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White v. Provident Life Accident Insurance

United States Court of Appeals, Fourth Circuit
May 19, 1997
114 F.3d 26 (4th Cir. 1997)

Summary

holding that "the federal common law under ERISA ... does not incorporate the principles of waiver and estoppel.... ERISA, however, does not provide for such unwritten modifications of ERISA plans."

Summary of this case from Otero v. Unum Life Ins. Co. of Am.

Opinion

No. 96-1695.

Argued: April 10, 1997.

Decided: May 19, 1997. PUBLISHED

Appeal from the United States District Court for the Middle District of North Carolina, at Salisbury. N. Carlton Tilley, Jr., District Judge. (CA-91-485-4)

Before WILKINSON, Chief Judge, and HAMILTON and MOTZ, Circuit Judges.

Affirmed by published opinion. Chief Judge Wilkinson wrote the opinion, in which Judge Hamilton and Judge Motz joined.


OPINION


Willis White sued Provident Life and Accident Insurance Company, seeking a declaration that he was entitled to life insurance benefits under both a group policy and an individual conversion policy issued to White by Provident. The district court granted Provident summary judgment, and White appeals. Because the group policy and the right of conversion are governed by ERISA, and because their plain terms prohibit White from recovering life insurance benefits under a group policy and an individual conversion policy, we affirm the judgment of the district court.

I.

On October 26, 1981, Provident issued a Group Life Insurance Policy to the employees of White Packing Company. Willis White, an employee of the company, received $34,000 of coverage under the group policy. On October 31, 1981, White suffered chronic renal failure and, as a result, ceased working. Because of his total disability, White became entitled to continuous life coverage under the group policy with a waiver of premiums. This coverage remains in effect.

Under the terms of the group policy, a conversion policy was available to employees who no longer qualified for group coverage as a result of, for example, no longer being employed by the company. On July 16, 1984, White executed an "application for Conversion of Group Life Insurance to an Individual Life Insurance Policy" seeking to convert his coverage under the group policy to individual coverage. The group policy provides that an insured may not simultaneously sustain both group and individual coverage. White's application for a conversion policy identifies the $34,000 of coverage under the group policy as the "group life insurance terminated" in conjunction with the issuance of an individual policy.

On August 1, 1984, Provident mistakenly issued White an individual conversion policy. The face value and material terms of the policy were the same as that of the life coverage under the group policy. White tendered premiums for the conversion policy from the time the policy was issued until the summer of 1988.

In the summer of 1988, Provident discovered it had erroneously issued a conversion policy to White. Immediately after this discovery, on August 3, 1988, Provident notified White that he could not maintain simultaneous coverage under the group policy and the conversion policy. Provident told White that the individual policy had been issued by mistake and that it should be returned. Provident repaid all premiums previously paid by White under the individual conversion policy. White, however, refused to accept the repayment and refused to return the individual policy. Provident has accepted no further premium payments from White.

White filed suit in state court seeking a declaratory judgment that he was entitled to coverage under both the group and individual policies. Provident removed the case to federal court on the grounds that White's claims were preempted by ERISA. Both parties moved for summary judgment, and the district court granted summary judgment for Provident. White appeals.

II. A.

White first contends that ERISA does not govern this case. White concedes that the group policy is an ERISA benefits plan. He argues, however, that the individual conversion policy constitutes a distinct contract between himself and Provident whose relation to the group policy is too tenuous and remote for ERISA to apply.

The majority of courts which have examined the issue of whether ERISA applies to conversion policies have found ERISA to be applicable. Those cases reason that the right of conversion is a benefit required by ERISA, see 29 U.S.C. § 1161 1162, and that the entire existence of a conversion policy rests on the conversion right found in an ERISA plan. In a case analogous to the one at hand, for instance, the Ninth Circuit stated:

The group plan in this case, which the [plaintiffs] admit is an ERISA plan, provides for the conversion benefit. Because the [plaintiffs] would not be eligible for a conversion policy without first belonging to the class of beneficiaries covered by the ERISA group plan, we conclude that the individual conversion benefits are part of the ERISA plan and are thus governed by ERISA.

Greany v. Western Farm Bureau Life Insurance, 973 F.2d 812, 817 (9th Cir. 1992). Similarly, the Eleventh Circuit has found that a converted policy is covered by ERISA because the "ability to obtain the converted life insurance policy arose from the ERISA plan, and the converted policy itself continued to be integrally linked with the ERISA plan." Glass v. United of Omaha Life Insurance, 33 F.3d 1341, 1347 (11th Cir. 1994); see also Beal v. Jefferson-Pilot Life Insurance, 798 F. Supp. 673, 675 (S.D. Ala. 1992); Nechro v. Provident Life Accident Insurance, 795 F. Supp. 374, 378-80 (D.N.M. 1992); Rasmussen v. Metropolitan Life Insurance, 675 F. Supp. 1497, 1506 (W.D. La. 1987). Even the minority of courts which have found ERISA inapplicable to claims arising under the terms of conversion policies have agreed that ERISA applies to cases dealing with the right to convert. See Vaughn v. Owen Steel Co., 871 F. Supp. 247, 249 (D.S.C. 1994); Mimbs v. Commercial Life Insurance, 818 F. Supp. 1556, 1561 (S.D. Ga. 1993).

We need not adopt one view or the other for purposes of this case, because even under the minority view, ERISA governs the right of conversion to an individual policy. Since White's claims are clearly related to the conditions placed by the group policy on the right of conversion, his claims must be governed by ERISA. It is clear that under this ERISA plan, a beneficiary may claim coverage under either the group policy or a conversion policy, but not both. The group policy states:

If a converted policy is issued under the plan, it must be returned without claim before insurance will be continued under [the group policy]. Any premiums paid for the converted policy will be returned to you.

The group policy goes on to indicate that "the Insurance Company will pay to the beneficiary of record the amount of the Employee's life insurance . . . less the amount of any individual policy issued in accordance with the conversion privilege and in force at death." (emphasis added). In addition to these prohibitions, the group policy adds that "nothing will be paid under the [conversion policy] if any amount is paid under the [group policy]."

The group policy thus allows an insured to obtain individual conversion coverage as an alternative, but not in addition to, group coverage. The written terms of this ERISA plan plainly prohibit simultaneous recovery under the group policy and a conversion policy, and ERISA demands adherence to the clear language of this employee benefit plan. See 29 U.S.C. § 1102(a)(1) 1102(b)(3).

B.

White argues that Provident should not be allowed to apply the clear language of the ERISA plan because of an incontestability clause in that plan. That clause states that there "will be no contest of an Employee's coverage after it has been in force for two years from the date of coverage." White maintains that since he has been covered under the group policy since 1984, this clause acts to prohibit Provident from denying recovery under the group policy.

White's contention, however, misses the point. An incontestability clause prevents an insurer from contesting the validity of an insurance contract. However, such a clause certainly does not prevent the insurer from invoking the plain terms of an ERISA plan. The issue here is not whether the group policy is valid, but rather whether it forbids a double recovery. The ERISA plan plainly includes such a prohibition, and Provident was entitled to assert it.

C.

Provident accepted premiums from White on the individual conversion policy from 1984 through 1988. Upon the discovery of its mistake in 1988, Provident immediately attempted to repay these premiums. White refused to accept this repayment and now asserts that Provident's mistaken acceptance of premiums constituted a waiver of its right to deny a dual recovery. White, of course, cannot premise this waiver theory on state law. ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA. 29 U.S.C. § 1144(a). In Holland v. Burlington Industries, 772 F.2d 1140 (4th Cir. 1985), we specifically held that state law waiver and estoppel claims were preempted by ERISA, noting that such claims pose a risk of creating "conflicting employer obligations and variable standards of recovery." 772 F.2d at 1147. This is precisely the result that ERISA's broad preemption clause was enacted to avoid. Id.

Nor can White rely on the federal common law under ERISA, which does not incorporate the principles of waiver and estoppel. As we recently noted in HealthSouth Rehabilitation Hospital v. American National Red Cross, 101 F.3d 1005 (4th Cir. 1996), "ERISA simply does not recognize the validity of oral or non-conforming written modifications to ERISA plans." Id. at 1010. In this case, White cannot even point to any explicit assurances by Provident that he was entitled to double coverage. Rather, he would have us hold that Provident's mistaken acceptance of premiums constituted a knowing waiver of rights that is in direct conflict with the plain written terms of an ERISA plan. ERISA, however, does not provide for such unwritten modifications of ERISA plans. See 29 U.S.C. § 1102(a)(1) (requiring that "[e]very employee benefit plan shall be established and maintained pursuant to a written instrument"); 29 U.S.C. § 1102(b)(3) (requiring that an ERISA plan describe the formal procedures by which the plan may be amended). Therefore, White's waiver argument cannot prevail.

III.

We note in conclusion that White may prove to be his own worst enemy in this case. Even if White were able to convert to an individual policy, the net result would be that he would pay premiums for coverage to which he is entitled under the group policy for free. Fortunately for White, the insurer in this case sought only the return of a conversion policy as provided for in the ERISA plan. It is clearly entitled to such a return, and we thus affirm the judgment of the district court.

AFFIRMED


Summaries of

White v. Provident Life Accident Insurance

United States Court of Appeals, Fourth Circuit
May 19, 1997
114 F.3d 26 (4th Cir. 1997)

holding that "the federal common law under ERISA ... does not incorporate the principles of waiver and estoppel.... ERISA, however, does not provide for such unwritten modifications of ERISA plans."

Summary of this case from Otero v. Unum Life Ins. Co. of Am.

holding that waiver claim predicated on insurer's mistaken acceptance of premiums was preempted by ERISA

Summary of this case from Gross v. St. Agnes Health Care, Inc.

holding that mistaken acceptance of premiums does not constitute "a waiver of rights in direct conflict with the plain written terms of an ERISA plan"

Summary of this case from Kluge v. Life Insurance Company of North America

holding that "the federal common law under ERISA . . . does not incorporate the principles of waiver and estoppel"

Summary of this case from Kaelin v. Tenet Employee Benefit Plan

holding that separate insurance policy could not alter the ERISA plan in question because "ERISA demands adherence to the clear language of employee benefit plan"

Summary of this case from Colin v. Marconi Commerce Sys. Employees' Retirement Plan

rejecting "unwritten modifications of ERISA plans"

Summary of this case from Stanford v. Cont. Cas. Co.

rejecting claim for conversion benefits by plaintiff who had benefits simultaneously under both a group policy and a conversion because the "written terms of this ERISA plan plainly prohibit simultaneous recovery under the group policy and a conversion policy, and ERISA demands strict adherence to the clear language of this employee benefit plan"

Summary of this case from Wagner v. Unison Administrative Services, LLC

rejecting plaintiff's argument that the insurer's mistaken acceptance of premiums constituted a waiver of its right to deny coverage, and holding that the "plain written terms of ERISA plan" governed the plaintiff's right to benefits

Summary of this case from Funkhouser v. Pilgrim's Pride Corp. Gr. Benefits Plan

questioning whether converted policy was subject to ERISA

Summary of this case from Cehovic-Dixneuf v. Wong

In White v. Provident Life Accident Insurance Co., 114 F.3d 26 (4th Cir. 1997), the insurer issued an insurance policy based upon a legitimate "mistake."

Summary of this case from Gagliano v. Reliance Standard

In White v. Provident Life Accident Co., 114 F.3d 26 (4th Cir. 1997), the plaintiff was a former employee who was mistakenly permitted to convert his policy.

Summary of this case from Waks v. Empire Blue Cross/Blue Shield

noting that state law waiver and estoppel claims based on a continued acceptance of premiums are preempted by ERISA

Summary of this case from Galante v. Fin. Indus. Regulatory Auth., Inc.

stating that federal common law under ERISA does not incorporate the principles of waiver and estoppel

Summary of this case from Trane U.S. Inc. v. Neblett

stating that federal common law under ERISA does not incorporate the principles of waiver and estoppel

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noting that ERISA demands adherence to the clear language of employee benefit plans when interpreting coverage under the plan

Summary of this case from Pegram v. Prudential Insurance Co.

discussing the nature of the conversion right and holding that "ERISA governs the right of conversion to an individual policy"

Summary of this case from Petty v. Carolina Biological Supply

In White v. Provident Life Accident Ins., 114 F.3d 26, 28 (4th Cir. 1997), the United States Court of Appeals for the Fourth Circuit held that the plaintiff's claims under a conversion policy (he also had a group policy) were clearly related to the conditions placed by the group policy on the right of conversion, and, therefore, his claims were governed by ERISA.

Summary of this case from Pergosky v. Life Insurance Company of North America

In White, the Plaintiff had a group insurance plan whose terms prohibited an insured from being simultaneously covered by both group and individual coverage.

Summary of this case from Pergosky v. Life Insurance Company of North America

In White, the court noted that the issue was not whether the group policy is valid, but rather whether it forbids a double recovery under a group plan and an individual conversion plan, an invocation of the plain terms of the ERISA plan.

Summary of this case from Pergosky v. Life Insurance Company of North America

In White v. Provident Life Acc. Ins. Co., 114 F.3d 26 (4th Cir. 1997), plaintiff Willis White asserted that he was entitled to life insurance benefits under both a group policy and an individual "conversion policy" offered by the same insurer, despite the fact that the group policy expressly provided that individuals could not simultaneously hold both forms of coverage.

Summary of this case from Russo v. Abington Memorial Hospital

In White v. Provident Life Accident Ins. Co., 114 F.3d 26, 29 (4th Cir. 1997), the Court appears to leave open the possibility that the doctrines may apply in cases in which the record included something beyond mere oral assurances or promises by the insurer.

Summary of this case from Band v. Paul Revere Life Insurance Co.
Case details for

White v. Provident Life Accident Insurance

Case Details

Full title:WILLIS HOPE WHITE, PLAINTIFF-APPELLANT, v. PROVIDENT LIFE ACCIDENT…

Court:United States Court of Appeals, Fourth Circuit

Date published: May 19, 1997

Citations

114 F.3d 26 (4th Cir. 1997)

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