Society of New York Hospital v. Malsky

Citation86 Misc.2d 221,382 N.Y.S.2d 433
PartiesSOCIETY OF the NEW YORK HOSPITAL, Plaintiff, v. Edward MALSKY and Edward Malsky, Jr., Defendants. Edward MALSKY and Edward Malsky, Jr., Third-Party Plaintiffs, v. The HEALTH AND WELFARE FUND OF the PROVISION SALESMEN AND DISTRIBUTORS UNION, LOCAL 627, Third-Party Defendant.
Decision Date12 April 1976
CourtNew York City Court

FELICE K. SHEA, Judge.

This is an action by New York Hospital for services in the amount of $3,045.10 rendered to Defendant Edward Malsky, Jr. ('Malsky'). Defendants Malsky and his father have impleaded The Health and Welfare Fund of the Provision Salesmen and Distributors Union, Local 627 ('the Union'), alleging that Malsky is a covered dependent under the terms of the Union's group health insurance plan. The plaintiff hospital is conceded by all parties to have a meritorious claim against defendants. The issue, submitted to the Court on an agreed statement of facts, is whether third-party defendant is liable to third-party plaintiffs.

The Court must decide first a threshhold question of jurisdiction. Although none of the parties herein challenged the Court's jurisdiction to adjudicate this dispute, it is well settled that subject matter jurisdiction 'cannot be conferred upon the court by any consent or stipulation of the parties.' Robinson v. Oceanic Steam Nav. Co., 112 N.Y. 315, 324, 19 N.E. 625, 627.

In a recent case which raised the question whether a dependent child was covered by her father's union health insurance plan, the Civil Court, Bronx County, held that '. . . the determination as to whether or not the daughter is a covered dependent under the plan is not within the jurisdiction of the Civil Court. The nature of this action has been held to be an action to declare and enforce rights in a trust fund, as a purported beneficiary (citations omitted). Therefore, the case must be transferred to the Supreme Court, Article 6, section 19 f of the New York State Constitution.' Sommers v. Horsford, N.Y.L.J. Feb. 13, 1976, p. 10, col. 3.

This Court must respectfully disagree that the nature of the third-party action is equitable. While it is true that the trustees of a union welfare trust fund manage the assets of the fund and may exercise fiduciary functions with regard to overall policy and planning, they exercise no fiduciary discretion in carrying out contractual provisions such as those upon which this action is based. The Union has contracted with Associated Hospital Service of New York (Blue Cross Plan) for hospital benefits and it is this contract, inserted verbatim into the welfare plan trust agreement, which the Court must construe.

The court in Sommers v. Horsford, supra, relied on two cases in support of its conclusion that a claim for health insurance benefits against a union welfare fund must be transferred to a court of equity. Hellman v. Ploss, 46 A.D.2d 658, 359 N.Y.S.2d 823, dealt with an action for supplemental unemployment insurance benefits; in Kaminsky v. Connolly, 73 Misc.2d 789, 342 N.Y.S.2d 394, the claim was for pension benefits. In these two cases, and in the older pension cases (E.g., Milberg v. Nagler, 17 Misc.2d 893, 191 N.Y.S.2d 821; Hoffman v. Nagler, 206 Misc. 623, 134 N.Y.S.2d 335), it would appear that the union welfare plans were privately funded. To the extent that it was necessary to review fiduciary discretion under the facts of those cases, they may be sound law. No reason exists, however, to extend the doctrine to claims against a union welfare fund for benefits which are funded by insurance.

Where a union welfare fund purchases insurance for the benefit of union employees, questions of construction of the contract of insurance are cognizable in a court of law. In Smith v. Boer, 45 Misc.2d 338, 256 N.Y.S.2d 776, the Civil Court of the City of New York determined which of two provisions in a union trust agreement governed the claim of the beneficiary of a deceased union member to recover the proceeds of a group life insurance policy. In Pasko v. Cuba, 33 Misc.2d 350, 224 N.Y.S.2d 925, plaintiff's intestate brought suit in the former Municipal Court to enforce the terms of a life insurance policy against union welfare fund trustees who had sole power to approve the application. The court held: 'The union's claim that the court has no jurisdiction is without merit. Plaintiff's intestate, as a third-party beneficiary, may institute suit under the collective bargaining contract and need not resort to a court of equity.' Id. at 352, 224 N.Y.S.2d at 928. See also Soto v. Masters Mates & Pilots, 74 Misc.2d 355, 343 N.Y.S.2d 497; Krohn v. Steinlauf, 22 Misc.2d 365, 193 N.Y.S.2d 731.

In essence, third-party plaintiffs are bringing suit upon a collective bargaining agreement which provides hospital insurance benefits. The union member and his covered dependents are also third party beneficiaries of the group insurance contract and are entitled, if they choose, to sue Blue Cross directly. Blue Cross v. Ayotte, 35 A.D.2d 258, 315 N.Y.S.2d 998; 1 Appleman, Insurance Law and Practice § 41, p. 52. The fact that the Union Welfare Fund is administered by trustees does not change the true nature of the proceeding.

The traditional rationale for the doctrine that an action for breach of contract may not be maintained against a trustee in a court of law is that a jury might be called upon to decide complicated questions involving the conduct of a trustee in the administration of a trust. 3 Scott on Trusts § 197.2 (3rd ed. 1967). This reasoning has no application to the case at bar where the issue is insurance coverage, not fiduciary discretion. Furthermore, since no issues of fact remain to be tried, and no jury was requested in any case, transfer of this matter to a court of equitable jurisdiction could serve no useful purpose. Unless compelling reasons are present, principles of sound judicial administration proscribe transfers which use the time of non-judicial personnel, cost money and cause delay.

The Court, then, holds that it has subject matter jurisdiction and turns to a consideration of the undisputed facts.

Malsky's father is a union member who is eligible for union welfare benefits. Malsky was born on April 30, 1953 and suffered from congenital heart disease, causing him to be absent from school for extended periods of time and to fall behind his schoolmates. Between June 4 and June 9, 1973, he was hospitalized for heart surgery and the implanting of a pacemaker. At the time hospital services were rendered, Malsky was 20 years old, a full-time student in his last year of high school,...

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6 cases
  • Washington Hosp. Center Nat. Rehabilitation Hosp. v. Collier
    • United States
    • U.S. Court of Appeals — District of Columbia Circuit
    • November 5, 1991
    ...Bridals Inc. v. Mutual Ben. Life Ins. Co., 62 Ill.App.3d 542, 19 Ill.Dec. 547, 379 N.E.2d 62 (1978); Society of New York Hospital v. Malsky, 86 Misc.2d 221, 382 N.Y.S.2d 433 (Civ.Ct.1976). Resolution of this issue may have a significant impact upon Maryland health insurance practices. Accor......
  • Collier v. MD-Individual Practice Ass'n, Inc.
    • United States
    • Maryland Court of Appeals
    • September 1, 1991
    ...the ordinary and accepted meaning of a contract term is the purpose of the contract. The court in Society of the New York Hosp. v. Malsky, 86 Misc.2d 221, 382 N.Y.S.2d 433, aff'd, 88 Misc.2d 832, 390 N.Y.S.2d 512 (1976) (per curiam), well expressed the purpose of the subject type of contrac......
  • Hampton v. District Council 37 Health & Sec. Plan
    • United States
    • New York City Court
    • October 31, 1978
    ...the contract between the Plan and its insurer, a matter clearly "cognizable in a court of law." (Society of N. Y. Hospital v. Malsky, 86 Misc.2d 221, 223, 382 N.Y.S.2d 433, 435 (Civil Ct., N.Y.Co.), Aff'd, 88 Misc.2d 832, 390 N.Y.S.2d 512 (App.T., 1st Dept. Based upon the credible evidence ......
  • Brown v. Group Health Inc., 2007 NY Slip Op 33136(U) (N.Y. Sup. Ct. 9/25/2007)
    • United States
    • New York Supreme Court
    • September 25, 2007
    ...beneficiaries of the insurance contract, and thus may enforce any rights they may have thereunder (Society of the New York Hospital v. Malsky, 86 Misc2d 221 [Civ Ct. NY Co.], aff'd, 88 Misc2d 832 (Appellate Term 1st Dept 1976]). The certificate of insurance, in this case the Plan, "appraise......
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