NE DEPT. ILGWU v. TEAMSTERS LOC. UNION NO. 229

• Decision Date: 30 December 1983
• Docket Number: Civ. No. 82-0745.
• Citation: 584 F. Supp. 68
• Parties: NORTHEAST DEPARTMENT ILGWU HEALTH AND WELFARE FUND and Sol Hoffman, Plaintiffs, v. TEAMSTERS LOCAL UNION NO. 229 WELFARE FUND, Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

584 F. Supp. 68

NORTHEAST DEPARTMENT ILGWU HEALTH AND WELFARE FUND and Sol Hoffman, Plaintiffs, v. TEAMSTERS LOCAL UNION NO. 229 WELFARE FUND, Defendant.

Civ. No. 82-0745.

United States District Court, M.D. Pennsylvania.

December 30, 1983.

Charles W. Johnston, Harrisburg, Pa., for plaintiffs.

Robert D. Mariani, Scranton, Pa., for defendant.

MEMORANDUM AND ORDER

NEALON, Chief Judge.

This case is before the court based upon cross-motions for summary judgment. All of the material facts appear in the Stipulation, Document 7 of the Record, including, as Exhibit "A", plaintiffs' group insurance plan and, as Exhibit "B", defendant's group insurance plan. After careful consideration, the court will grant plaintiffs' motion for summary judgment and deny defendant's motion for the same.

I.

The plaintiff, ILGWU Fund, is an employee benefit plan within the meaning of ERISA, 29 U.S.C. §§ 1002(1) and (3) and plaintiff Sol Hoffman is a fiduciary of the ILGWU Fund in accordance with 29 U.S.C. § 1002(21). Stipulation, Document No. 7 of the Record at 2. The defendant, Teamsters Fund, is also an employee benefit plan within the meaning of 29 U.S.C. §§ 1002(1) and (3). Id. The eligibility rules for the ILGWU Fund and the Teamsters Fund are promulgated by the trustees of their respective Funds through authority granted by the terms of their collective bargaining agreements. Id. at 2-3. The eligibility rules of the ILGWU Fund under review here state:

You are not eligible for hospital, medical-surgical, or Major Medical benefits under this plan if there exists at your spouse's place of employment a group plan which provides for family coverage of these types of benefits so long as 50% or more of the cost of such family coverage is paid by other than you or a member of your family.

Id. at 3, citing Summary Plan Description of the ILGWU Fund at 7. The applicable eligibility rules of the Teamsters Fund provide:

Our Group Insurance Plan contains a non-profit provision coordinating it with other plans under which an individual is covered so that the total benefits available will not exceed 100% of the allowable expenses....

When a claim is made, the primary plan pays its benefits without regard to any other plans. The secondary plans adjust their benefits so that the total benefits available will not exceed the allowable expenses. No plan pays more than it would without the coordination provision.

A plan without a coordinating provision is always the primary plan. If all plans have such a provision: (1) the plan covering the patient directly, rather than as an employee's dependent, is primary and the others secondary, (2) if a child is covered under both parents' plans, the father's is primary, (3) if neither (1) nor (2) applies, the plan covering the patient longest is primary.

Id. at 4-5, citing Summary Plan Description of the Teamsters Fund at 35.

This case is before the court as a result of both the ILGWU Fund and the Teamsters Fund denying coverage for medical bills submitted to them for services incurred by Ruth Fazio. Mrs. Fazio, an employee in the garment industry, is a participant in the ILGWU Fund and a beneficiary of the Teamsters Fund (inasmuch as her husband is employed in an industry covered by the Teamsters Fund). Id. at 5. After receipt of the bills, the ILGWU Fund advised Mrs. Fazio that she was not eligible for hospital, medical-surgical or Major Medical benefits since she was covered by the Teamsters Fund as a dependent.¹ The Teamsters Fund determined they would not pay the bills since their plan coordinates against other plans under which an individual is covered.²

The issues for this court to address are:

(1) Whether the ILGWU Fund or the Teamsters Fund is responsible for Ruth Fazio's medical bills.

(2) If the Teamsters Fund is primarily responsible, whether the ILGWU Fund discriminates against its members on the basis of marital status.³

II.

A. Coverage Issue

The court must initially decide whether the medical bills incurred by Ruth Fazio are payable by the Teamsters or the ILGWU Fund. This issue appears to be one of first impression involving questions of contract interpretation and general principles of insurance law. While there is little law dealing with the issue of double coverage for health insurance, the same principles applied in auto insurance cases are applicable. Even if an individual purchases two policies of insurance, the total amount recoverable by the insured may not exceed the amount of the loss. By the same token, however, he should not receive less than he would if he were protected by only one of the policies. See 8A Appleman, Insurance Law and Practice § 4907 at 354 (1981). Where an insured is covered by more than one policy, "the rights and liabilities of the different insurers involved depend, at least in part, upon the specific language of the policies." Id, at 364. A duplicate insurance clause does not "create coverage where none exists ... the allocation of liability between insurers is determined by contract, and where such contractual provisions are not inconsistent with public policy, they will be enforced." Id. at 365-67.

In the area of health insurance, it is becoming a common occurrence for a spouse to be covered both as a direct beneficiary and also as a dependent beneficiary of a spouse's employment group contract. In order to avoid duplicate recovery by a beneficiary, the health insurance industry has developed a technique called the coordination of benefits provision (COB).⁴See Starks v. Hospital Service Plan of N.J., 182 N.J.Super. 342, 440 A.2d 1353, 1354 (1981). Approaches to the duplicate-coverage problem generally fall into one of three broad categories: (1) a carrier remains primarily liable despite other insurance but ordinarily bears only a pro rata liability with other primary insurers; (2) excess insurance clause where carrier pays the loss to the extent it exceeds other available insurance; and (3) escape clause where carrier disclaims all liability if other insurance is available. Id. 440 A.2d at 1355. This escape clause, though, only applies when there is a loss covered by the policy. Therefore, when an exclusion operates to eliminate coverage under the policy, the duplicate insurance clauses are not applicable. See Liberty Mutual Insurance Co. v. State Farm Auto. Ins. Co., 262 Md. 305, 277 A.2d 603 (Md.1971).

In determining where the primary coverage falls, we must first "determine from the contracts themselves what obligations the respective obligors intended to assume and then to determine whether these intentions are compatible not only each with the other but also with the insured's rights and expectations and with the controlling demands of public policy." Starks, 440 A.2d at 1358. The ILGWU Plan clearly states that an individual is not eligible for hospital, medical-surgical, or Major Medical benefits if his or her spouse's employer provides coverage for "these types of benefits" and bears at least fifty percent of the cost. The Teamsters Plan, on the other hand, provides coverage for "these types of benefits" and does not invoke the coordinating provision unless there is another plan "under which an individual is covered." The individual involved here is Mrs. Fazio and, in such circumstances, she simply has no coverage for these benefits. (Defendant has not argued that the Teamsters Plan would provide less of "these types of benefits" than the ILGWU Plan). If this court were to require the ILGWU Plan to undertake primary responsibility to the insured or even to share the payment of benefits pro rata with the Teamsters Plan, the intention of the ILGWU Plan would be defeated. The ILGWU Plan intended that the insured not be "covered" when there exists other insurance. In fact, the Plan has available another set of benefits which may be available if an individual is not covered by the hospital, medical-surgical and major medical program.⁵ The Ladies Garment Workers adopted this Plan with the economic realities of their situation in mind, realizing the limiting financial constraints in which they work.⁶ See Brief of Plaintiffs, Document No. 12 of the Record at 13-14.

Having determined that it was the intention of the ILGWU Fund in the first instance not to cover individuals otherwise covered by a spouse's insurance, the court must next consider the expectations and rights of the participants in the Fund. It is clear from the language of the ILGWU Summary Plan Description that they did not intend to cover participants in Mrs. Fazio's situation, while the Teamsters Summary Plan Description instead coordinates its coverage with other plans covering her. Since it has been determined that the ILGWU Plan provided no hospital, medical-surgical or major medical coverage for Ruth Fazio, the Teamsters Fund's COB provisions do not apply. The participants of the ILGWU Fund have been given adequate notice of the exclusion where there is coverage through a spouse. Therefore, the expectations and rights of the participants in the ILGWU Fund are not thwarted by the Plan's provision denying regular medical and hospital coverage when a spouse carries such insurance through his employer.

There appears to this court to have been a basic unfairness to Ruth Fazio in being denied benefits by both the ILGWU and the Teamsters Fund. In view of the fact that two collective bargaining contracts are involved, we must take a fundamental approach to the problem and construe the meaning of the contracts literally. A basic contract principle that must be applied is that where there is room for ambiguity it must be resolved against the writer of the policy. The ILGWU plan includes a specific exclusion denying Ruth Fazio coverage where her spouse's employer provides coverage. The Teamsters plan, however, includes only a coordination of benefits provision which is predicated on having available other coverage to qualify as the primary plan. Since it has been determined...