United Ben. Life Ins. Co. v. U.S. Life Ins. Co.

• Decision Date: 27 October 1994
• Docket Number: No. 93-8838,93-8838
• Citation: 36 F.3d 1063
• Parties: , 18 Employee Benefits Cas. 2308 UNITED BENEFIT LIFE INSURANCE COMPANY, Plaintiff-Appellee, v. UNITED STATES LIFE INSURANCE COMPANY, Defendant-Appellant, Sally Y. King, Defendant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1063

36 F.3d 1063

63 USLW 2352, 18 Employee Benefits Cas. 2308

UNITED BENEFIT LIFE INSURANCE COMPANY, Plaintiff-Appellee, v. UNITED STATES LIFE INSURANCE COMPANY, Defendant-Appellant Sally Y. King, Defendant.

No. 93-8838.

United States Court of Appeals Eleventh Circuit.

Oct. 27, 1994.

Rehearing Denied Dec. 9, 1994.

H. Sanders Carter, Jr., Michael A. Coval, Carter & Ansley, Atlanta, GA, for appellant.

Beryl Harold Weiner, Weiner, Yancey & Dempsey, Atlanta, GA, for Sally King.

Andrew John Ekonomou, Howell Alexander Hall, Boyce, Ekonomou & Atkinson, Atlanta, GA, for appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before ANDERSON and BIRCH, Circuit Judges, and ALBRITTON ^*, District Judge.

ALBRITTON, District Judge:

This is a dispute between two insurance companies over whether one or both are primarily liable for the payment of certain medical expenses.

Appellant United States Life Insurance Company ("U.S. Life") appeals the district court's order denying its motion for summary judgment and granting the motion for summary judgment filed by appellee United Benefit Life Insurance Company ("United Benefit"). U.S. Life contends that United Benefit is primarily liable for the medical expenses, while U.S. Life is only secondarily liable. United Benefit maintains that both carriers are primarily liable, and therefore, they should share the liability on a pro rata basis. The district court agreed with United Benefit and held the two carriers liable on a pro rata basis. Because we find that United Benefit is primarily liable for the medical expenses, and U.S. Life is only secondarily liable, we reverse the district court and enter judgment in favor of U.S. Life.

I. BACKGROUND

On December 28, 1991, Sally King sustained a gunshot wound to her back. As a result, she incurred substantial medical expenses. On the date of her injury, and at all times material to this case, King was insured under two policies of group health insurance. The first policy, which was issued by United Benefit, became effective June 1, 1991. It covered King as a member of the American Association for Consumer Benefits, the group policyholder. The second policy, which was issued by U.S. Life, became effective December 1, 1991. It covered King as an employee of R.C. Specialty Industrial Corporation, the group policyholder. The U.S. Life policy was part of an employee welfare benefit plan as defined by the Employee Retirement Income Security Act of 1974 as amended ("ERISA"), 29 U.S.C. Sec. 1002(1).

Both policies, standing alone, provide primary coverage for King's medical expenses. However, the policies also contain coordination of benefits provisions ("COB provisions") which are intended to establish the order of payment in a case, such as this one, where two separate policies, standing alone, would provide primary coverage. The carriers could not agree on the net effect of their respective COB provisions.

On August 3, 1992, United Benefit filed a declaratory judgment action against King and U.S. Life in the Superior Court of Dekalb County, Georgia. United Benefit sought a declaration that U.S. Life was primarily liable for King's medical expenses, and United Benefit was only secondarily liable.

On September 17, 1992, King filed a pleading in the state court action entitled "Motion to Dismiss, Affirmative Defenses, Answer, Counter-Claims, Cross-Claims and Jury Demand." In this pleading, King asserted claims against both carriers for medical expenses and for statutory bad faith penalties under Georgia law. Based on federal jurisdiction over King's ERISA claims against U.S. Life, ¹ U.S. Life removed the entire case to the United States District Court for the Northern District of Georgia. King's claims against both carriers were subsequently settled and dismissed by consent of the parties.

In April of 1993, United Benefit and U.S. Life filed cross-motions for summary judgment. In its motion, United Benefit did not contend that U.S. Life should be the sole primary payor of King's medical expenses, as it had done in its complaint. Instead, United Benefit conceded that the COB provision in its policy dictated that it pay its benefits first. ² However, United Benefit argued in its motion, and now argues on appeal, that the COB provision in U.S. Life's policy dictates that U.S. Life pay its benefits first. Since each policy dictates that it pay first, argues United Benefit, the policies are irreconcilable or "mutually repugnant," and therefore, the two carriers should share the liability on a pro rata basis. U.S. Life, on the other hand, argues that its COB provision does not require it to pay first, but, rather, dictates that United Benefit pay its benefits first, and therefore United Benefit is the sole primary insurer of King's medical expenses.

In its order of June 1, 1993, the district court granted United Benefit's motion and denied U.S. Life's motion. The district court held that the respective COB provisions are mutually repugnant and ordered the two carriers to pay King's medical expenses on a pro rata basis. U.S. Life now appeals the district court's ruling.

II. STANDARD OF REVIEW

This court has explained many times that a district court's interpretation of an unambiguous contract is reviewed on appeal de novo as a question of law. See, e.g., Carriers Container Council v. Mobile Steamship Assoc., 896 F.2d 1330, 1337, modified on rehearing, 904 F.2d 28 (11th Cir.1990). On the other hand, if a contract is ambiguous and the district court must look to extrinsic evidence to determine the intent of the parties, the district court's determination of such intent is a finding of fact and is reviewed using the clearly erroneous standard. Id. In the case at bar, the insurance policies are not ambiguous, and the district court did not look beyond the language of the policies to determine their meaning. Therefore, we review the district court using the de novo standard. ³

III. DISCUSSION

We find that the COB provision contained in the U.S. Life policy dictates that United Benefit pay its benefits first. Since the parties agree that the United Benefit COB provision dictates that United Benefit pay first, we hold that there is no conflict between the policies' respective COB provisions, and United Benefit is the sole primary insurer of King's medical expenses.

The COB provision in the U.S. Life policy reads, in pertinent part, as follows:

[T]he plan that will pay its benefits first will be:

1. the plan which covers the person as an employee rather than as a retiree or a laid off person.

Item 1 will not apply unless a similar provision is contained in all plans. In this case items 2, 3 or 4 will determine which plan pays first.

2. if 1 does not apply, the plan which covers the person as an employee, retiree or laid off person rather than as a dependent.

3. if 1 and 2 do not apply, the plan which covers the person as a dependent of the parent whose month and date of birth occurs earlier in the year.

. . . . .

4. if 1, 2 and 3 do not apply, the plan which has covered the employee for the longer time rather than for the shorter time.

The parties advance very different interpretations of these four rules.

While conceding that Rules 1 and 3 do not apply to this case, United Benefit argues that Rules 2 and 4 dictate that U.S. Life pay its benefits first in this case. United Benefit contends that the meaning of Rule 2 is that the policy covering the insured person as an employee, retiree or laid off person is primary over the policy covering the insured person on some other basis. Similarly, United Benefit reasons that Rule 4 is intended to make the policy covering the insured person as an employee primary over the policy covering the insured person on some other basis. Since U.S. Life covers King as an employee of the group policyholder and United Benefit covers King merely as a member of the group policyholder, United Benefit argues that Rules 2 and 4 require U.S. Life to pay its benefits first.

U.S. Life, on the other hand, argues that Rules 1, 2 and 3, by their terms, do not apply to this case. U.S. Life contends that Rule 4 is the only one of the rules that applies, and Rule 4 makes United Benefit the sole primary insurer because United Benefit has covered King for longer than U.S. Life has covered her.

We agree with U.S. Life. By their terms, the first three rules of the U.S. Life COB provision do not apply to this case. Rule 1 does not apply to this case because King is not covered by either policy as a retiree or laid off person. Contrary to United Benefit's contentions, Rule 2 does not apply because King is not a dependent under either policy. Rule 3 also does not apply because King is not a dependent under either policy. The only rule that applies to this case is Rule 4.

We find Rule 4 to be determinative. Once again, that rule states that "if [Rules] 1, 2 and 3 do not apply, the plan which has covered the employee for the longer time rather than for the shorter time [pays its benefits first]." In this case, it is undisputed that United Benefit has covered King for longer than U.S. Life. Therefore, according to the U.S. Life COB provision, United Benefit must pay its benefits first.

We do not agree with United Benefit's contention that the word "employee" in Rule 4 exhibits an intent to distinguish between the two policies on the basis of the insured's status as an employee or a non-employee. Instead, we find that "employee" is merely a term used to identify the primary insured. After all, the U.S. Life policy is an employee welfare benefit plan under ERISA. It is logical that such a plan would refer to the primary insured as the "employee."

Not only is it logical, an examination of the U.S. Life policy shows that the word "employee" is often used in such policy to refer to the primary insured. For example, the policy's definition of "insured person" is "an insured employee or...