to receive notification of his COBRA rights. "Under [29 U.S.C.] § 1166(a)(2) an employer has a duty to report most qualifying events, including termination of employment [and reduction of work hours], to its group health plan administrator within 30 days of the qualifying event." Geissal, 118 S.Ct. at 1873. In turn, an administrator must inform any qualified beneficiary of his or her COBRA rights within fourteen days of receiving notice of the qualifying event. 29 U.S.C. § 1166(a)(4) and (c); Geissal, 118 S.Ct. at 1873; see also Smith v. Rogers Galvanizing Co., 128 F.3d 1380, 1383 (10th Cir. 1997) ("When a qualifying event occurs . . . the employer is required to notify the plan administrator within thirty days of the date of the qualifying event. . . . The administrator is then required to notify `any qualified beneficiary' of the qualifying event."). Nothing in these provisions suggests that PMS' obligation to provide COBRA notice remained dormant until after Anthem made a final eligibility determination.
As noted, supra, Rittenhouse's employer, PMS, acted as both the Anthem plan sponsor and the plan administrator.
The Court also finds unpersuasive PMS' effort to seek refuge in Pflum's February, 1996, telephone conversation with Anthem representative Judy Grimes. During the course of that conversation, he mentioned that Rittenhouse had been off of work for approximately six months, and that he wanted to continue his insurance. The specific purpose for Pflum's call, however, was to inquire about "how we could handle [Rittenhouse's] payment, whether Mike should be sending the payment directly to Anthem or to us, to make sure I understood." (Pflum depo. at 27). Pflum and Grimes never discussed COBRA, the duration of Rittenhouse's ability to obtain coverage, or the impact of his disability on his coverage under the Anthem plan. (Id. at 28). In fact, Pflum did not even consider the duration of Rittenhouse's right to obtain coverage under the Anthem policy. (Id. at 31). Rather, he simply indicated that Rittenhouse was disabled and asked Grimes whether he (Rittenhouse) could continue to pay premiums on his own. (Id. at 36).
In light of these facts, the Court finds nothing in Pflum's conversation with Grimes to suggest that Anthem is responsible for the inadequate COBRA notification to Rittenhouse. By his own admission, Pflum did not ask Grimes anything about providing COBRA notice, and she did not provide him with any inaccurate advice. To the contrary, Pflum merely inquired about the proper payment procedure for a disabled plan participant, and Grimes answered his question. Grimes' failure to volunteer unsolicited information concerning COBRA notification and eligibility cannot shift liability to Anthem, particularly in light of the unambiguous plan documents imposing upon PMS the obligation to provide Rittenhouse with such notice.
Finally, the Court finds no basis for imposing COBRA notification liability upon Anthem, even if it knew of Rittenhouse's disability and failed to modify its records accordingly. This argument simply has no bearing on the issue of COBRA notice liability. Regardless of whether Anthem possessed actual knowledge that Rittenhouse was disabled, and that he was or should have been on COBRA, these facts do not vitiate PMS' statutory obligation to inform Rittenhouse about his continuation coverage rights.
In short, the Court can conceive of no basis for PMS obtaining indemnification or contribution from Anthem for any liability that it may incur under Count V of Rittenhouse's amended Complaint. Construing the facts and all reasonable inferences in a light most favorable to PMS, the Court finds no genuine issue of material fact precluding the entry of summary judgment in Anthem's favor. Accordingly, Anthem's Motion for Summary Judgment (Doc. #31) is hereby sustained.
V. Analysis of Motion to Strike Jury Demand (Doc. #32)
Also pending before the Court is an unopposed Motion to Strike Jury Demand (Doc. #32) filed by Third-Party Defendant Anthem. This Motion is moot, however, in light of the Court's determination that Anthem is entitled to summary judgment. Although the Motion will be overruled on the basis of mootness, the Court notes that the only viable claim in Rittenhouse's amended Complaint is Count V, which alleges a violation of COBRA's notice provisions and seeks per diem penalties under 29 U.S.C. § 1132(c). As noted, supra, that statute authorizes the Court, in its discretion, to assess penalties of up to $100 per day against a plan administrator who violates COBRA's notice requirements. Rittenhouse plainly has no right to a jury trial on this claim.Daniel v. Eaton Corp., 839 F.2d 263, 268 (6th Cir. 1988).
VI. Conclusion
Based upon the foregoing analysis, the Motion for Summary Judgment filed by Defendant Professional Micro Systems, Inc. (Doc. #34), is SUSTAINED IN PART, and OVERRULED IN PART. The Motion is SUSTAINED with respect to Counts III and IV of the Plaintiff's amended Complaint (Doc. #24). The Motion is OVERRULED with respect to Count V of the Plaintiff's amended Complaint (Doc. #24), insofar as the Plaintiff seeks to recover statutory penalties for the Defendant's failure to provide proper COBRA notification.
As noted, supra, the Plaintiff has withdrawn Counts I and II of his amended Complaint.
The Motion for Summary Judgment filed by third-party Defendant Community Insurance Company, dba Anthem Blue Cross and Blue Shield (Doc. #31) is SUSTAINED. The Motion to Strike Jury Demand filed by third-party Defendant Anthem (Doc. #32) is OVERRULED, AS MOOT.
The Court recognizes that a potentially dispositive Motion for Summary Judgment remains pending in a related case, captioned Indiana Insurance Company v. Professional Micro Systems, Inc., et al., No. C-3-98-109. In that case, Plaintiff Indiana Insurance Company seeks a declaratory judgment concerning its obligation to defend PMS in the present litigation. The pending Motion for Summary Judgment in the declaratory judgment action will be decided shortly. Following a ruling on that Motion, the Court will schedule a telephone conference call with counsel in the present case and counsel in the related insurance coverage case, if same remains viable.