On Appeal from the United States District Court for the Middle District of Pennsylvania. (D.C. Civil Action No. 90-01541).
Before: Hutchinson and Scirica, Circuit Judges and Standish, District Judge*fn*
This is an action seeking health insurance coverage under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461 (1988). Nancy Smith has required skilled nursing care since suffering a cerebral hemorrhage in August 1985. After her employer changed its group health policy to a self-insured plan, she enrolled in the new plan based on the employer's erroneous representations that she would receive the same level of nursing care coverage. When the plan stopped providing coverage, Nancy and Joseph Smith filed suit, alleging the employer's misrepresentations entitled them to relief under ERISA. The district court granted summary judgment to defendants. We will affirm in part and reverse in part and remand.
On August 27, 1985, Nancy Smith suffered a cerebral hemorrhage while working as a nurse's aide for the Rehab Hospital in Mechanicsburg, Pennsylvania. As a result, she required continuous care in a skilled nursing facility, and became a patient at Seidle Memorial Hospital in Mechanicsburg. At the time of her hemorrhage, Mrs. Smith was covered by the Rehab Hospital's group health insurance policy with Capital Blue Cross and Pennsylvania Blue Shield. The policy, which paid for skilled nursing care up to a maximum lifetime benefit of $1 million and did not limit coverage to a specific number of days, covered Ms. Smith's expenses.
On December 1, 1986, while Mrs. Smith was still receiving care at Seidle Memorial, the Rehab Hospital's parent company directed its subsidiary hospitals to switch their health care coverage to self-funded insurance plans. Accordingly, the Rehab Hospital replaced the Blue Cross/Blue Shield policy with such a plan, entitled the P.I.A. Voluntary Employees Beneficiary Association Plan (the "VEBA Plan" or "Plan"). Unlike the Blue Cross/Blue Shield policy, the VEBA Plan covers skilled nursing care only for the first 180 days of the patient's confinement.
Rehab Hospital employees received only one week to decide whether to enroll in the VEBA Plan. The Hospital's personnel director Beverly North conducted seminars to help employees make this decision. At the seminars, North distributed a one-page document entitled "Transition Provision," summarizing certain effects of the change in plans. This document provides in part:
WE WILL WAIVE OUR PRE-EXISTING CONDITION LIMIT FOR EVERYONE ENROLLED IN YOUR PRIOR PLAN AS OF 11/31/86
IF YOU OR YOUR DEPENDENTS ARE IN THE HOSPITAL OR DISABLED ON 12/1/86, BENEFIT PAYMENTS WILL BE THOSE OF YOUR PRIOR PLAN OR OUR PLAN, WHICHEVER IS LESS
IF YOU ARE CURRENTLY DISABLED AND RECEIVING BENEFITS UNDER YOUR CURRENT CARRIER, BENEFITS WILL CONTINUE TO BE PAID TO YOU UNDER THE PROVISIONS OF THAT POLICY, NOT OURS
Despite the apparent contradiction between the last two paragraphs, North interpreted the "Transition Provision" to mean that benefits under the new self-insured plan would be the same as, or better than, those under the Blue Cross/Blue Shield policy.
On December 3, 1986, Joseph Smith, on behalf of his wife, attended two of the seminars North conducted on the changes in benefits. North distributed the Transition Provision and advised those attending that their benefits would not change under the VEBA Plan. Concerned about his wife's benefits, Smith specifically asked North at the seminar and afterwards in her office what his wife's benefits would be under the VEBA Plan. Referring to the above-quoted paragraphs of the Transition Provision, North assured Smith his wife would receive exactly the same benefits under the VEBA Plan as under the Blue Cross/Blue Shield policy. Smith then elected to enroll his wife in the VEBA Plan.
When the VEBA Plan failed to make payments for Mrs. Smith's nursing care in the months following the Smiths' enrollment, Mr. Smith repeatedly contacted Plan representatives to inquire about coverage. Each time these representatives told him not to worry and attributed the failure to pay Mrs. Smith's nursing care bills to administrative delays. Initially, Mr. Smith telephoned North several times asking how to obtain payment for his wife's bills. North told him to submit the bills to the Hartford Insurance Group, the VEBA Plan's processing agent. In January 1987, when payments were not forthcoming, Seidle Memorial's billing supervisor Sandra Fertenbaugh contacted the Rehab Hospital to inquire about coverage. Karen Davies, North's successor, advised Fertenbaugh that Smith was covered under the Plan. Apparently believing Hartford had simply replaced Blue Cross/Blue Shield as the group insurer, Mr. Smith telephoned Hartford several times. Two Hartford claims processors assured him his wife's bills would be paid, and attributed the Plan's failure to pay claims to the delay in receiving Mrs. Smith's medical records and the transition in plans. Despite these repeated assurances, Hartford sent Mr. Smith a letter on August 26, 1987, informing him his wife's skilled nursing benefit was exhausted because her stay in the skilled nursing facility had exceeded the 180-day limit under the VEBA Plan, and that no further payment would be made.
Mr. Smith promptly appealed the denial of benefits in a letter to the Rehab Hospital and a formal complaint to the Pennsylvania Department of Insurance, explaining he had enrolled his wife in the VEBA Plan based on assurances he received in the Transition Provision and from Ms. North and Hartford that his wife would continue to receive the same coverage for her nursing care expenses. Hartford responded by letter on February 22, 1988, stating the VEBA Plan would agree to pay for nursing care services though April 7, 1988. On December 6, Hartford reiterated to Mr. Smith no coverage would be provided for care given after April 7, only to receive further appeals from Mr. Smith. On July 14, 1989, Hartford communicated the Plan's final offer -- to extend coverage through June 15, 1989 -- if Mr. Smith would accept this as full and final payment. He rejected this offer. The Plan has not paid Mrs. Smith's expenses since April 7, 1988, although she remains a skilled nursing care patient at Seidle Memorial.
On July 17, 1990, the Smiths brought suit to obtain the disputed coverage in the Court of Common Pleas of Cumberland County, Pennsylvania against Hartford and Provident Life and Accident Insurance Company, who replaced Hartford as the Plan's claim processor. Hartford and Provident removed the case to the United States District Court for the Middle District of Pennsylvania because the Smiths' claim was subject to ERISA, and moved to dismiss the complaint.*fn1 The Smiths amended their complaint, naming additional defendants, and all defendants moved unsuccessfully to dismiss this complaint. The parties stipulated to the dismissal of all defendants other than the Rehab Hospital, the VEBA Plan, and the Plan's Administrator, and the case proceeded against these parties.
In the district court, the Smiths claimed defendants' actions gave rise to ERISA liability under three theories. They contended the Transition Provision coupled with the Hospital's oral representations to them constituted an "employee welfare benefit plan" enforceable in a breach of contract action under § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B). The Smiths also maintained these representations formed the basis for an equitable estoppel claim under § 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3). Finally, they claimed the Hospital's actions constituted a breach of fiduciary duty running from the Plan and its Administrator to the Smiths, a claim also actionable under § 502(a)(3). Defendants moved for summary judgment.
Granting the motion, the district court held the written and oral representations did not contain sufficiently specific information regarding benefits and eligibility to constitute an employee benefit plan enforceable under ERISA. The court also ruled the Smiths could not recover on their equitable estoppel claim because they could not show injury resulting from their reliance on the Hospital's misrepresentations. To establish injury, the Smiths maintained that were it not for the misrepresentations, they could have obtained alternative coverage. But the district court held the Smiths had not introduced sufficient evidence that such coverage was available to them to withstand summary judgment. The court also held the Smiths' inability to show injury justified dismissal of their claim for breach of fiduciary duty.*fn2 The Smiths appealed.
We have jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over the district court's grant of summary judgment, which we can uphold only if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Taylor v. Continental Group Change in Control Severance Pay Plan, 933 F.2d 1227, 1231 (3d Cir. 1991); Fed. R. Civ. P. 56(c).
ERISA grants the beneficiary of an "employee welfare benefit plan," 29 U.S.C. § 1002(a), an express contract action "to recover benefits due to him under the terms of his plan," 29 U.S.C. § 1132(a)(1)(B). The Smiths invoke this section, claiming the Transition Provision coupled with North's oral ...