919 F.2d 747 (D.C. Cir. 1990), 89-7206, Eddy v. Colonial Life Ins. Co. of America

Docket Nº:89-7206.
Citation:919 F.2d 747
Party Name:Joan EDDY, Executor of the Estate of James Peter Eddy, Appellant, v. COLONIAL LIFE INSURANCE COMPANY OF AMERICA, Appellee.
Case Date:November 23, 1990
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit
 
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Page 747

919 F.2d 747 (D.C. Cir. 1990)

Joan EDDY, Executor of the Estate of James Peter Eddy, Appellant,

v.

COLONIAL LIFE INSURANCE COMPANY OF AMERICA, Appellee.

No. 89-7206.

United States Court of Appeals, District of Columbia Circuit.

November 23, 1990

Page 748

       Argued Oct. 25, 1990.

       Patricia A. Smith, with whom Dale Edwin Sanders, Alexandria, Va., was on the brief, for appellant.

       Frank J. Martell, Washington, D.C., for appellee.

       Before WALD, Chief Judge, MIKVA and RUTH B. GINSBURG, Circuit Judges.

       WALD, Chief Judge:

       Joan Eddy appeals from a district court ruling that the Colonial Life Insurance Company ("Colonial Life" or "Chubb") did not breach its fiduciary duty to her son, James Peter Eddy, despite Eddy's claim that he received misleading information which resulted in the termination of his health and life insurance coverage. We hold that the district court erroneously construed Chubb's fiduciary duty to Eddy; accordingly, we reverse the district court's decision and remand for further proceedings.

  1. BACKGROUND

           In May 1986, James Peter Eddy was diagnosed as "HIV-positive," that is, as infected with the virus that causes Acquired Immune Deficiency Syndrome (AIDS). Eddy's doctors told him that he had one year to live. Undaunted, Eddy continued to work at Unitag, a Washington, D.C. travel agency, where he served as office manager. In the summer of 1987, his condition worsened. He developed symptoms often associated with AIDS--fevers, vomiting, weight loss; he underwent medical treatment for those symptoms; and, at his doctor's direction, he scheduled exploratory surgery for Monday, September 14. Trial Transcript ("Tr.") at 13-14.

           At his office on September 10, Eddy received a memorandum. Its brevity belied its gravity:

    Unitag's group health insurance policy [offered by Colonial Life] will terminate September 14, 1987. Any health costs you have incurred prior to September 14, 1987 will be covered by our present policy. However, no expenses incurred on or after September 14, 1987 will be covered[; they will instead] be your responsibility.

    Four Seas has not made it clear whether they will cover you immediately or not. So for your convenience, Nabil [Mounla, Finance Director] has found a company willing to cover individuals for short temporary periods. An information booklet and application are enclosed.

           Joint Appendix ("J.A.") at 199 (emphasis supplied). Unitag, it seems, had come upon hard times and was being sold to Four Seas, another travel agency. Accordingly, Unitag was canceling its group insurance coverage, ostensibly leaving Eddy and its other employees uninsured.

           Understandably concerned--surgery was scheduled for the coming Monday--Eddy reviewed the booklet attached to the memo; he found, unfortunately, that the new coverage described was not available in Washington, D.C. See J.A. at 200. He then called Mounla, who was responsible for Unitag's insurance coverage, but Mounla offered little help. Finally, Eddy telephoned Colonial Life directly; he told the agent that he was a Unitag employee and that his group policy benefits were being terminated. Eddy v. Unitag World Travel Service, Inc. et al., No. 88-1038, Memorandum Opinion ("Mem. op.") (D.D.C. July 31, 1989) at 4, reprinted in J.A. at 11, 15.

           What happened next is disputed. At trial, Eddy testified that the Chubb agent then consulted Unitag's policy and transferred

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    the call to a man who identified himself as a supervisor. Eddy testified that he explained his situation to the supervisor and asked "about conversion rights underneath my policy"; the supervisor "said that [Eddy] did not have the right to convert [his employment-based coverage] to an individual policy." Tr. at 20. Witnesses for Chubb testified that they had no record of Eddy's call, but admitted that the company did not keep complete records of such calls. They also testified that, contrary to Eddy's testimony, none of the agents in the department to which Eddy's call should have been directed were men. Mem. op. at 9, J.A. at 20.

           Eddy did not "convert" his insurance coverage and at midnight on September 13-14, his coverage ended. Now uninsured, Eddy postponed his surgery. On September 14, instead of going to the hospital, Eddy went to his new job at Four Seas Travel.

           As witnesses for Chubb would later testify, Eddy did in fact have a right to convert his insurance coverage, a right to extend his coverage even though Unitag's group policy had been terminated. See J.A. at 180, 194-95. Had he so converted his coverage and kept current his premium payments, Eddy would have retained his health and life insurance benefits. In April 1988, Eddy filed suit in the District Court for the District of Columbia, contending inter alia 1 that, in its dealings with Eddy, Chubb had violated the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Sec. 1001 et seq.

    ...

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