Gaskell v. Harvard Co-op. Soc.

• Decision Date: 05 May 1993
• Docket Number: Nos. 93-1024,93-1102,s. 93-1024
• Citation: 3 F.3d 495
• Parties: , 17 Employee Benefits Ca 1152 David and Carolyn GASKELL, Plaintiffs, Appellants, v. The HARVARD COOPERATIVE SOCIETY, et al., Defendants, Appellees. David and Carolyn GASKELL, Plaintiffs, Appellees, v. The HARVARD COOPERATIVE SOCIETY, et al., Defendants, Appellants. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 495

3 F.3d 495

62 USLW 2162, 17 Employee Benefits Ca 1152

David and Carolyn GASKELL, Plaintiffs, Appellants, v. The HARVARD COOPERATIVE SOCIETY, et al., Defendants, Appellees.

David and Carolyn GASKELL, Plaintiffs, Appellees, v. The HARVARD COOPERATIVE SOCIETY, et al., Defendants, Appellants.

Nos. 93-1024, 93-1102.

United States Court of Appeals First Circuit.

Heard May 5, 1993.

Decided Aug. 25, 1993.

Norman H. Jackman with whom Martha M. Wishart and Jackman & Roth, Boston, MA, were on brief, for plaintiffs, appellants.

Francis J. Lawler with whom Robert M. Shea and Peabody & Brown, Boston, MA, were on brief, for defendants, appellees.

Before TORRUELLA, OAKES ^* and CYR, Circuit Judges.

CYR, Circuit Judge.

This case presents several important issues relating to group health plan "continuation coverage" under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Sec. 1001 et seq., as amended by the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), P.L. 99-272, 100 Stat. 82, 222 (1986). The district court ruled that plaintiff Carolyn Gaskell, wife of "covered employee" David Gaskell, was entitled to three years' continuation coverage under COBRA, dating from her election of continuation coverage under an ERISA employer-sponsored group health insurance plan. The court denied a related subrogation claim brought by the Gaskells in the name of their current insurer. The district court rejected plaintiffs' requests for statutory penalties, punitive damages, and attorney fees.

I BACKGROUND

David Gaskell was a longtime employee of the Harvard Cooperative Society ("Coop"), which provided Blue Cross group medical plan coverage for its employees and their families. On January 14, 1987, David went on full disability leave, during which he received full salary and benefits, including Blue Cross group plan coverage for himself and Carolyn, apparently at Coop expense. More than a year later, on February 29, 1988, still unable to work, David terminated his employment with the Coop, retroactive to January 14, 1988.

Under COBRA, an employer that sponsors a group health insurance plan must offer employees and "qualified beneficiaries," including spouses and dependent children, the opportunity to continue their health insurance coverage, at group rates but at their own expense, for at least eighteen months after the occurrence of a "qualifying event" and notice to the affected employee. See 29 U.S.C. Sec. 1161-68. A "qualifying event" includes a "termination ..., or reduction of hours, of the covered employee's employment" which, "but for the continuation coverage under this part, would result in the loss of coverage of a qualified beneficiary." Id. at Sec. 1163(2). In April 1988, following David's resignation, the Coop sent a COBRA notice informing him of his statutory right to continue his Blue Cross group plan coverage for eighteen months, beginning July 1, 1988. On April 26, 1988, David elected "continuation coverage" for himself and Carolyn.

Within a year, the Gaskells learned that David would become eligible for Medicare benefits beginning July 1, 1989. Although Medicare eligibility would render David ineligible for "continuation coverage" after July 1, 1989, see id. at Sec. 1162(2)(D)(ii), it also would serve as a new "qualifying event," see id. at Sec. 1163(4), and make Carolyn eligible for three years' "continuation coverage" under the Coop group plan with Blue Cross. See id. at Sec. 1162(2)(A)(ii). At about the same time, however, the Gaskells learned that the Coop intended to terminate its Blue Cross group plan and adopt a self-funded insurance plan administered by Benefit Plans Northeast ("BPN"), effective July 1, 1989. As the new BPN-administered plan would not be "convertible" to individual coverage at the end of Carolyn's continuation coverage period, the Gaskells decided to exercise their "conversion option" under the Coop Blue Cross group plan. Accordingly, in June 1989, prior to the changeover in Coop plan administration, the Gaskells asked the Coop to "convert" Carolyn's group coverage, effective July 1, to individual direct-pay coverage under the Blue Cross Managed Major Medical Plan.

The coincidence of David's Medicare eligibility, Carolyn's application for conversion to an individual policy, and the Coop's change to a self-funded plan, engendered considerable confusion among the parties. On August 30, 1989, Blue Cross began returning the Gaskells' On January 31, 1991, the Gaskells settled their claims against Blue Cross, in return for, inter alia, individual coverage for Carolyn under the Blue Cross Managed Major Medical Plan retroactive to July 1, 1989. The retroactive coverage was subject to a twenty percent co-payment. As part of the settlement, Blue Cross assigned the Gaskells its subrogation rights against the remaining defendants. The Gaskells then amended their complaint to add a subrogation claim against the Coop and BPN, relating to the eighty percent of Carolyn's medical expenses which Blue Cross had paid under the terms of Carolyn's individual Blue Cross policy.

medical bills unpaid. Blue Cross contended that its obligation to provide Carolyn with individual direct-pay coverage had terminated on June 30, 1989, concurrently with the expiration of its group plan arrangement with the Coop, and that any Blue Cross coverage beyond that date would be available only on the terms imposed on new applicants, viz., a 240-day waiting period and an exclusion for preexisting medical conditions. Finding these terms unacceptable, the Gaskells sought to continue Carolyn's coverage under the Coop group plan, then being administered by BPN. BPN refused, asserting that the Coop's obligation to provide "continuation coverage" had terminated before the change in plan administration took place on July 1, 1989. After several unsuccessful efforts to obtain satisfactory coverage, the Gaskells brought the present action against the Coop, BPN, James Argeros (Coop president), Leonard Cutler (BPN president), and Blue Cross, alleging violations of COBRA and Massachusetts law. ¹

On May 17, 1991, acting on cross-motions for judgment on the pleadings, the district court ruled that BPN and the Coop were legally responsible under COBRA for providing "continuation coverage" of Carolyn's medical expenses between July 1, 1989 and July 1, 1991. The court rejected the Gaskells' demand for "extra-contractual" damages, and limited compensatory damages to the twenty percent co-payment amount not retroactively covered by Carolyn's individual Blue Cross policy, at the same time reserving decision on their subrogation claim for the remaining eighty percent of Carolyn's medical expenses. See Gaskell v. Harvard Cooperative Soc'y, 762 F.Supp. 1539, 1543-1544 & n. 8 (D.Mass.1991). Shortly thereafter, in an unpublished order, the district court granted summary judgment against the Gaskells on their subrogation claim, ruling that Blue Cross "possessed no rights pursuant to the Subscriber Certificate against [the Coop] for reimbursement of any monies paid towards [Carolyn's] medical bills." The individual claims against Leonard Cutler, as "plan administrator," were dismissed on October 6, 1992. The parties stipulated to the dismissal of the remaining count against BPN, and final judgment was entered on December 14, 1992. This appeal followed.

II DISCUSSION

Standards of Review

We review a grant of summary judgment de novo, employing the same criteria incumbent upon the district court. See Vanhaaren v. State Farm Mut. Auto. Ins. Co., 989 F.2d 1, 3 (1st Cir.1993); High Voltage Eng'g Corp. v. Federal Ins. Co., 981 F.2d 596, 598 (1st Cir.1992); Pedraza v. Shell Oil Co., 942 F.2d 48, 50 (1st Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 993, 117 L.Ed.2d 154 (1992). Summary judgment is appropriate where "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 judgment as a matter of law." Fed.R.Civ.P. 56(c); see Vanhaaren, 989 F.2d at 3; Canal Ins. Co. v. Benner, 980 F.2d 23, 25 (1st Cir.1992). Similarly, on plenary review of a district court judgment on the pleadings under Rule 12(c), all material allegations in the complaint are credited in the light most favorable to the plaintiff, see International Paper Co. v. Jay, 928 F.2d 480, 482 (1st Cir.1991). A dismissal on the pleadings will be upheld only if " 'it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claims which would entitle [it] to relief.' " Id. at 482-83 (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957)).

Statutory Background

COBRA was enacted in 1986, as a legislative response to "reports of the growing number of Americans without any health insurance coverage and the decreasing willingness of our Nation's hospitals to provide care to those who cannot afford to pay," H.R.Rep. No. 241, 99th Cong., 2d Sess. 44, reprinted in 1986 U.S.C.C.A.N. 42, 579, 622. ² In "an effort to provide continued access to affordable private health insurance for some of these individuals," H.R.Rep. No. 241, at 44, 1986 U.S.C.C.A.N. at 622, without increasing the "staggering budget deficits now facing the United States," see S.Rep. No. 146, 99th Cong., 2nd Sess. 3, reprinted in 1986 U.S.C.C.A.N. 42, 43, COBRA compels employers that sponsor certain group health plans to provide "qualified beneficiaries" with the option of receiving self-paid "continuation coverage," at no more than 102% of group rates, for eighteen or thirty-six months after the occurrence of a "qualifying event" which would otherwise result in a termination of coverage. See 29 U.S.C. Sec. 1161(a), 1162(2)(A). ³

The "continuation coverage" required by COBRA must be "identical to the coverage provided under the plan to similarly situated beneficiaries...