Genter v. Acme Scale & Supply Co., 84-3617

• Decision Date: 20 June 1985
• Docket Number: Nos. 84-3617,No. 84-3617,84-3638,84-3617,s. 84-3617
• Citation: 776 F.2d 1180
• Parties: Jean R. GENTER, Appellant in, v. ACME SCALE & SUPPLY COMPANY, a Penna. corporation; Acme Scale & Supply Co. Profit Sharing Plans and Trust, Raymond C. Canfield and Jeffrey D. Canfield v. The TRAVELERS INSURANCE COMPANIES, Third Party Defendant. Appeal of ACME SCALE & SUPPLY COMPANY and Raymond C. Canfield, Defendants. and Third Party Plaintiffs. . Submitted Under Third Circuit Rule 12(6)
• Court: U.S. Court of Appeals — Third Circuit

Page 1180

776 F.2d 1180

Jean R. GENTER, Appellant in No. 84-3617, v. ACME SCALE & SUPPLY COMPANY, a Penna. corporation; Acme

Scale & Supply Co. Profit Sharing Plans and Trust, Raymond C. Canfield and Jeffrey D. Canfield v. The TRAVELERS INSURANCE COMPANIES, Third Party Defendant.

Appeal of ACME SCALE & SUPPLY COMPANY and Raymond C.

Canfield, Defendants. and Third Party Plaintiffs.

Nos. 84-3617, 84-3638.

United States Court of Appeals Third Circuit.

Submitted Under Third Circuit Rule 12(6)

June 20, 1985.

Decided Nov. 18, 1985.

James C. Larrimer, Dougherty, Larrimer & Lee, Pittsburgh, Pa., for appellant.

Edward J. Kabala, Michael A. Cassidy, Kabala & Geeseman, Pittsburgh, Pa., for Acme Scale and Supply, et al.

David A. Cicola, William K. Herrington & Associates, Pittsburgh, Pa., for Travelers Ins. Companies.

Before ALDISERT, Chief Judge, and GIBBONS, Circuit Judge, and BECHTLE, District Judge. ^*

OPINION OF THE COURT

BECHTLE, District Judge.

This appeal is governed by the Employee Retirement Income Security Act, ("ERISA"), 29 U.S.C. Secs. 1001 et seq., and is brought by plaintiff, Jean R. Genter, as the surviving spouse of Robert D. Genter ("decedent"). She appeals from the grant of summary judgment in favor of defendants, Acme Scale and Supply Company, Acme Scale and Supply Company Profit Sharing Plan and Trust, and Raymond C. Canfield, the plan administrator. Those defendants, in turn, appeal from the grant of summary judgment in favor of the third party defendant Travelers Insurance Companies. Jean Genter also appeals from the dismissal of her claim for relief based on alleged retaliation by the employer defendants.

We hold that the district court erred in granting summary judgment in favor of the defendants, reverse the district court's order, and grant summary judgment in plaintiff's favor. We reverse the district court's order dismissing plaintiff's separate claim based on retaliation and remand for further proceedings on that claim. We also reverse and remand for further proceedings the summary judgment in favor of third party defendant insurance company.

I.

This case arose when plaintiff, following her husband's death, submitted a claim to Acme Scale & Supply Company ("employer") the decedent's employer, for payment of life insurance benefits due her as beneficiary under an employer sponsored contributory life insurance plan (the "Plan"). The Plan was underwritten by Travelers Insurance Companies ("insurance company"); but it was administered by the employer which had direct contact with its employees concerning all matters involving the Plan. All Plan documents and notification of Plan amendments or changes were furnished directly to the employer, who, in turn, supplied the Plan documents to its employees. The insurance company paid the life insurance benefits directly to the beneficiary named in the employee's life insurance policy.

Plan premiums were paid on a contributory basis in which each employee would pay a fixed amount, deducted monthly from his/her paycheck, and the balance would be paid by the employer. The employee's contribution would remain fixed irrespective of the amount of the employee's insurance coverage but the employer's contribution would increase as the employee's increased coverage.

Under the terms of the Plan an employee could obtain insurance coverage commensurate with the employee's annual salary. In the decedent's case, he was entitled to have $10,000.00 of coverage for as long as his salary was at least $10,000.00 and not more than $20,000.00. When his salary was increased to over $20,000.00, he became eligible for $20,000.00 of life insurance coverage.

The Plan provided that upon reaching a designated salary plateau, an employee could receive the prescribed increase in insurance if the plan's procedure was followed. Under a method of that procedure, that for purposes of this opinion shall be referred to as the "anniversary date method," an employee's coverage could be changed on the anniversary date of the master policy which was March 26th of each year. Pursuant to this method the employer, in December of the preceding year, furnished a list to the insurance company of its employees and their corresponding salary levels. Thereafter, any employee seeking an increase in benefits because of a salary change was required to directly notify the insurance company, within sixty (60) days of the anniversary date of the policy (i.e., before January 26th of each year), of the requested increase. Such notification was accomplished by the employee returning a preprinted notification card, previously supplied by the insurance company to the employer and in turn to the employee. The Insurance Company could not increase the coverage until it received the insurance increase request card from an employee on the list shown to be eligible for such an increase. If that employee's card was received on time the insurance company would increase the employee's coverage effective March 26th. If no card was received, there would be no change and indeed, there would be no opportunity for a change until the insurance company received the employer's list the following December which would show employees entitled to apply for coverage to be effective the following March 26th.

A second method, which shall be called the "midstream method," not described in the plan documents or materials but practiced by the employer and the insurance company on certain selected occasions allowed increases at times other than the anniversary date. If for example, an employee, at any time during the calendar year, received a salary increase that placed him/her at a plateau where an increased life insurance coverage change was authorized, the employee, at that time, would provide the notification card to the Insurance Company and the additional coverage would be provided immediately. This midstream method though practiced on several occasions was not communicated to the employees generally, but apparently became known to a few individuals who took advantage of it, including the President's grandson. ¹

On January 11, 1982, the decedent had $10,000.00 life insurance coverage which corresponded to his salary of $19,240.00. On that date, the decedent received a salary increase to $20,800.00 thus putting him over the $20,000.00 salary plateau and allowing for increased life insurance coverage of $20,000.00. Pursuant to the anniversary date method, which was the only method provided in the plan documents, the decedent's name was on the list given to the insurance company in December 1982 which was eleven months after receiving his salary increase and three months before any increased coverage could go into effect pursuant to the anniversary date method. The decedent had until January 26, 1983 to send his insurance increase card to the insurance company in order to be eligible for the increased coverage of $20,000.00 effective March 26, 1983. Unfortunately, plaintiff's decedent died on January 23, 1983 which was a year after he received his salary increase and two months before an increase in insurance based on that raise could go into effect. That is under the anniversary date method, even though the decedent's salary increase became effective in January of 1982, it would be nearly fourteen months before the decedent's life insurance coverage keyed to his increased salary level would go into force, had he lived.

The decedent had not requested an increase in his life insurance coverage as of the date of his death although he had until January 26th to do so. It is clear that if he had done so, and he had lived beyond the anniversary date of the policy, March 26, 1983, his coverage would have been increased to $20,000.00.

In her motion for summary judgment, plaintiff contended that the employer/administrator violated its fiduciary duty as administrator of the Plan by failing to advise the decedent before, or at the time of his salary increase in January 1982, that he could apply immediately for increased insurance coverage under the midstream method. Plaintiff contended that the Plan documents provided to the employees did not advise them of their right to seek a midstream increase in coverage. She contends that if it had, her husband could have applied for and been provided with coverage of $20,000.00 at or about January 11, 1982 which would have been in force one year later when he died rather than the $10,000.00 that was in force at that time.

Deposition testimony from representatives of the employer, defendant Robert Canfield (president of the company and the administrator of the Plan), and from officials of the insurance company, recalled that some employees of the company who had received salary increases had indeed been given the opportunity by the administrator and the insurance company to increase their insurance coverage contemporaneously with their salary increase, (i.e., midstream). ² Thus, some employees were permitted to receive the benefits of increased life insurance coverage sooner than the annual anniversary date while other employees, such as the plaintiff's decedent, were not.

Plaintiff contended that by not informing the deceased and the other employees of this important right amounted to a breach of fiduciary duty by the employer and administrator under ERISA.

In rejecting plaintiff's claim the district court relied upon the language in the Group Insurance Benefit booklet which provides that:

If you become entitled to an increase or decrease in amount of insurance, due to change in your salary or wage, you may submit a new signed request to your Employer for such new amount of insurance within 60 days prior to the new Policy Anniversary, with such evidence of insurability as may be required by The Travelers. If approved by The Travelers such new amount is to be effective on such Policy Anniversary, except that no increase in amount of insurance will become effective if you are away...