Springs Valley Bank & Trust Co. v. Carpenter

• Citation: 885 F. Supp. 1131
• Decision Date: 21 October 1993
• Docket Number: No. NA 91-94-C.,NA 91-94-C.
• Parties: SPRINGS VALLEY BANK & TRUST COMPANY, as trustee of the Kimball International, Inc. Employee Health Care Plan, Plaintiff-Counterdefendant, v. Dorothy A. CARPENTER, Defendant-Counterclaimant.
• Court: U.S. District Court — Southern District of Indiana

885 F. Supp. 1131

SPRINGS VALLEY BANK & TRUST COMPANY, as trustee of the Kimball International, Inc. Employee Health Care Plan, Plaintiff-Counterdefendant, v. Dorothy A. CARPENTER, Defendant-Counterclaimant.

No. NA 91-94-C.

United States District Court, S.D. Indiana, New Albany Division.

October 21, 1993.

COPYRIGHT MATERIAL OMITTED

S. Frank Mattox, Mattox & Mattox, New Albany, IN, Robert G. Stachler and Mark J. Ruehlmann, Taft Stettinius & Hollister, Cincinnati, OH, for Springs Valley Bank & Trust Co.

John R. Werner, Waldschmidt & Werner, Cannelton, IN and Gary Becker, Louisville, KY, for Dorothy Carpenter.

ADOPTION OF MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION

BROOKS, Chief Judge.

Having reviewed Magistrate Judge Kennard P. Foster's Report and Recommendation on the parties' cross motions for summary judgment in this Cause and having carefully considered the objections thereto, and being duly advised, the Court hereby approves and adopts the Report and Recommendation.

SO ORDERED.

REPORT AND RECOMMENDATION ON PARTIES' CROSS MOTIONS FOR SUMMARY JUDGMENT.

FOSTER, United States Magistrate Judge.

Springs Valley Bank & Trust Company ("Springs Valley") brought this action under 28 U.S.C. §§ 2201 and 2202 for a declaratory judgment determining its obligation under the Kimball International, Inc. Employee Health Care Plan ("the Plan") and the Employee Retirement Income Security Act ("E.R.I.S.A."), 29 U.S.C. §§ 1001 et seq., to pay health benefits to the defendant, Mrs. Dorothy A. Carpenter.¹ Mrs. Carpenter counterclaimed to recover benefits under the Plan (presumably pursuant to 29 U.S.C. § 1132(a)(1)(B)) and to recover common law damages for mental and physical suffering, intentional infliction of emotional distress, and punitive damages for Springs Valley's suspension of payments. Each party filed a motion for summary judgment which came before the undersigned Magistrate Judge, by designation of the Honorable Gene E. Brooks, District Judge, for the preparation of a report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). This Court has jurisdiction over this cause under 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e)(1) and (2). For the reasons set forth below, I recommend that each motion be granted in part and denied in part.

Summary judgment shall be rendered when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "In determining whether a genuine issue of material fact exists, a trial court must view the record and all reasonable inferences drawn therefrom in the light most favorable to the non-moving party." Renovitch v. Kaufman, 905 F.2d 1040, 1044 (7th Cir.1990). "`A party bearing the burden of proof on an issue may not simply rest on its pleadings, but must demonstrate that a genuine issue of material fact exists and requires trial.'" Stewart v. McGinnis, 5 F.3d 1031, 1033 (7th Cir.1993) (quoting Jamison-Bey v. Thieret, 867 F.2d 1046, 1047 (7th Cir.1989)); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256-57, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986) ("the plaintiff must present affirmative evidence in order to defeat a properly supported motion for summary judgment"). Following the Supreme Court's declaration that "one of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses, and we think it should be interpreted in a way that allows it to accomplish this purpose," Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986), the Seventh Circuit has held that "requiring a district court to take totally unsupported allegations as true would clearly impede the utility of having a summary judgment rule." Stewart v. McGinnis, at 1034.

Background.

The parties do not dispute the following facts. On May 28, 1990, Mrs. Carpenter was injured in a one-car accident near Owensboro, Kentucky. She was a passenger in the car which was driven by her husband, Michael Carpenter, and owned by Bryan Kellams, her brother. Michael Carpenter's negligence caused the accident. Michael Carpenter is employed by Kimball International, Inc. ("Kimball"), of Jasper, Indiana, which maintains an E.R.I.S.A.-qualified employee health benefits plan. Springs Valley, also of Jasper, is the trustee and claims processor for the Plan and Kimball is the plan administrator. As the spouse of a Kimball employee, Mrs. Carpenter is covered by the Plan. After paying approximately $6,000 of Mrs. Carpenter's medical and hospital expenses resulting from the accident, Springs Valley suspended further payments.² Some time after the accident, Mrs. Carpenter received $10,000 in no-fault benefits from the Economy Fire and Casualty Company ("Economy"), Mr. Kellams' insurer,³ and $25,000 in benefits from American Family Insurance Company ("American Family"), her husband's liability carrier.⁴

Springs Valley claims it suspended payments to Mrs. Carpenter because she failed to fulfill her obligation under the Plan to cooperate. It claims that Mrs. Carpenter never informed it of the $35,000 in payments from Economy and American Family, she still refuses to provide documentation of these recoveries, she has not executed a subrogation agreement, she refuses to agree not to prejudice the Plan's subrogation rights, and she refuses to repay the Plan for the benefits it has already paid to her. Springs Valley seeks a judgment declaring that its suspension of benefits is lawful under the Plan. To do so, the Court must find that (1) Mrs. Carpenter is obligated to supply certain information to the Plan before receiving benefits and has failed to do so, (2) Mrs. Carpenter is obligated to execute a subrogation agreement in favor of the Plan before receiving benefits and has failed to do so, and (3) the Plan is entitled to demand reimbursement of the approximately $6,000 of benefits already paid before making further payments. Mrs. Carpenter contends that (1) she did not fail to cooperate, (2) the Plan is not entitled to suspend payments because of a beneficiary's failure to cooperate, (3) the Plan is not entitled to reimbursements before making additional payments, (4) the Plan has no subrogation rights to the $35,000 Mrs. Carpenter received from Economy or American Family, and (5) the Plan is only entitled to a pro rata reimbursement from Mrs. Carpenter's recoveries if she is not made whole.

Standard of Review.

An E.R.I.S.A. plan trustee's actions are reviewed de novo unless the plan grants the trustee discretionary power to construe the plan's terms, in which case the trustee's actions will be upheld unless arbitrary or capricious. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117, 109 S.Ct. 948, 958, 103 L.Ed.2d 80 (1989). In this case, the Plan's policy grants the trustee such discretion:

The Plan Administrator shall have authority to interpret the provisions of the Plan and establish rules for the administration of the Plan. Unless arbitrary or capricious, the Plan Administrator's interpretation of any provisions of the Plan shall be binding and conclusive on all persons.

Policy, § 9.01.⁵ See Cutting v. Jerome Foods, Inc., 993 F.2d 1293, 1295 (7th Cir. 1993) (similar provision warrants arbitrary and capricious review). While the parties dispute whether the level of deference under the arbitrary and capricious standard should be "reasonableness" or "abuse of discretion," see Lister v. Stark, 942 F.2d 1183, 1187-88 (7th Cir.1991); Loyola University of Chicago v. Humana Insurance Co., 996 F.2d 895, 898 n. 1 (7th Cir.1993), we adhere to the view that there is insignificant, if any, difference between the two and that the standard is best defined as simply one of reasonableness. Loyola University, 996 F.2d at 898 ("Under the arbitrary and capricious standard, a denial of benefits will not be set aside if the denial was based upon a reasonable interpretation of the plan documents"); Cutting, 993 F.2d at 1295-96 (defining the standard by such "possibly synonymous" terms as arbitrary and capricious, abuse of discretion, and clear error, and holding that courts should overturn actions "only if persuaded that the administrator acted unreasonably"); Russo v. Health, Welfare & Pension Fund, 984 F.2d 762, 765 (7th Cir.1993) ("judicial review is limited to whether trustees' decision was arbitrary and capricious.... In other words, as long as the Trustees' decision was based on a reasonable interpretation of the plan's language and the evidence in the case, we will not disturb it"); Hammond v. Fidelity and Guaranty Life Insurance Co., 965 F.2d 428, 429 (7th Cir.1992) ("we simply defer to the trustee's interpretation, assuming it's reasonable"); Lister, 942 F.2d at 1188;⁶ Jones v. Iron Workers District Council of Southern Ohio, 829 F.Supp. 268, 270 (S.D.Ind.1993). Therefore, we will uphold Springs Valley's interpretations and applications of the Plan unless persuaded that they are unreasonable.⁷

Analysis.

A. Summary plan description vs. plan policy.

The initial issue is which Plan provisions governed Springs Valley's actions. An employee benefit plan under E.R.I.S.A. consists of the plan policy, or written instrument, 29 U.S.C. § 1102, and the summary plan description. Every plan is required to supply participants and beneficiaries with an understandable summary plan description ("S.P.D.") which is "sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." 29 U.S.C. §§ 1021(a)(1), 1022(a)(1), and 1024(b). The question is which document controls when an S.P.D. conflicts with a plan policy.

The S.P.D. supplied to participants of Kimball's Plan⁸ included the following subrogation language:

SUBROGATION

When Major Medical Benefits are paid under

...