Wayne Chemical, Inc. v. Columbus Agency Service Corp., 77-1281
Citation | 567 F.2d 692 |
Decision Date | 08 November 1977 |
Docket Number | No. 77-1281,77-1281 |
Parties | 1 Employee Benefits Ca 1691 WAYNE CHEMICAL, INC., Robert C. Tribolet and Thomas C. Tribolet, Plaintiffs-Appellees, v. COLUMBUS AGENCY SERVICE CORPORATION, Defendant-Appellant. |
Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
Clifford E. Simon, Jr., Fort Wayne, Ind., Duke W. Thomas, Columbus, Ohio, for defendant-appellant.
Theodore L. Sendak, Atty. Gen., Indianapolis, Ind., David J. Brummond, Milwaukee, Wis., for amicus curiae.
Sherrill William Colvin, Vincent J. Heiny, Fort Wayne, Ind., for plaintiffs-appellees.
Before SWYGERT, CUMMINGS and TONE, Circuit Judges.
Thomas C. Tribolet suffered an injury that made him a quadriplegic while he was 18 years old and still covered by a group medical insurance policy purchased by his father's employer. The insurance agency through which the policy had been obtained had changed insurers 24 days earlier, and it ultimately developed that, under the policy issued by the new carrier, Thomas' benefits would end on his 20th birthday. This result was not permitted under Indiana law. Also, the new insurer was not authorized to insure risks in Indiana, which made the agent liable under Indiana law if the insurer defaulted on its obligation, as it ultimately did. The determinative question on this interlocutory appeal is whether these provisions of Indiana law favorable to Thomas were preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq., commonly known as ERISA.
In this action by Thomas, joined by his father and his father's employer, against the agent and others, the District Court held that ERISA did preempt state law but that a federal common law should be developed to fill the regulatory void created by preemption, and that under that federal common law Thomas' insurance benefits could not be terminated. The court entered a preliminary injunction against the agent enjoining it from terminating coverage and also ordering it to make available to Thomas a policy of individual hospital and surgical insurance, as provided by the policy that had been superseded 24 days before Thomas' injury. Wayne Chemical, Inc. v. Columbus Agency Service Corp., 426 F.Supp. 316 (N.D.Ind.1977). We modify the order and affirm it as modified, but rely on reasons different from those relied on by the District Court.
In 1974 plaintiff Wayne Chemical, Inc. purchased group medical insurance coverage for several of its employees and their families from an insurance salesman for a Fort Wayne, Indiana, insurance firm, defendant O'Rourke, Andrews & Maroney, Inc. One of these employees was plaintiff Robert C. Tribolet, father of Thomas. The O'Rourke firm obtained the insurance, through an intermediate broker or agent, from defendant Columbus Agency Service Corporation, also known as "CASCO." The latter firm describes itself in its brief as "an insurance and health plan brokerage company," which "acts as agents for entities such as National Multiple Employers Foundation and Association Life Insurance Company." 1 Apparently affiliated with CASCO in some way are the CASCO Insurance Trust Fund and its trustees, about whom the record tells us little else. CASCO placed the insurance with Association Life Insurance Company.
The insurance salesman from the O'Rourke firm filled in, and Wayne's president signed, an application for insurance addressed to Association Life. The printed application form included a section entitled "Employer Agreement and Subscription to Trust," which recited that Wayne "does hereby apply for Group Insurance Benefits set forth in the proposal dated 4-29-74 and subscribes to the Agreement and Declaration of Trust establishing the . . . Insurance Trust Fund." The proposal referred to is not in the record. No agreement and declaration of trust appears in the record, nor does it appear that Wayne was ever shown or ever signed such a document.
As evidence of the insurance, Wayne received a "certificate of insurance," which described the Trustees of the CASCO Insurance Trust Fund as the "policyholder," defined the "certificateholder" as the insured employee, and referred to Group Policy No. 1438, and in which "certain provisions of the Policy (were) summarized." Apparently neither Wayne nor its employees obtained copies of the policy.
The insurance continued with Association Life until July 1, 1975. Sometime earlier that year Wayne received an undated notice from CASCO bearing the salutation, "To our policyholders," which stated "We have been advised by the carrier of our CASCO Insurance program, the Association Life Insurance Company, that effective July 1, 1975, a rate increase of approximately 100% Will be necessary. We wish to advise you that effective July 1, 1975, a new carrier with increased coverages will be made available for continuance of your coverages.
Subsequently Wayne received another undated notice from CASCO with the salutation, "To our policyholders," which stated:
CASCO sent a copy of the latter notice to its agents with a separate notice advising the agents as follows:
The O'Rourke firm received copies of the latter two notices.
All of these notices were presumably sent before July 1, 1975 and in any event before Thomas Tribolet's tragic accident on July 24 of that year. The last transition notice received by Wayne from CASCO bore the salutation, "Dear Policyholder," and stated as follows:
Neither Wayne nor the Tribolets were advised of the identity of the "new carrier" or of any adverse change in the terms of coverage until many months after the changeover. As late as November 5, 1975 Wayne, after having repeatedly requested copies of the new policy, received a letter from the O'Rourke firm stating as follows:
The "outline" referred to in the letter said nothing about any changes in policy terms with respect to either continuation of coverage for an insured disabled at the time coverage would otherwise terminate or convertability at that time without evidence of insurability. It ultimately appeared, however, that the new coverage was, with respect to these matters, materially less advantageous to beneficiaries than the Association Life policy. This fact was first disclosed in late December 1975 when CASCO sent Wayne a pamphlet describing the new coverage.
The front cover of the pamphlet bears the title, "Comprehensive Major Medical Benefits," the name CASCO combined with the initials NMEF in a pictorial trademark, and the name National Multiple Employers Foundation. On the back cover appears the recital, "Plan Design and Administration by CASCO" and the name Columbus Agency Service Corporation. The inside of the cover bears the following legend:
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