Connecticut General Life Insurance Company v. Craton

• Decision Date: 06 December 1968
• Docket Number: No. 25112.,25112.
• Citation: 405 F.2d 41
• Parties: CONNECTICUT GENERAL LIFE INSURANCE COMPANY and United Aircraft Corporation, Appellants, v. Charles CRATON et al., and Seminole Lodge 971, International Association of Machinists and Aerospace Workers, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

405 F.2d 41 (1968)

CONNECTICUT GENERAL LIFE INSURANCE COMPANY and United Aircraft Corporation, Appellants, v. Charles CRATON et al., and Seminole Lodge 971, International Association of Machinists and Aerospace Workers, Appellees.

No. 25112.

United States Court of Appeals Fifth Circuit.

December 6, 1968.

Joseph C. Wells, Washington, D. C., John M. Farrell, Palm Beach, Fla., for appellants, Patterson, Belknap, Farmer, Shibley & Wells, Washington, D. C., Burns, Middleton, Rogers & Farrell, Palm Beach, Fla., of counsel.

Joseph P. Manners, Miami, Fla., for appellees, Manners & Amoon, Miami, Fla., of counsel.

Before GOLDBERG, GODBOLD and SIMPSON, Circuit Judges.

GOLDBERG, Circuit Judge:

This case brought under the aegis of § 301 of the Labor Management Relations Act, 29 U.S.C.A. § 185,¹ involves questions of contract interpretation in both a collective bargaining agreement and a group disability insurance policy. These contracts share a common and fraternal fallibility found in many contracts in that they have failed by their terms to anticipate the contingencies upon which the parties ultimately found themselves in disagreement.

The present action was initiated in the district court below by Seminole Lodge 971 of the International Association of Machinists and Aerospace Workers (Seminole) in conjunction with 214 of its individual members. Plaintiffs sought a declaratory judgment, damages and injunctive relief to enforce a collective bargaining agreement between Seminole and United Aircraft Corporation (United), or, in the alternative, to enforce the provisions of a group insurance policy. The insurance policy, issued by Connecticut General Life Insurance Company (Connecticut General), had been secured by United pursuant to its obligations under the collective bargaining agreement with Seminole. When a dispute subsequently arose as to the meaning of a term in the insurance policy, the sufficiency of United's compliance with its collective bargaining agreement was also put in issue.

The collective bargaining agreement that United is alleged to have violated was entered into in late 1965 and early 1966. It dealt with the basics of labor management negotiations pertaining to wages, hours, grievances and the like and incorporated them into one written document. Although insurance programs were also discussed in these negotiations, the insurance terms agreed upon were placed in an ancillary letter agreement.

During the negotiations, United made available to union officials a pamphlet entitled "Highlights of Improved Group Insurance Plan For Hourly Rated Employees." This pamphlet described insurance provisions relating to accident and sickness insurance, surgical expense benefits, survivor income benefit insurance, hospital expense insurance, and other matters relating to the costs of illness. In most respects the insurance coverage described by the pamphlet was familiar to the union negotiators because similar provisions had appeared in earlier group insurance policies. However, in one respect the new insurance proposal was quite different. The pamphlet indicated that the new insurance policy would contain a provision for "coordination of benefits" (C.O.B.). This concept was described by the United pamphlet in pertinent part as follows:

"When, for example, more than one member of a family works, such as husband and wife, and each is covered as a dependent under the other\'s group insurance plan, and dependent children are covered under both plans, the problem of over-insurance arises. This means, for example, that when one of these people is sick or injured, he may collect from both plans total benefits which may exceed his expenses and thereby produce a `profit\' after all the bills are paid. This is not the purpose of group insurance. This situation results in higher than necessary group insurance premium cost to the employee.

"The insurance industry has produced a fair answer — called Coordination of Benefits — C.O.B. This means that when an employee or one of his dependents, covered by two or more group plans, is sick or injured, the insurance companies involved work together in paying up to 100% of his allowable expenses — but no more."

* * * * * *

"We will under the revised group insurance program coordinate with all group plans both hospital-medical and disability income with respect to the employee and/or his dependents, including disability income payments under Social Security. We will not coordinate with benefit plans under individual policies."

Based upon the explanation of C.O.B. contained in United's pamphlet and the oral representations of United's negotiators,² Seminole and United entered into the above mentioned ancillary letter agreement. This agreement, drafted by United, contained a section on coordination of benefits that was essentially a rescript of the C.O.B. description of United's pamphlet. It was understood by the parties that United would secure insurance in compliance with the terms of this letter agreement, and that such insurance would then be made available to United's employees on a voluntary participation basis.³ Subscribers to the group insurance coverage were to receive individual certificates of insurance reflective of the master insurance policy issued to United by Connecticut General.

On January 16, 1966, Seminole's membership ratified the terms of the ancillary letter agreement. Subsequently, Connecticut General delivered to the insured employees certificates of insurance and explanatory insurance guides. These individual insurance certificates and the master insurance agreement between United and Connecticut General contained the following provision on coordination of benefits:

"If during any week an Employee is entitled to receive benefits under one or more of the following plans which provide periodic disability income payments:

(a) * * * * *

(b) Any plan toward which any employer of the Employee contributes or makes payroll deductions,

(c) Labor-management trusteed plans, union welfare plans, employer organization group plans, employee benefit plans, and/or

(d) The Social Security Act,

his Amount of Weekly Disability Income under Section 1 of the contract will be reduced for that week by the amount he is entitled to receive under such plan or plans in accordance with (a) through (d) above."

Sometime in February, 1966, plaintiffs became aware that the above provisions were being interpreted by both United and Connecticut General in a manner inconsistent with plaintiffs' view of the collective bargaining agreement. Benefits being paid to union members as a result of their participation in a program called the Mutual Benefit Fund were being deducted from payments owing to employees covered by Connecticut General's insurance policy. Plaintiffs therefore brought suit to enjoin further deductions, to recover those that had already been made, and to obtain a declaratory judgment of their rights under the collective bargaining agreement and the insurance policy.

At trial United and Connecticut General claimed that such deductions were authorized by the coordination of benefits clause in the insurance policy because the Mutual Benefit Fund was either a "union welfare plan" or an "employee benefit plan." Payments under such plans, they argued, could properly be offset against disability benefits owing under the group insurance policy. In rebuttal, plaintiffs contended that there was no indication in any of the written documents available to them during their negotiations with United, or in United's verbal communications, that the Mutual Benefit Fund was the type of plan includable within the terms of the coordination of benefits clause. United's chief negotiator admitted that the Mutual Benefit Fund was never mentioned in the negotiations. Furthermore, plaintiffs argued that the insurance certificate and the health insurance guide were not available to them when the ancillary letter agreement was negotiated and ratified.

The district court after a full hearing and after a consideration of interrogatories taken from both defendants entered judgment for plaintiffs. It found that United Aircraft Corporation had been primarily responsible for the misunderstanding between United and Seminole as to the extent to which the insurance policy was to be coordinated with other benefit programs. On this basis, the court concluded that there had been no manifestation of mutual intent or meeting of the minds concerning the inclusion of the Mutual Benefit Fund within the coordination of benefits clause, and that therefore the deductions had been wrongfully made. United and Connecticut General were ordered to cease and desist from further coordinating or setting off disability income payments against benefits paid out to members of the Mutual Benefit Fund, and United was ordered to pay to the individual plaintiffs and to other members of the Fund all moneys withheld and deducted. Defendants thereupon entered this appeal. For reasons set forth below, we reverse.

The district court determined that because the Union and United had not specifically addressed themselves to, nor had they achieved a meeting of the minds on, the interrelationship between the group insurance policy and the Mutual Benefit Fund, no coordination of benefits between the two had been intended. While we agree that the Fund's benefits are not deductible, we take a very different path to that result.

The ancillary letter agreement between Seminole and United contains a provision which stipulates that the group insurance policy is to be coordinated with "all group plans both hospital-medical and disability income." While such a provision does not necessarily compel inclusion of the Mutual Benefit Fund within the purview of the collective bargaining agreement, it does suggest the inappropriateness of concluding that the Fund was excluded from coverage merely because it was not mentioned by name. Reasonable...