Tackitt v. Prudential Ins. Co. of America, C83-2507A.

Decision Date11 October 1984
Docket NumberNo. C83-2507A.,C83-2507A.
Citation595 F. Supp. 887
PartiesDonald F. TACKITT v. PRUDENTIAL INSURANCE COMPANY OF AMERICA, the United States of America and Special Agents Mutual Benefit Association, Inc.
CourtU.S. District Court — Northern District of Georgia

COPYRIGHT MATERIAL OMITTED

Thomas W. Thrash, Finch, McCraine, Brown & Blank, Atlanta, Ga., for plaintiff.

Ben Kingree, Carter, Ansley, Smith & McLendon, Atlanta, Ga., for defendant Prudential Ins. Co. of America.

Myles E. Eastwood, Asst. U.S. Atty., Atlanta, Ga., for defendant U.S.

Oliver B. Dickins, Jr., Edward Katze, Constangy, Brooks & Smith, Atlanta, Ga., Denis F. Gordon, Gordon & Barnett, Washington, D.C., for defendant Special Agents Mut. Ben. Ass'n.

ORDER

MOYE, Chief Judge.

The above-styled action is before the Court on the plaintiff's motion for partial summary judgment against the defendants Special Agents Mutual Benefit Association, Inc. (SAMBA) and Prudential Insurance Company of America (Prudential), and the cross-motions for summary judgment of the United States of America (Government) and SAMBA. Also before the court is the plaintiff's motion for preliminary injunction. Jurisdiction is predicated on diversity of citizenship, 5 U.S.C.A. § 701 (West 1977), and 5 U.S.C.A. § 8912 (West Supp. 1984).

I. BACKGROUND

The plaintiff is a retired Special Agent of the Federal Bureau of Investigation. As such he is eligible to participate in the SAMBA Health Benefit Plan (SAMBA Plan or Plan) pursuant to the Federal Employees Health Benefits Act (FEHBA or Act). The plaintiff has been a member of the SAMBA Plan since 1972.1

FEHBA establishes a subsidized health benefits system for federal employees, and during a four-week annual "open season," these employees may choose the insurance plan most suitable to their needs. 5 U.S. C.A. § 8905(e) (West Supp.1984); 5 C.F.R. 890.301(d) (1984). SAMBA is one of the employee organization carriers, which reimburses the cost of health services to its members according to the terms of the SAMBA Plan. The SAMBA Plan is underwritten in part by Prudential.

The plaintiff, a paraplegic with amputations in both lower limbs as a result of injuries received in an automobile accident and subsequent complications of those injuries, has received private duty nursing in his home since October of 1977.2 The SAMBA Plan covered one hundred percent of the plaintiff's private duty nursing expenses through 1982, after subtraction of the amounts stated in its deductible and co-insurance provisions. The Office of Personnel Management (OPM) requested that the SAMBA and other health benefit plans maintain, in preparing estimates for the 1983 benefit and premium proposals, overall benefit levels at a constant level, possibly by increasing some and decreasing others, in order to "control spending under the Federal Employees Health Benefits Program."3

After consulting with Prudential, SAMBA proposed, among other changes, to limit benefits for private duty nursing care to $2,500 per calendar year.4 This change was one of eight changes SAMBA proposed to OPM after Prudential advised SAMBA that a 30.3% increase in premiums would occur if 1982 benefit levels were maintained.5 This contract modification was approved by the OPM for the 1983 contract year.

The issues to be decided in the pending motions for summary judgment are as follows: (1) whether plaintiff had a vested right to receive reimbursement for private duty nursing at the benefit level stated in his 1977 contract, (2) whether the reduction of the benefits level for private duty nursing care under the SAMBA Plan violated the statutory requirement to provide "catastrophic" coverage under 5 U.S.C.A. § 8904(4) (West 1967), and (3) whether OPM's approval of the relevant changes in the SAMBA Plan was arbitrary and capricious.

For the reasons stated below, the Court grants the defendants' motions for summary judgment and denies the plaintiff's motion for partial summary judgment. In consequence, it is unnecessary to consider the plaintiff's motion for preliminary injunction, since it is based on the same legal issues as those decided below.

II. DISCUSSION
A. Standard of review

Under Federal Rule 56, summary judgment should be entered only if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The movant bears the burden of demonstrating that there is no dispute as to any material fact in the case. "In assessing whether the movant has met this burden, the courts should view the evidence and all factual inferences therefrom in the light most favorable to the party opposing the motion." Warrior Tombigbee Transportation Co. v. M/V Nan Fung, 695 F.2d 1294, 1296 (11th Cir.1983).

B. Contract interpretation

The plaintiff contends that Prudential and SAMBA have breached their contract with him by failing to consider his entitlement to reimbursement for expenses of private duty nursing care to be vested within the limitations of his 1977 contract with SAMBA. This question is to be decided under federal principles rather than state insurance law, since state law inconsistent with the contract is preempted and superseded by the contract provisions under 5 U.S.C.A. § 8902(m)(1) (West Supp. 1984). It is undisputed that the contracts in question are limited in duration to a single year, subject to annual modification or, with proper notice, termination. The plaintiff argues that his rights to private duty nursing expense reimbursement vested under his 1977 contract at the rates stated in that contract. His contention is based on the general principle of insurance contract construction that ambiguities in such contracts are to be construed in favor of the party who did not draft the contract.

The coverage language in the plaintiff's 1977 brochure indicates that coverage under "major medical benefits" provides coverage "subject to the definitions, limitations, and exclusions in this brochure, ... for expenses of the following services and supplies (referred to as `eligible charges') ..."6 This coverage language does not refer to "illness" or any synonym thereof, indicating that the risk insured against is the occurrence of medical expenses. Additional coverage language is provided in a conspicuous place at the second page of the brochure. It reads as follows: "The contract may be modified or terminated. However, no such modification or termination will affect adversely any benefit for a covered service received prior to such modification or termination."7 The plaintiff contends that the language just quoted is ambiguous. His argument is as follows:

The language describing the terms under which the contract could be modified gave to Plaintiff a vested right to continuation of benefits for nursing care services at a level no less than that established by the 1977 contract. The language of this contract provided that modification of the contract will not affect adversely `any benefit for a covered service received prior to such modification or termination.' The term `benefit' should be construed to mean the `benefits' described under the heading `Major Medical Benefits' on page 8 of the brochure. The Plaintiff received benefits for nursing care services for a condition which developed prior to the modification which occurred with the 1983 contract. Therefore, that modification could not affect his continued benefits for those services at the levels which existed prior to the modification.8

Contrary to the plaintiff's contention, the Court finds this language unambiguous. The contract language does not suggest that modification could not affect continued benefits "at the levels which existed prior to the modification." Benefit levels are not mentioned in this coverage language. The right expressly safeguarded by this language from the effect of any subsequent modification is "any benefit for a covered service received prior to such modification ..." The result of this language is preservation of the right to reimbursement for services received prior to the modification; a covered service received subsequent to the modification will not be reimbursed at the pre-modification rate. In consequence, the contract language precludes any vested right to receive reimbursement at pre-modification benefit rates for private duty home nursing care.

In accord with this result is a recent case from the Eastern District of Pennsylvania, Garvey v. Prudential Insurance Co., 596 F.Supp. 1119 (E.D.Pa.1984), attached to various of the defendants' motions. The insurance plan involved in Garvey provided that modification would not "affect adversely any benefit for an allowable expense incurred prior to such modification or termination." Id. at 1123. The plaintiff in Garvey also argued that the coverage language was ambiguous, and that he therefore had a vested right to reimbursement for expenses of private-duty nursing care without cost limitations resulting from a subsequent modification of these benefits. This language, in which the plaintiff finds a substantive difference from that in the Plan, appears to provide precisely the same coverage as the language of the Plan. The Garvey court held that this language contained no ambiguity and that the plaintiff had no vested right to reimbursement at pre-modification benefit levels. In addition, the Garvey court observed in a footnote that "expenses are incurred on the date services and supplies are received." Id. at 1123 n. 15. Logic and the plain meaning of the contract language dictate the same result in the case sub judice. Accordingly, the Court holds that the plaintiff is subject to the modification of private duty nursing expense reimbursement as provided in the 1983 SAMBA Plan. In addition, since SAMBA is not liable for breach of contract, the issue of the defendant Prudential's liability for this breach need not be reached.

C. Catastrophic Coverage

The plaintiff claims...

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