the event that the amount of any such recovery is less than the total amount of all Fund benefits paid to him, or in his behalf, Claimant agrees to repay to the Fund the full amount of such recovery.
Pl.'s Ex. 2. It is clear that, although the subrogation provision in the SPD makes reference to the separate subrogation agreement, it does not disclose the latter's terms, nor does the subrogation agreement appear as an attachment to the SPD itself.
The Court is satisfied that the subrogation provision disclosed in the SPD plainly limits the Fund's subrogation rights to circumstances in which a claimant would otherwise receive a double payment. The penultimate paragraph of the SPD clearly states this:
As a result [of a participant's fulfillment of his obligations], payment collected first from the Fund and then again from some other person or party, a double payment to the participant, will be avoided.
Pl's Ex. 1, at 11. This purpose is reflected in language in the provision defining the obligations of participants:
Under the Plan's subrogation provision, a participant has the following obligations:
. . .
(b) Any money recovered from third persons for expenses paid by the Plan should be paid immediately to the Plan.
Id. (emphasis added). The clear implication of this passage, when bead in light of language barring double payment, is that a recovery for other expenses, not paid by the plan, lies outside of the Fund's subrogation rights.
In contrast, the Fund urges the Court to read the SPD in light of the terms of the separate subrogation agreement. This document clearly claims entitlement to any third-party recovery in order "to repay to the Fund the full amount of all Fund benefits paid " to the participant. Pl.'s Ex. 2 (emphasis added). The subrogation agreement stipulates, moreover, that "the amount to be repaid shall not be reduced for any reason." Id. The Court finds that this exposition of the Fund's subrogation rights does not say the same thing as the disclosed subrogation provision. It is true that the first paragraph of the subrogation provision is written in broad language, similar to that used in the subrogation agreement. But the SPD's subrogation provision must be read as a whole, and effect must be given to all of its terms. The unqualified language of the agreement is inconsistent with the more limited language of the SPD provision, which clearly confines subrogation to circumstances in which a double payment is possible.
Moreover, while the Court finds the subrogation provision in the SPD, when read as a whole, to be clear on its face, even if the Court were to find its language ambiguous, the rule of contra proferentem would require that ambiguities in the plan be construed against the Fund. See Kunin v. Benefit Trust Life Ins. Co., 910 F.2d 534, 539 (9th Cir.) (Under the rule of contra proferentem, "ambiguities in insurance contracts must be construed against the insurer"), cert. denied, 112 L. Ed. 2d 587, 111 S. Ct. 581 (1990). The Court of Appeals for the Ninth Circuit has succinctly summarized the rationale behind this widely accepted rule of construction:
Insurance policies are almost always drafted by specialists employed by the insurer. In light of the drafters' expertise and experience, the insurer should be expected to set forth any limitations on its liability clearly enough for a common layperson to understand; if it fails to do this, it should not be allowed to take advantage of the very ambiguities that it could have prevented with greater diligence.
Id. at 540. While the circuits are split on the applicability of this rule of construction to ERISA plans,
the Court finds the reasoning of the Ninth and Second Circuits persuasive. In Kunin, the Ninth Circuit considered whether Firestone Tire & Rubber Co. v. Bruch abolished the contra proferentem rule for all ERISA plans, and concluded that it did not. Id. That court went on to distinguish the application of a presumption in favor of a party from deference to a particular party's interpretation, noting that the Bruch Court "said nothing whatsoever about the ordinary principles of construction according to which courts and administrators alike should arrive at their interpretations." Id. at 541. Accordingly, deference to an administrator's interpretation does not trump the longstanding rule of construction that ambiguities are resolved in favor of the insured. Id. The Court of Appeals for the Second Circuit arrived at the same conclusion by a somewhat different route when it found that the application of this rule of construction to ERISA plans "is an appropriate implementation of the congressional expectation that the courts will develop a 'federal common law of rights and obligations under ERISA-regulated plans.'" Masella v. Blue Cross & Blue Shield of Connecticut, Inc., 936 F.2d 98, 107 (2nd Cir. 1991) (quoting Bruch, 489 U.S. at 110-11).
B. Whether the Trustees' Interpretation is Consistent with the Purposes of the Plan
The purpose of the plan, obviously, is to provide health benefits to all present eligible claimants while preserving the pool of Fund assets for future plan participants and beneficiaries. "The arbitrary and capricious standard allows plan fiduciaries the discretion to balance competing interests of present and future claimants while maximizing assets to the aggregate advantage of all beneficiaries." Oglethorpe Power, 712 F. Supp. at 228 (citing Fink v. National Savings and Trust Co., 249 App. D.C. 33, 772 F.2d 951, 955-56 (D.C. Cir. 1985)). The trustees suggest that these purposes are served by subrogation: "The Trustees believe subrogation will result in savings to the Plan for the benefit of all participants because the cost of treatment for such conditions will be paid by the person who is responsible for or contributed to the condition for which benefits are paid by the Plan, or his insurer." Def.'s Mot. for Summ. J., at 12. As a general matter, this argument is always true. By analogy, "every time the Trustees make a decision to deny benefit applications, they are preserving the Fund's financial resources. Were the Court to defer to this argument, Trustee denials of benefits could never be deemed to be arbitrary and capricious." Carlough, 576 F. Supp. at 250-51. In Mr. Germany's case, the force of the Fund's argument is weakened considerably because the trustees have indicated that they may waive their subrogation claim to Mr. Germany's anticipated $ 50,000 recovery, but only after he signs the subrogation agreement.
C. Whether the Trustees' Interpretation is Consistent with the Purposes of the Particular Provision Itself
It is this factor that gives the Court the greatest difficulty in determining that the trustees' interpretation is reasonable. What is at issue here is not merely the construction of the terms of a plan in the same sense as commonly appear in cases brought under 29 U.S.C. § 1132(a)(1)(B) of ERISA. See, e.g., Block, slip. op. at 2-3 (interpretation of the terms "totally disabled" in the plan); Fuller v. CBT Corp., 905 F.2d 1055, 1057 (7th Cir. 1990) (interpretation of the terms "certified as necessary"). There is no dispute that Mr. Germany is a "participant" in the Fund's plan. See Bruch, 489 U.S. at 108. He clearly is. And there is no dispute that he is "eligible" to receive benefits under this plan for the injuries he sustained in the accident. See Petrilli v. Drechsel, 910 F.2d 1441 (7th Cir. 1990). The Fund has stated that it will begin processing his claims for medical expenses as soon as he signs the subrogation agreement. See Pl.'s Ex. 11. Rather, what is at issue is the trustees' interpretation of a legal right, long recognized at common law, to which the Fund lays claim. While trustee interpretation of a subrogation clause is subject to review according to the same standards as set forth in Bruch, see Baxter ex rel. Baxter v. Lynn, 886 F.2d 182, 187 (8th Cir. 1989), the Court must not ignore the purpose for such an equitable doctrine in deciding whether the trustees are arbitrary and capricious. See Foltz, 663 F. Supp. at 1514.
The penultimate paragraph of the subrogation provision in the SPD clearly indicates that its purpose is to avoid a double recovery, which is wholly consistent with the prevention of unjust enrichment that is the rationale for the equitable doctrine of subrogation. See American Sec. Bank v. Bethlehem Nat'l Bank, 314 U.S. 314, 317, 86 L. Ed. 241 , 62 S. Ct. 226 (1941); Bachmann v. Glazer, 316 Md. 405, 412-13, 559 A.2d 365, 368-69 (1989). That purpose is not served here. Mr. Germany's anticipated $ 50,000 recovery will not result in a double payment because his loss to date far exceeds what he can expect to receive in benefits under the plan and in a third-party recovery.
The subrogation agreement, in contrast, disregards this purpose in laying claim to any third-party recovery to the full extent of benefits paid. To say that this document merely restates in legal language the same rights as are set forth in the SPD provision is to ignore the express purpose of the subrogation rights claimed in the latter: to bar a double payment.
D. Whether the Trustees' Interpretation is Consistent with Prior Interpretations and Whether Mr. Germany had Notice of that Interpretation
While it appears that the Fund has required claimants who might recover from third parties to execute the subrogation agreement, it is not clear that the trustees have ever considered the language of that agreement in the context of a grossly undercompensated tort victim. See Ornold Dep. at 12-13, Def.s' Ex. 6. It is noteworthy that, one year after Mr. Germany's accident, the trustees modified the plan to exclude from coverage
injuries sustained under circumstances which create a legal liability with some other person or party, provided that the plan will advance payment of benefits otherwise payable as long as the participant and/or dependent execute an agreement to pay the plan from any recovery from such other persons or party.
Pl.'s Ex. C. The parties agree that, had this provision appeared in the SPD prior to Mr. Germany's accident, there would be no lawsuit. In the absence of such a provision, it is hard to see how Mr. Germany, or some other similarly situated claimant, would have notice that the Fund would claim subrogation rights to a third-party recovery even though there was no danger of double payment.
ERISA's disclosure and reporting requirements mandate that the administrator of an employee benefit plan supply each participant covered under the plan with a summary plan description, along with all modifications and changes, which must also be filed with the Secretary of Labor. 29 U.S.C. §§ 1021(a), 1021(b). According to the statute, the summary plan description is required to contained certain information listed in § 1022(b), "shall be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." 29 U.S.C. § 1022(a)(1). Courts have frequently held that, when there is a discrepancy between a "plan summary" as defined in § 1022, and other documents which purport to define the rights and obligations of plan participant but which were neither filed with the Secretary nor disclosed to participants in accordance with § 1021, the summary plan description controls. See Heidgerd v. Olin Corp., 906 F.2d 903, 906-9 (2nd Cir. 1990); Edwards v. State Farm Mutual Automobile Ins. Co., 851 F.2d 134, 135-37 (6th Cir. 1988); McKnight v. Southern Life and Health Ins. Co., 758 F.2d 1566, 1570 (11th Cir. 1985).
In this case, the Fund has stated that the SPD disclosed to Mr. Germany "is both 'the plan description' which is filed with the Secretary of Labor as well as the written plan document." Pl.'s Ex. 8. The Court believes, however, that the general principal established in such cases as Heidgerd and McKnight remains: if the Fund seeks, by a document neither disclosed nor reported pursuant to § 1021, to change the rights and obligations of plan participants from those set forth in the SPD, then the Court must find the SPD controlling. Otherwise, ERISA's command, that the summary plan be "sufficiently accurate and comprehensive," would be violated. 29 U.S.C. § 1022(a)(1). Because the subrogation agreement the Fund seeks to enforce was neither filed with Secretary of Labor nor disclosed to plan participants, the Fund cannot enforce its terms to the extent they are inconsistent with the SPD.
Thus, the Court finds that subrogation rights claimed in the separate agreement clearly and impermissibly broaden the Fund's entitlement to Mr. Germany's third-party recovery. The Court further finds the trustees' interpretation to the contrary to be arbitrary and capricious. See Block, slip op. at 8. Given this discrepancy, the Court finds that the exposition of the Fund's subrogation rights set forth in the SPD, as construed in this Memorandum and Opinion, accurately expresses the Fund's entitlement to any third-party recovery, while the version contained in the subrogation agreement does not. See Heidgerd, 906 F.2d 908 at 908-09 . The Court will, accordingly, grant Mr. Germany's Motion for Summary Judgment, and deny the Fund's Motion, and issue an Order 1) declaring that Mr. Germany is entitled to his anticipated $ 50,000 recovery free of any subrogation claims from the Fund; 2) requiring the Fund to make an accounting to Mr. Germany of all of the benefits to which he is entitled as a result of his injury; and 3) enjoining the Fund from seeking to enforce any right of subrogation against Mr. Germany inconsistent with the subrogation provision contained in the Summary Plan Description as interpreted herein.
GEORGE H. REVERCOMB
UNITED STATES DISTRICT JUDGE
ORDER - March 9, 1992, Filed
For the reasons stated in the Court's Memorandum and Opinion of this date, plaintiff's Motion for Summary Judgment is GRANTED, and defendants' Motion for Summary Judgment is DENIED. Further, the Court 1) DECLARES that Mr. Germany is entitled to his anticipated $ 50,000 third-party recovery free of any subrogation claims from the defendants' Fund so long as there is no double payment to him for the same expenses; 2) ORDERS the Fund to make an accounting to Mr. Germany of all of the benefits to which he is entitled as a result of his injury; and 3) ENJOINS the Fund from seeking to enforce any right of subrogation against Mr. Germany inconsistent with the subrogation provision contained in the Summary Plan Description as interpreted in the Court's Memorandum and Opinion.
GEORGE H. REVERCOMB
UNITED STATES DISTRICT JUDGE