The opinion of the court was delivered by: TRUMP
This case has come before the court on the parties' cross-motions for summary judgment. The current dispute arises out of a series of medical benefits claims filed by four part-time employees who were covered as employee-participants under plaintiffs' funds and who, at the same time, were dependent beneficiaries of the defendant fund. Not surprisingly, each fund contends that, by the terms of its plan, the other is primarily liable for the claims. Thus framed, this case presents a question of first impression in the federal courts regarding the proper resolution, under federal common law, of the conflict between mutually repugnant coordination of benefits or "other insurance" clauses appearing in two self-funded multi-employer benefit plans, both of which are governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq. For the reasons discussed below, defendant's motion for summary judgment will be granted and plaintiffs' motion will be denied.
The material facts of this case are undisputed. Plaintiffs are the trustees of two self-funded, multi-employer welfare benefit plans of the United Food and Commercial Workers Local 1262 (collectively, the "Local 1262 Funds"), covering the employees of several contributing employers in the supermarket industry. The Local 1262 Funds' plan documents provide, in pertinent part, that
As this is a Reimbursement Plan for Part-time Members who are Covered Members... payments will be made after all other sources of coverage have been exhausted.
(Kinsora Aff. Exh. A § 3.14D.) Similarly, the Summary Plan Description states that, with respect to part-time members,
This Plan is always a reimbursement plan; if you are covered under another medical plan, this Plan will only take effect when the limits of your other Plan have been exceeded. This means that, you can receive benefits from this Plan (in the form of reimbursement payments) only after the other plan pays benefits to the full extent of the terms of that plan.
(Kinsora Aff. Exh. B at 22 (emphasis in original).)
Defendant Teamsters Local 560 Trucking Employees of North New Jersey Welfare Fund ("the TENJ Fund") is also a self-funded, multi-employer benefit plan. Its plan documents contain the following coordination of benefits provision:
In determining whether this plan is primary for a spouse [or dependent] the following will apply:
The Plan covering the patient as an employee or in which the employee is a participant (regardless of whether the Plan deems the patient covered for the particular benefit), will be the primary plan. If the primary plan denies coverage because of the application of a Rule which is unique to that Plan and which is not a rule of this Fund, then this Fund will provide only that coverage which it would have provided if the primary plan had granted primary coverage. This Fund does not afford coverage to a participant's dependent who herself/himself is a participant in a Reimbursement or similar plan that affords coverage only if there is no other health/welfare coverage.
(Def.'s Appendix at 41 (emphasis in original).) In an effort to further clarify its coverage, the TENJ Fund sent a letter to its participants containing the following hypothetical:
Mr. ABC is a participant under our Welfare Fund. His spouse works for the XYZ company. Under normal coordination of benefits, Mrs. ABC's medical claims are submitted to her company first. After they pay the claim, in accordance with their Plan, she submits the claim with a copy of the explanation of benefits from her Plan to our Fund showing the amount paid. Our Fund then pays our portion of the claim under the coordination of benefits rule as the secondary payor and pays the difference up to the Fund's allowable amount. However, if Mrs. ABC's XYZ Plan rejects her claim because XYZ says its Plan is a Reimbursement Plan and will not pay claims if there is any other coverage, such as her being covered as a dependent under her husband's plan, then our Fund will not pay any portion of Mrs. ABC's claim.
(Def.'s Appendix at 41 (emphasis added).)
Commencing in May of 1993, Susan Armstrong, a part-time employee of ShopRite Supermarkets -- a contributing employer to the Local 1262 Funds -- submitted medical expense claims to the Local 1262 Funds in the aggregate amount of $ 243,993.56. (Boas Aff. P 4.) Because Ms. Armstrong's father was a participant in the TENJ Fund, she was also eligible for dependent coverage under that plan. Accordingly, the Local 1262 Funds denied Ms. Armstrong's claims and notified the TENJ Fund that, because the Local 1262 Funds provided only reimbursement coverage for part-time employees, the TENJ Fund was primarily liable for the claims. (Boas Aff. P 5.) Similarly, the Local 1262 Funds received claims from Karen Iler, Esther Owens, and Patricia Kelly, all of whom, like Ms. Armstrong, were part-time employees of contributing employers to the Local 1262 Funds and dependents of participants in the TENJ Fund. The Local 1262 Funds likewise denied these claims and notified the TENJ Fund that it bore primary responsibility.
In order to avoid undue hardship to the claimants throughout the period of time in which the two funds debated their respective liabilities, the Local 1262 Funds paid the claimants' benefits, but advised the TENJ Fund that the payments were being made without prejudice to the Local 1262 Funds' right to proceed against and seek reimbursement from the TENJ Fund. (Boas Aff. PP 6-15, Exh. C & H.) The TENJ Fund seemingly agreed to pay secondarily, but again, "without prejudice to either party." (McCarthy Aff. P 7, Exh. F.) To date, the Local 1262 Funds have paid a total of $ 266,852.14 on the four claims in question. (Boas Aff. PP 4-15, Pls.' Mem. of Law in Supp. of Mot. for Summ. J. at 9 n.7.) The TENJ Fund has paid approximately $ 15,764.48. (Def.'s Mem. of Law in Supp. of Mot. for Summ. J. at 11-12.)
On October 26, 1994, plaintiffs filed a five-count Complaint seeking a declaration that the defendant fund is primarily liable for the claims at issue and an order directing the defendant fund to reimburse plaintiffs for the monies they had paid to the claimants in the assumed role as the primary provider. Plaintiffs' Complaint rests almost exclusively on the argument that the provision of the TENJ Fund's plan in which it disclaims all liability if the beneficiary is covered by an independent reimbursement plan is an invalid "escape clause" that must be declared unenforceable. According to plaintiffs, once the alleged escape clause is read out of defendant's plan, the clear terms of both plans assign primary liability to the TENJ Fund. Defendant argues in its motion for summary judgment that its plan does not contain an escape clause, that plaintiffs' reimbursement plan is unenforceable as being violative of the policies underlying ERISA, and that the Local 1262 Funds, as the claimants' employers' plan, is primarily responsible for the claims.
Both the Local 1262 and the TENJ Funds are self-funded plans and, therefore, fall squarely within ERISA's definition of an "employee welfare benefit plan." 29 U.S.C. § 1102(a). Accordingly, they are governed exclusively by the broad statutory scheme that ERISA established and are exempt from state insurance regulations. See FMC Corp. v. Holliday, 498 U.S. 52, 112 L. Ed. 2d 356, 111 S. Ct. 403 (1990); Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 96 L. Ed. 2d 1, 107 S. Ct. 2211 (1987). Unfortunately, however, ERISA does not contain a coordination of benefits provision and offers no explicit guidance as to how disputes involving conflicting coordination of benefits clauses are to be resolved. Left with these sorts of legislative "gaps" that plague ERISA, it has become incumbent upon the federal courts to develop a "federal common law of rights and obligations under ERISA-regulated plans."
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56, 95 L. Ed. 2d 39, 107 S. Ct. 1549 (1987). See also Northeast Dept. ILGWU Health and Welfare Fund v. Teamsters Local Union No. 229 Welfare Fund, 764 F.2d 147 (3d Cir. 1985) (recognizing that dispute over coordination of benefits not expressly addressed under ERISA is governed by federal common law); PM Group Life Ins. Co. v. Western Growers Assurance Trust, 953 F.2d 543 (9th Cir. 1992) (relying on federal common law to resolve issue of conflicting "other insurance" provisions).
When interpreting provisions in competing ERISA plans,
'the judicial task is first to determine from the contracts themselves what obligations the respective obligor 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.' ... In the ERISA context, courts should give effect to the intent of the trustees of the competing benefit plans, as evidenced by their incorporation of 'other insurance' provisions, if the provisions are compatible, unless doing so results in the enforcement of a provision that conflicts with the language or the policies of ERISA.
Northeast, 764 F.2d at 159 (quoting Starks v. Hospital Serv. Plan of New Jersey, 182 N.J. Super. 342, 351, 440 A.2d 1353 (App. Div. 1981). Thus, this court's analysis must begin with an examination of the intent of the parties, as evidenced through the language of the parties' plan documents. If that examination reveals that the two plans are mutually repugnant, that is, that the court cannot simultaneously give effect to the plain language of both plans, this court then must resolve the conflict under the federal common law of ERISA-covered employee benefit plans.
Turning first to the terms of the TENJ Fund's plan, it is obvious that the Fund did not intend to provide primary coverage for a member's dependent if that dependent is also a member of his or her own employer's plan. (Def.'s App. at 41 ("in determining whether this Plan is primary for a spouse [or dependent] the following will apply: the Plan covering the patient as an employee... will be the primary plan").) It is equally clear that, if the dependent's employer's plan is a reimbursement plan, the TENJ Fund intended to afford no coverage whatsoever. Id. ("this Fund does not afford coverage to a participant's ...