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No. 96-1773ND

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Young America, Inc., *

*

Appellee, * Appeal from the United States

* District Court for the District

v. * of North Dakota.

*

Union Central Life Insurance *

Company, *

*

Appellant. *

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Submitted: November 21, 1996

 Filed: November 29, 1996

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Before FAGG, WOLLMAN, and HANSEN, Circuit Judges.

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FAGG, Circuit Judge.

In 1981, Manhattan Life Insurance Company sold a group term life

insurance policy to a business owned by the Fink family, Young America,

Inc. As part of Young America's welfare benefit package, the policy is

governed by the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001-

1461 (1994) (ERISA). Corporate officers Selma and Robin Fink were intended

insureds under the policy. In 1988, Union Central Life Insurance Company

purchased Manhattan Life. Union Central notified Young America that the

Manhattan Life policy was terminated, Union Central had issued a new

policy, and eligibility requirements remained the same.

 

After the 1991 death of Stanley Fink, Young America's chief executive

officer and Selma Fink's spouse, Union Central refused to pay life

insurance benefits because Stanley was not an active, full-time employee

at the time of his death. Union Central asserts
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that both the Manhattan Life and Union Central policies required active,

full-time employment in addition to status as a corporate officer. The

Union Central policy states, "[N]o corporate officer or director will be

eligible [for life insurance] solely due to his or her title. . . . All of

these persons must be active full-time employees to be eligible."

Similarly, the Manhattan Life policy only insured "individuals" who were

"actively perform[ing] . . . services . . . on a full-time basis consisting

of at least a 5-day week of at least 30 total hours at [Young America's]

regular place of business." In an earlier lawsuit, we held Union Central

did not abuse its discretion in denying benefits for Stanley Fink. Fink

v. Union Central Life Ins. Co., 94 F.3d 489, 491 (8th Cir. 1996).

 

Young America later requested the return of premiums paid on behalf

of Selma and Robin Fink, claiming Young America had paid the premiums under

the mistaken belief that Selma and Robin were eligible insureds as

corporate officers regardless of whether they were active, full-time

employees. Union Central canceled the policy in 1994, and offered to

refund one year's premiums. Young America rejected the offer and brought

this action seeking recovery of all the premiums paid between 1981 and

1994. Union Central moved for summary judgment, contending Young America

cannot recover more than one year's premiums under the policy's one-year

limit on premium refunds for erroneous continuation of insurance on living

persons. Before Young America responded, the district court granted

summary judgment to Young America, holding Young America was entitled to

recover premiums under the federal common law of ERISA. The district court

concluded the insurance policy's one-year limit on refunds was arbitrary

and capricious and ordered Union Central to refund all premiums paid by

Young America between 1981 and 1994. Union Central appeals. We affirm in

part and remand in part.

At the outset, we agree with the district court that an
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employer has a federal common law action for restitution of mistakenly made

payments to an ERISA plan. See UIU Severance Pay Trust Fund v. Local Union

No. 18-U, 998 F.2d 509, 512-13 (7th Cir. 1993); Whitworth Bros. Storage Co.

v. Central States, S.E. & S.W. Areas Pension Fund, 982 F.2d 1006, 1016 (6th

Cir. 1993); Jamail, Inc. v. Carpenters Dist. Council, 954 F.2d 299, 304-05

(5th Cir. 1992); Kwatcher v. Massachusetts Serv. Employees Pension Fund,

879 F.2d 957, 966-67 (1st Cir. 1989); Plucinski v. I.A.M. Nat'l Pension

Fund, 875 F.2d 1052, 1053, 1057-58 (3d Cir. 1989); Dumac Forestry Servs.,

Inc. v. International B'hood of Elec. Workers, 814 F.2d 79, 82-83 (2d Cir.

1987). This principle encompasses restitution of insurance premiums

mistakenly paid for employees who are not eligible for insurance. See

Construction Indus. Retirement Fund v. Kasper Trucking, Inc., 10 F.3d 465,

467 (7th Cir. 1993). Restitution is granted when the remedy is equitable

under the circumstances. See UIU Severance Pay Trust Fund, 998 F.2d at 513

(listing factors). 

Union Central contends the district court improperly found that

restitution is appropriate in this case. Union Central complains the

district court failed to make specific findings about certain equitable

factors: whether laches bars the claim for a refund, whether the Finks were

attempting to defraud the insurance fund by obtaining insurance for

ineligible persons, and whether a refund would harm the insurance fund's

actuarial soundness. 

We reject Union Central's contention. The district court examined

the situation and decided the undisputed facts in the record supported an

award refunding mistaken premium payments to Young America. There is no

genuine issue of material fact about whether Young America paid premiums

for life insurance coverage under the mistaken belief that Selma and Robin

Fink were eligible insureds. Union Central did not dispute that Young

America was mistaken about eligibility, or that Selma and Robin were

ineligible when Union Central canceled the policy. Indeed, Union Central
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offered to refund one year of premiums paid to insure Selma and Robin Fink.

We agree with the district court that Young America is entitled to

restitution. 

The appropriate amount of restitution is unclear, however. According

to Union Central, "[I]t appears that [Selma and Robin] were eligible

insureds at some point between 1981 and 1994" as active, full-time

employees, and thus, Young America should not receive a refund of premiums

paid during the time Selma and Robin were actually insured. This may be

correct. In its statement of material facts supporting its summary

judgment motion, Union Central asserts Selma and Robin are former full-time

employees of Young America. The record shows that at one time, Robin was

employed as an assistant manager at Young America, and Selma was Young

America's buyer for several years during the 1980's. The record does not

reflect whether these jobs involved more than thirty hours of work per week

or satisfied the other requirements of active, full-time employment. We

simply cannot tell whether Selma and Robin were actually insured anytime

between 1981 and 1994. The district court apparently did not consider this

possibility, so we remand for resolution of this issue. Premiums for any

periods of coverage were not mistakenly paid and should not be refunded.

See Construction Indus. Retirement Fund, 10 F.3d at 467 (despite lack of

claims, restitution of health insurance premiums inappropriate because

employees received coverage). 

Union Central also contends the district court committed error in

finding the plan's one-year limit on premium recovery is arbitrary and

capricious. The limiting provision states, "If a person's insurance is

continued in error beyond the date it should have terminated, . . . the

Insurer will declare it void and premiums paid on or after that date will

be refunded. However, refund is limited to a period of 12 consecutive

months for a living person." If Selma and Robin Fink were not active,

full-time employees of Young America at any time, the limit may not apply
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because Selma and Robin were never insured in the first place, and thus,

their insurance was not "continued in error." If Selma and Robin were once

insured but later became ineligible because they no longer worked full

time, Union Central would be unjustly enriched if allowed to retain the

mistakenly paid premiums. See Whitworth Bros. Storage Co., 982 F.2d at

1013. Further, Young America's policy was in effect for several years

without any limit on refunds, then the limit was added in 1990 and applied

retroactively. See Jamail, 954 F.2d at 305-06. We agree with the district

court that under the circumstances of this case, Union Central's one-year

limit on premium refunds is arbitrary and capricious. See Whitworth Bros.

Storage Co., 982 F.2d at 1013; Jamail, 954 F.2d at 305-06.

In sum, we affirm the district court's holding that the common law

of ERISA provides an employer with an action for a refund of mistakenly

paid insurance premiums, and that a refund to Young America is equitable

in this case. We remand for further proceedings on the amount of Young

America's refund. 

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.