King v. Provident Life & Acc. Ins. Co., Civ. A. No. 3:92-cv-124WS.

• Decision Date: 23 March 1995
• Docket Number: Civ. A. No. 3:92-cv-124WS.
• Citation: 908 F. Supp. 1395
• Court: U.S. District Court — Southern District of Mississippi
• Parties: John Michael KING, Sr., Beverly King, John Michael King, Jr., a Minor, and Angela Lynn King, a Minor, by their Next Friend, Beverly E. King, Plaintiffs, v. PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY, a Tennessee Corporation; Alco Management, Inc., a Tennessee Corporation, and Motel Restaurant, Inc., Defendants.

908 F. Supp. 1395

John Michael KING, Sr., Beverly King, John Michael King, Jr., a Minor, and Angela Lynn King, a Minor, by their Next Friend, Beverly E. King, Plaintiffs, v. PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY, a Tennessee Corporation; Alco Management, Inc., a Tennessee Corporation, and Motel Restaurant, Inc., Defendants.

Civ. A. No. 3:92-cv-124WS.

United States District Court, S.D. Mississippi, Jackson Division.

March 23, 1995.

Don H. Goode, Dossett, Goode, Barnes & Broom, Jackson, MS, S. Dennis Joiner, Joiner & Polk, Jackson, MS, for John Michael King, Sr., Beverly E. King.

Roy H. Liddell, Kenna L. Mansfield, Jr., Wells, Wells, Marble & Hurst, Jackson, MS, for Provident Life and Accident Insurance Company.

Virginia T. Munford, Watkins & Eager, Jackson, MS, for Alco Management, Inc., Motel Restaurant, Inc.

MEMORANDUM OPINION AND ORDER

WINGATE, District Judge.

Before the court are the parties' respective motions for summary judgment in the above styled and numbered cause. The parties agree that this case is governed by the Employment Retirement Income Security Act of 1974, Title 29 U.S.C. §§ 1001-1461 (hereinafter "ERISA"), and the amendments to ERISA under the Consolidated Omnibus Budget Reconciliation Act, Title 29 U.S.C. §§ 1161 through 1168 (hereinafter "COBRA").¹ The plaintiffs (hereinafter the "Kings") filed their first lawsuit pertaining to this matter on May 9, 1990, in state court, asking for injunctive relief, damages, and costs. The Kings sought to enjoin Provident Life & Accident Insurance Company (hereinafter "Provident") and the other defendants from terminating the group medical coverage of John Michael King, Sr. Provident and the other defendants removed the case to the United States District Court for the Southern District of Mississippi (see Civil Action No. J90-0272(B)) where the Kings immediately sought injunctive relief. The federal court denied the Kings' request for injunctive relief; the matter proceeded to discovery; and dispositive motions were filed by the parties. On June 3, 1991, the parties' motions for summary judgment came on for hearing before the federal district court, the Honorable William H. Barbour presiding. There, it was noted by the federal court that the Kings had asserted for the first time in their briefs that they had been denied an adequate opportunity to convert John Michael King, Sr.'s group plan to individual coverage. Judge Barbour, finding that this issue did not appear in the Kings' complaint and that no attempt had been made to amend the complaint, denied the King's request to amend their complaint as untimely and entered judgment in favor of Provident on all the other issues. However, Judge Barbour noted that the Kings could file another lawsuit and assert their "inadequate opportunity to convert claim." No appeal was taken from Judge Barbour's ruling.

The Kings filed the instant lawsuit on February 28, 1992, and the parties filed motions for summary judgment. This court entered summary judgment in favor of Provident on June 24, 1993, finding that the inadequate opportunity to convert claim was barred by federal principles of claim preclusion.² However, this court's ruling was reversed by the United States Court of Appeals for the Fifth Circuit in King v. Provident Life & Accident Insurance Company, 23 F.3d 926 (5th Cir. 1994) (holding that Judge Barbour's statement to the Kings that they could file another lawsuit operated as a reservation of right which limited the preclusive effect of dismissal so that dismissal did not bar the claim under the doctrine of res judicata). Hence, the case was remanded to this court for consideration of the King's claims under ERISA and COBRA. Jurisdiction over this matter is predicated on Title 28 U.S.C. § 1331 which provides that "district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States."

PERTINENT FACTS

John Michael King, Sr., (hereinafter "King") was employed as the manager of Danver's Restaurant in Jackson, Mississippi, between 1982 and 1987. The parent corporation of Danver's Restaurant was Motel Restaurant, Inc., the entity that provided medical, disability, and hospitalization insurance for the Kings through a "Group Protection of Employees of Alco Properties, Inc., Group Plan" (hereinafter the "Plan"). Benefits under the Plan were provided through a group policy numbered K-997-F35F and issued by the defendant Provident. King became enrolled in and covered under the Plan on March 1, 1987. King's spouse and children also were covered under this policy. There is no suggestion in the record before this court that the Kings were not made aware at the commencement of their coverage under this policy of the benefits it provided.

In the summer of 1987, only a short time after he was enrolled in the Plan, King was diagnosed to be suffering with amyotrophic lateral sclerosis, also called "Lou Gehrig's disease," a motor neuron disease characterized by muscular weakness, atrophy, and progressive degeneration of the nervous system. On August 6, 1987, the extent of King's physical deterioration necessitated the termination³ of his employment with Danver's Restaurant. At the time of his termination, King received from the administrator of the Plan a "Notice to Persons Whose Group Health Benefits are Terminating."⁴ Pursuant to this notice, King was offered the opportunity to extend his group insurance coverage under the Plan for at least an additional eighteen months in accordance with COBRA, Title 29 U.S.C. §§ 1161 through 1168. This continuing coverage was the same as the coverage enjoyed by King under the Plan while he was employed with Danver's Restaurant, the only difference being that King was required to pay the premium.

Pursuant to COBRA, King began paying premiums for continuing benefits under the Plan in December of 1987. Over the next year, King's health continued to decline. Eventually, King was placed in a hospital's intensive care unit. King's apparently imminent demise prompted his family to inquire about removing King from the hospital and obtaining home nursing care. King's physician acquiesced, believing that King had no longer than six months to live. Under the Plan's "Alternative Treatment Benefit" provisions, home health care qualified as a covered expense. So, Provident agreed to pay for the cost of home health care in lieu of the vastly more expensive cost of hospitalization. According to Judge Barbour's opinion in Civil Action No. J90-0272(B), the parties do not dispute that the Kings' decision to opt for home health care resulted in a savings to Provident and the Plan of approximately $30,000.00 per month in medical expenses.

In January, 1989, the Kings learned that Provident intended to terminate coverage under the Plan in May of 1989. The Kings retained the services of an attorney who contacted Provident regarding the Plan's conversion coverage.⁵ The attorney was informed by letter dated March 29, 1989, that available benefits for converted policies are dependent on the state in which the insurance contract was sitused, that is, the State of Tennessee. The letter noted that Provident was required to offer only hospital/surgical benefits. Finally, the letter explained that while converted medical benefits were not required by either state or federal regulations to be the same as the benefits offered under the group coverage, medical benefits under COBRA had to be identical with the benefits offered under group coverage.

A copy of the Plan provided to the Kings' attorney provided in pertinent part:

If you have been covered under the Plan for a period of 3 months and your medical coverage under the plan ceases because:

(a) your employment ceases:

* * * * * *

you may apply for a conversion plan providing hospital and surgical benefits. (emphasis added)

* * * * * *

The amount of coverage provided will be subject to and determined by the laws of the state where the plan is issued (emphasis added).⁶ The coverage provided will not be identical to the coverage provided under this Plan. You have to apply within 31 days after coverage ends. The conversion plan will be subject to the rules and premiums that apply to such plans at that time. A description of conversion plan benefits, rates for coverage and application form will be given to you at the time your coverage under this Plan ends. If issued, the conversion plan will go into effect on the day following the date coverage under the Plan ended.

The individual conversion policy offered by Provident in accordance with Tennessee law governing conversion policies provided for hospital and surgical benefits, but neither alternative treatment benefits nor home health care services were available under the conversion policy.⁷ Provident steadfastly has maintained the position that it did not have to give King an opportunity to purchase a policy of conversion coverage which offered the same benefits as King enjoyed under the Plan. Consequently, the Kings did not apply for the conversion policy within 31 days after termination of group coverage, now arguing that Provident's conversion policy failed to provide adequate benefits.⁸

However, any immediate crisis was avoided when Provident informed the Kings that their group coverage under the Plan was being extended an additional twelve months pursuant to the Plan's extended benefits provision. Twelve months later, the extended benefits were exhausted, and Provident notified the Kings on March 22, 1990, that all benefits under the Plan would be terminated on May 31, 1990. Consequently, the Kings filed their first lawsuit in state court on May 9, 1990. Provident removed the Kings' state court action to this court, and the matter was assigned Civil Action No. J90-0272(B).

In Civil Action No. J90-0272(B), after injunctive relief was denied and the matter came on for hearing on the parties' motions for summary...