Harris Trust and Sav. Bank v. Provident Life and Acc. Ins. Co., s. 94-2021

• Citation: 57 F.3d 608
• Decision Date: 14 July 1995
• Docket Number: Nos. 94-2021,94-2296,s. 94-2021
• Parties: 19 Employee Benefits Cas. 1484 HARRIS TRUST AND SAVINGS BANK and Martin D. Hartog, as co-guardians of the Estate of Sandra Den Hartog, a disabled person, and Martin Den Hartog, individually, Plaintiffs- Appellants, Cross-Appellees, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, a Delaware corporation, Defendant-Appellee, Cross-Appellant, and Campbell Soup Company, a New Jersey domestic corporation, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 608

57 F.3d 608

19 Employee Benefits Cas. 1484

HARRIS TRUST AND SAVINGS BANK and Martin D. Hartog, as co-guardians of the Estate of Sandra Den Hartog, a disabled person, and Martin Den Hartog individually Plaintiffs- Appellants Cross-Appellees, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, a Delaware corporation, Defendant-Appellee, Cross-Appellant and Campbell Soup Company, a New Jersey domestic corporation, Defendant-Appellee.

Nos. 94-2021, 94-2296.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 6, 1995.

Decided June 19, 1995.

Rehearing and Suggestion for Rehearing En Banc Denied July 14, 1995.

William J. Harte (argued), Vickie Voukidis Blum, Herbert Stride, Stride & Associates, Joan M. Mannix, Harte & Associates, Chicago, IL, for Harris Trust and Sav. Bank, Martin D. Hartog.

J. Robert Geiman, William A. Chittenden, III (argued), Douglas J. Varga, Peterson & Ross, Chicago, IL, for Provident Life and Acc. Ins. Co.

Scott B. Greene (argued), Jeffrey C. Clark, Phelan, Pope, Cahill & Devine, Chicago, IL, for Campbell Soup Co.

Before CUMMINGS and KANNE, Circuit Judges, and GRANT, District Judge. ¹

GRANT, District Judge.

This action involves a dispute over insurance coverage provided under an employee welfare benefits plan governed by the Employee Retirement Securities Act ("ERISA"). Harris Trust and Savings Bank and Martin Den Hartog, co-guardians of the estate of Mr. Den Hartog's disabled daughter Sandra, brought suit against Campbell Soup Company and Provident Life and Accident, the administrator of Campbell's Group Benefits Plan, seeking a declaration of Sandra's rights under the Plan, specifically her right to continued coverage. Campbell filed a counterclaim under 29 U.S.C. Sec. 1132(a)(3) seeking restitution of benefits it had advanced on Sandra's behalf under the Plan's third party exclusion provision. Cross-motions for summary judgment were filed; the defendants ultimately prevailed; and plaintiffs were ordered to pay $290,241.53 in restitution. See Harris Trust & Savings v. Provident Life and Acc. Ins. Co., 854 F.Supp. 524 (N.D.Ill.1994). The district court, however, denied Provident's motion for attorneys' fees and costs under 29 U.S.C. Sec. 1132(g)(1). This appeal and cross-appeal followed. For the following reasons, we now AFFIRM.

I. BACKGROUND

Sandra Den Hartog was rendered a quadriplegic when an automobile in which she was riding was struck by a train in September 1985. At the time of the accident, Sandra's medical insurance coverage was provided by her father's employer, Specialty Brands, Incorporated. Pursuant to the Specialty Brands' Employee Benefits Plan, all medical expenses relating to the accident were paid by the plan's administrator, Lincoln National Life Insurance Company, subject to a "Third Party Limitation" provision, which provided as follows:

If an individual insured under the policy has ... medical or dental charges ... as a result of the negligence or intentional act of a third party, and makes a claim to Lincoln National for benefits under the policy for such charges, the insured individual (or legal representative of a minor or incompetent) must agree in writing to repay Lincoln National from any amount of money received by the insured individual from the third party, or its insurer. The repayment will be to the extent of the benefits paid by Lincoln National, but will not exceed the amount of the payment received by the individual from the third party, or its insurer....

On March 4, 1986, Martin Den Hartog filed a personal injury lawsuit on his daughter's behalf against Conrail, the owner and operator of the train, and Peter Beck, the engineer. Consistent with the third party limitation provision, Mr. Den Hartog executed written agreements to repay Lincoln National the money it had advanced for Sandra's medical expenses under the Specialty Brands' Plan. The lawsuit was settled on January 26, 1989 for $7 million. ² As part of the settlement, Sandra's estate reimbursed Lincoln National for the benefits it had advanced on Sandra's behalf, in an amount exceeding $400,000.00.

On March 31, 1988, while the lawsuit was still pending, Specialty Brands sold its Thornton Illinois plant to Campbell Soup Company. Mr. Den Hartog consequently became a Campbell employee and a participant in Campbell's Soup Company Group Benefit Plan ("the Plan" or "the Campbell Plan") which was fully funded by Campbell and administered by Provident Life and Accident Insurance Company. Although employees were not furnished with a written summary of the Campbell Plan's provisions until June 1989, they were assured at the time the transition occurred that their insurance benefits would remain the same and were instructed to rely on the terms of the Specialty Brands Plan in determining the extent of their coverage under the new Campbell Plan.

Although Sandra became eligible for coverage under the Campbell Plan on March 31, 1988, her eligibility was subject to a pre-existing condition clause, which provided:

In the event you or an eligible dependent is totally disabled on the date your benefits with respect to your eligible dependent becomes effective, no benefits will be payable under this Plan for expenses incurred for treatment of the condition causing the total disability until ... the date a person has been covered under this Plan for a period of 12 consecutive months.

The Specialty Brands' Plan, however, contained an "Extension of Benefits" provision, which provided:

If an individual's insurance terminates because of termination of the policy and while the individual is totally disabled, the Medical Insurance hereunder will be extended with respect to the illness causing the individual to be totally disabled as of the date of termination of the policy. Such benefits will be extended while the insured remains so disabled until the earlier of: (a) twelve consecutive months beyond the date the individual's insurance terminates, or (b) the date the individual becomes eligible for coverage under another plan of group insurance provided such plan does not contain a pre-existing conditions limitation applicable to such individual.

Consistent with that provision, Lincoln National continued to pay Sandra's medical expenses from March 31, 1988 to March 31, 1989. When Sandra's coverage under the Specialty Brands' Plan lapsed, Provident began paying her accident-related medical expenses, and continued to do so from April 1, 1989 to June 15, 1991.

In June 1989, Campbell published a new Summary Plan Description which described the conditions, limitations, exclusions, and eligibility requirements for receipt of medical benefits under its employee benefits plan. The provisions were virtually identical to those of the Specialty Brands' Plan and, like its predecessor, included a limitation of liability for injuries or illnesses caused by third parties. The Plan specifically provided that:

ACTS OF THIRD PARTIES

Medical care benefits are not payable to or for a person covered under this Plan when the Injury or Illness to the covered person occurs through the act or omission of another person. However, the Provident may elect to advance payment for medical care expenses incurred for an Injury or Illness in which a third party may be liable. For this to happen, the covered person must sign an agreement with the Provident to pay the Provident in full any sums advanced to cover such medical expenses from the judgment or settlement he or she receives.

In July 1989, Provident sent Mr. Den Hartog two repayment acknowledgement forms seeking information about the personal injury lawsuit and asserting a right to subrogation. Mr. Den Hartog never signed or returned the forms.

After its initial inquiries were ignored, Provident began to investigate the status of Sandra's lawsuit against Conrail. In October or November 1990, it learned that the case had been settled. When Provident's repeated efforts to obtain reimbursement for benefits it had paid on Sandra's behalf were unsuccessful, Campbell exercised its discretion under the third party exclusion and directed Provident to cease payment of all accident-related claims effective June 15, 1991. The present litigation ensued.

The parties filed cross-motions for summary judgment in the district court, each contending that there were no genuine issues of material fact which would preclude the entry of judgment in their favor. While the plaintiffs and Campbell argued over whether coverage was excluded under the Acts of Third Parties provision and whether the provision required reimbursement, Provident contended that it should not have been a party to the litigation in the first place, because it was not a fiduciary within the meaning of ERISA. The district court agreed with Provident and granted its motion for summary judgment. It also agreed with Campbell's interpretation of the Acts of Third Parties provision, holding that the provision not only precluded coverage for Sandra's pre-existing condition, but required repayment of all benefits which Campbell and Provident had advanced on Sandra's behalf. The court accordingly granted Campbell's motion for summary judgment and denied the plaintiffs' motion. Provident thereafter sought to recover attorneys' fees and costs as a prevailing party under 29 U.S.C. Sec. 1132(g)(1). Its motion was denied.

II. DISCUSSION

The issues presented on appeal are fairly straight forward: (1) is Provident a fiduciary within the meaning of ERISA; (2) does the third party exclusion provision apply and preclude coverage as a matter of law; (3) is Campbell entitled to restitution; and (4) is Provident entitled to attorneys' fees and costs under 29 U.S.C. Sec. 1132(g)(1)? We address each in turn.

A. Provident's Relationship to the Plan

ERISA defines a plan fiduciary as follows:

[A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control...