Just v. Accu-Turn, Inc., Case No. 09-C-0181

CourtUnited States District Courts. 7th Circuit. United States District Court of Eastern District of Wisconsin
Docket NumberCase No. 09-C-0181
Decision Date28 March 2012

After Thomas Just's employment was terminated by Accu-Turn, he filed this lawsuit alleging that Accu-Turn failed to provide to him requisite Consolidated Omnibus Budget Reconciliation Act ("COBRA") notices and failed to accept payment for his insurance premium. The court granted Travelers Indemnity Company of America's motion to intervene, and bifurcated the case to resolve the issue of coverage. Travelers then moved for summary judgment asking the court to declare that there is no liability coverage because there is no duty to indemnify, and, therefore, no duty to defend exists. Because the court finds that the ERISA exclusion applies, Travelers' motion will be granted and this case will be set for a status conference.

Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show thatthere is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). Material facts are those facts that under the applicable substantive law "might affect the outcome of the suit." See Anderson, 477 U.S. at 248. A dispute over "material facts" is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. A genuine issue of material fact is not shown by "the mere existence of some alleged factual dispute between the parties." Id., 477 U.S. at 247. Rather, a genuine issue of material fact exists only if "a fair-minded jury could return a verdict for the [nonmoving party] on the evidence presented." Id., 477 U.S. at 252. In determining whether a genuine issue of material fact exists, the court must consider the evidence and all reasonable inferences in the light most favorable to the nonmoving party. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., Ltd., 475 U.S. 574, 587 (1986).


Plaintiff Thomas J. Just resides at 18929 52nd Road, Union Grove, Wisconsin, 53182. Defendant Accu-Turn, a Wisconsin corporation, is located at 1375 Industrial Park Drive, Union Grove, Wisconsin, 53182-0036. Defendant Travelers Indemnity Company is a foreign insurance company having a principal place of business in Hartford, Connecticut. (Compl. ¶ 2.)

Just worked for Accu-Turn from January 2, 1987, until his termination on May 30, 2008. (Compl. ¶¶ 5, 8.) Accu-Turn sent Just a "Continuation Coverage Election Notice" informing him of his right to continue his Plan coverage and the notice contained a due date for receipt of premiums. (Compl. ¶ 11.) Just did not mail his August payment toAccu-Turn by the due date listed on the "Continuation of Coverage Election Notice." (Compl. ¶¶ 12-13.) Accu-Turn returned Just's August payment and instructed its insurance carrier to terminate Just's coverage because his payment was not received by the due date on the "Continuation Coverage Election Notice" that it had sent to Just. (Compl. ¶ 14.)

Just claims he suffered monetary damages as a result of Accu-Turn's decision to cancel coverage or "refusal to accept [his] August payment." (Compl. ¶¶ 15, 21.) He further alleges Accu-Turn violated COBRA and ERISA because its Plan Administrator did not provide an initial notice regarding COBRA rights or a COBRA election notice on a timely basis. (Compl. ¶¶ 28-31.) The complaint identifies the following causes of action: claim for benefits or to enforce rights under the plan, claim for statutory penalties - failure to provide initial COBRA notice; and claim for statutory penalties - failure to provide notice of right to elect COBRA coverage. (Compl. at ¶¶ 16-31.)

Travelers issued an Employee Benefits Liability Policy of Insurance (EBL) to Accu-Turn pursuant to Policy Number 1-680-9889C070-TIA-08, effective April 1, 2008, to April 1, 2009. (Compl. For Decl. Judgment at ¶ 9.) Travelers' EBL policy contains the following Insuring Agreement:


1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of any negligent act, error, or omission of the insured, or of any other person for whose acts the insured is legally liable. The negligent act, error, or omission must be committed in the "administration" of your "employee benefit program." No other obligation or liability to pay sums or perform acts or services is covered unless expressly provided for under SUPPLEMENTARY PAYMENTS. This insurance does not apply to any negligent act,error, or omission which occurred before the Retroactive Date, if any, shown in the Declarations or which occurs after the policy expires ....
b. This insurance applies to any negligent act, error or omission of the insured, but only if a claim for damages because of the negligent act, error or omission is first made against any insured during the policy period.

(Policy at Employee Benefits Liability Coverage Form, Doc. Nos. 15-2-15-3.)

The policy further provides that "[n]o other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments. (Id.)

The policy defines "Administration" as:

a. Counseling employees, including their dependents and beneficiaries, with respect to the "employee benefit program";
b. Handling records in connection with the "employee benefit program"; or
c. Effecting or terminating any employee's participation in a plan included in the "employee benefit program."

(Id. at Section VII - Definitions at (1)).

"Employee Benefit Program" includes the following plans:

a. Group life insurance, group accident or health insurance, "profit sharing plans," pension plans and "Stock subscription plans," provided that no one other than the employee may subscribe to such insurance or plans;
b. Unemployment insurance, social security benefits, workers' compensation and disability benefits;
c. Any other similar plan designated in the Declaration or added thereto by endorsement. (Id. at (5).)

The policy contains the following exclusion:

2. Exclusions

This insurance does not apply to:

g. Loss for which the insured is liable because of liability imposed on a fiduciary by the Employee Retirement Security Act (ERISA) of 1974, as now or hereafter amended.

(Id. at Exclusions (2)(g)).


The construction of an insurance policy is amenable to summary judgment because it presents a question of law. Rhein Bldg. Co. v. Gehrt, 21 F. Supp. 2d 896, 899 (E.D. Wis. 1998). The interpretation of words or clauses in an insurance policy and the determination of whether coverage exists under that policy are questions of law for the court. Doyle v. Engelke, 219 Wis. 2d 277, 284, 580 N.W.2d 245, 248 (Wis. 1998) (citing Just v. Land Reclamation, Ltd., 155 Wis. 2d 737, 744, 456 N.W.2d 570 [Wis. 1990]).

In Wisconsin, the duty to defend an insured "is determined by comparing the allegations of the complaint to the terms of the insurance policy." Estate of Sustache v. Am. Family Mut. Ins. Co ., 2008 WI 87, ¶ 20, 311 Wis. 2d 548, 751 N.W.2d 845. The duty is "triggered by the allegations contained within the four corners of the complaint." Id. In other words, the duty exists only where, if the allegations were proven, the insurer would be required to pay the judgment. School Dist. of Shorewood v. Wausau Ins. Cos., 488 N.W.2d 82, 87-88 (Wis.1992). Further, where the terms of a policy are unambiguous, courts need not resort to construction or case law to support the plain meaning. Stuart v. Weisflog's Showroom Gallery, Inc., 2008 WI 86, ¶ 20, 311 Wis.2d 492, 753 N.W.2d 448. As to indemnification, that duty is narrower than the duty to defend, thus, where there is no duty to defend there is clearly no duty to indemnify. See Estate of Sustache, 2008 WI87, ¶ 20. It is the insured's burden to prove coverage for a claim. Kenefick v. Hitchcock, 522 N.W.2d 261, 264 (Wis. App.1994). However, the insurer has the burden of proving an exception to coverage or that the insured comes within an exclusion. See Estate of Ermenc. v. American Family Mut. Ins. Co., 221 Wis. 2d 478, 481, 585 N.W.2d 679 (Ct. App. 1998).

Section 1 of Accu-Turn's EBL policy covers damages "because of any negligent act, error, or omission of the insured" committed in the "administration" of your "employee benefit program." "Administration" is defined as "counseling employees about employee benefits, handling records connected to the employee benefits plan, and effecting or terminating an employee's participation in a plan included in the 'employee benefits program.'" An "employee benefits program" includes a group health insurance plan.

Travelers focuses on the allegation in the complaint that Accu-Turn returned Just's payment to Just on August 22, 2008, and instructed its insurance carrier to terminate Just's coverage effective August 1, 2008. (Compl. ¶ 14.) Specifically, paragraph 15 reads: "As a result of Accu-Turn's refusal to accept Just's August payment .... " Because there was a deliberate decision by Accu-Turn, there was no negligent act, error or omission that would trigger coverage pursuant to the plain language of the Insuring Agreement of Accu-Turn's EBL policy.

Negligent acts, errors or omissions are not defined by the policy. Thus, Travelers relies on DeSantis Enterprises, Inc. v. American and Foreign Ins. Co., 541 A.D.2d 859, 661 N.Y.S. 92 (N.Y. App. Div. 1997), where the court held that an employer's termination of employee benefits after seeking the advise of legal advisors was an intentional act not...

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