Source: https://m.openjurist.org/955/f2d/1574
Timestamp: 2019-06-26 21:17:08
Document Index: 716481770

Matched Legal Cases: ['§ 1022', '§ 1022', '§ 2520', 'art 1', '§ 1161', '§ 1165', '§ 1162', '§ 1162']

955 F. 2d 1574 - Branch Bell v. G Bernd Company
955 F2d 1574 Branch Bell v. G Bernd Company
955 F.2d 1574
H. Lynn BRANCH, Administrator of the Estate of Dwayne Elijah
BELL, Plaintiff-Appellee,
G. BERND COMPANY, Defendant,
Pan American Life Insurance Company, Defendant-Appellant,
Blue Cross & Blue Shield of Ga., Inc., Defendant.
G. Bernd's Plan expressly set forth a 60-day election period, consistent with the minimum required by COBRA. But G. Bernd did not provide a copy of the Plan to Bell or to the Hospital, nor did it otherwise inform them of the Plan's 60-day limit. Instead, G. Bernd provided Bell with a printed summary of the Plan as required by ERISA, 29 U.S.C. § 1022. But this summary stated that the election period was only 31 days, and thus it was inconsistent with the 60-day election period that the Plan provided and violated COBRA's 60-day minimum. The district court held that, because the summary set forth an election period that violated COBRA's 60-day minimum, and because Bell was not provided with a copy of the Plan, G. Bernd and PALIC could not rely on the summary or the Plan to limit Bell's election period. Thus, the court held that "the terms of the [summary] created an open ended election period subject only to COBRA's maximum length of time a plan must provide continuation coverage to employees: eighteen months from the date of the qualifying event." Branch, 764 F.Supp. at 1540 (citation omitted).
1. The Reliance Requirement
The First and Third Circuits have expressly held that a beneficiary who seeks to prevent an insurer from enforcing terms in its plan that are inconsistent with those of the plan summary must show reliance on the summary. Bachelder v. Communications Satellite Corp., 837 F.2d 519, 522-23 (1st Cir.1988) ("Appellees cannot recover ... because appellees did not show significant reliance or even the possibility of prejudice flowing from the [summary]."); Govoni v. Bricklayers, Masons and Plasterers Int'l Union Local No. 5 Pension Fund, 732 F.2d 250, 252 (1st Cir.1984) ("[c]ase law suggests ... that to secure relief, Govoni must show some significant reliance upon, or possible prejudice flowing from, the faulty plan description"); Gridley v. Cleveland Pneumatic Co., 924 F.2d 1310, 1319 n. 8 (3rd Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 2856, 115 L.Ed.2d 1023 (1991) (following Bachelder ).
Although this court has not expressly held that beneficiaries must prove reliance on misleading summaries, it has emphasized the importance of reliance in its analysis of these disputes. In McKnight v. Southern Life and Health Ins. Co., 758 F.2d 1566 (11th Cir.1985), this court rejected the argument that the terms of an insurance plan should prevail over inconsistent terms in a plan summary because "[i]t is of no effect to publish and distribute a plan summary booklet designed to simplify and explain a voluminous and complex document, and then proclaim that any inconsistencies will be governed by the plan. Unfairness will flow to the employee for reasonably relying on the summary booklet." Id. at 1570 (emphasis added). The McKnight panel based its decision on the fact that "McKnight was justified in relying on the summary booklet to determine his pension rights." Id. at 1571 (emphasis added). Like this court, the Second Circuit has looked to an employee's reliance on a plan summary as its basis for holding that the terms of the summary prevail over inconsistent terms in the plan, without expressly holding that reliance must be shown. Heidgerd v. Olin Corp., 906 F.2d 903, 907-08 (2d Cir.1990) (ERISA "contemplates that the summary will be an employee's primary source of information regarding employment benefits, and employees are entitled to rely on the descriptions contained in the summary) (emphasis added).
Only the Sixth Circuit has stated that a beneficiary need not show reliance to enforce a summary's terms over those of the plan. Edwards v. State Farm Mut. Auto. Ins. Co., 851 F.2d 134 (6th Cir.1988). The district court in the present case relied on the statement in Edwards that:
Id. at 137 (quoted in Branch, 764 F.Supp. at 1539). But we refuse to accept this statement of the law, and to reject a reliance requirement, for several reasons. First, the statement is dictum because the Edwards court found that the beneficiary in that case reasonably relied on the summary plan description. Id. Second, the Edwards court, in making this statement, recognized that the beneficiary must have "been misled" by the summary, and thus a more reasonable interpretation of the Edwards court's statement is that the beneficiary who relies on the summary need not prove detriment. Third, the Edwards court cited none of the "existing precedent" to which it referred, and none appears to exist. Finally, we do not share the Sixth Circuit's belief that we would undermine Congress' objectives by requiring beneficiaries to prove reliance on inaccurate plan summaries. Congress, at 29 U.S.C. § 1022, required employers to provide their employees with accurate and understandable summary plan descriptions because it wanted "to protect the beneficiaries of benefit plans by insuring that employees are fully and accurately apprised of their rights under the plan." In re HECI Exploration Co., 862 F.2d 513, 524 (5th Cir.1988); see also 29 C.F.R. § 2520.102-2 (1991). Of course, when an employer provides an inaccurate plan summary, the beneficiaries who rely on that summary are not accurately apprised of their rights. But when a beneficiary fails to read or rely on the summary, whether it is accurate or not, the beneficiary also prevents full apprisal of the rights under the plan. Beneficiaries must do their part if Congress' objective is to be met. We thus hold that, to prevent an employer from enforcing the terms of a plan that are inconsistent with those of the plan summary, a beneficiary must prove reliance on the summary.2
2. Reliance in this Case
The district court stated that, if reliance is required, "considering Mr. Bell's conduct in combination with the lackadaisical approach taken by G. Bernd and PALIC in attempting to comply with strict ERISA directives, the court detects a flavor of reliance present in all the transactions which led to this dispute." Branch, 764 F.Supp. at 1540. It is unclear from the court's statement exactly what it found reliance upon. We reiterate our holding that a beneficiary must show reliance on the terms of the summary. Bachelder, 837 F.2d at 523; McKnight, 758 F.2d at 1570. To the extent that the district court found reliance on the summary in this case, we hold that the court's finding is clearly erroneous. There is no evidence in the record that Bell ever read or relied on the summary. Rather, Bell's conduct revealed absolute apathy regarding time limits or even continued health coverage. And there is no evidence that Branch or the Hospital ever had a copy of the summary on which to rely. In fact, all of the evidence indicates that the Hospital always assumed that the election period was 60 days. Because Branch has offered no evidence of reliance on G. Bernd's summary, we hold that the Plan's 60-day election period is effective in this case.
The district court determined that, even if the Plan's 60-day election period controls, Branch's election on May 25, 1989 was timely because the election period was tolled from Bell's incapacitation on March 25, 1989 until the probate court appointed Branch as administrator on May 25, 1989. Branch, 764 F.Supp. at 1540. The court acknowledged that COBRA and its underlying regulations do not address tolling, but found that "tolling of the election period is consistent with policies and concerns which initially led to the passage of COBRA ... and ERISA...." Id. at 1541-42. PALIC contends that the district court erred in applying tolling principles to this case.
While ERISA and COBRA preempt state law, Congress has authorized federal courts to create federal common law to implement these statutory schemes. Kane v. Aetna Life Insurance, 893 F.2d 1283, 1285 (11th Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 232, 112 L.Ed.2d 192 (1990). Whether courts should read equitable tolling principles into COBRA's election period as a matter of federal common law is an issue of first impression in the federal courts of appeals.3 But we find guidance for our decision in the line of cases addressing the application of equitable tolling principles to federal statutes of limitation. The Supreme Court has recognized the power of federal courts to read equitable tolling principles "into every federal statute of limitation," Holmberg v. Armbrecht, 327 U.S. 392, 397, 66 S.Ct. 582, 585, 90 L.Ed. 743 (1946), unless it would be "inconsistent with the legislative purpose" to do so. American Pipe and Constr. Co. v. Utah, 414 U.S. 538, 559, 94 S.Ct. 756, 769, 38 L.Ed.2d 713 (1974); accord Hill v. Texaco, Inc., 825 F.2d 333, 334 (11th Cir.1987). Thus, "the basic inquiry is whether congressional purpose is effectuated by tolling the statute of limitations in given circumstances." Burnett v. New York Central C.R. Co., 380 U.S. 424, 427, 85 S.Ct. 1050, 1054, 13 L.Ed.2d 941 (1965). We determine Congress' purpose by examining "the purposes and policies underlying the limitations provision, the Act itself, and the remedial scheme developed for the enforcement of the rights given by the Act." Id.
Congress' broad purpose in enacting COBRA was to "provide continued access to affordable private health insurance," which it believed was necessary because of "the growing number of Americans without any health insurance coverage and the decreasing willingness of our Nation's hospitals to provide care to those who cannot afford to pay." H.R.Rep. No. 241, Part 1, 99th Cong., 2d Sess. 44, reprinted in 1986 U.S.C.C.A.N. 579, 622. To this end, Congress provided that beneficiaries who would otherwise lose health coverage as a result of a qualifying event must be given the opportunity to continue that coverage for a specified period. 29 U.S.C. § 1161. Moreover, Congress specifically provided that the employer's health plan must allow its beneficiaries at least 60 days after notice of their right to continued coverage in which to make an informed decision. Id. § 1165(1).4 And once the beneficiary elects to continue coverage, "[t]he coverage must extend for at least the period beginning on the date of the qualifying event." Id. § 1162(2) (emphasis added).
PALIC's policy was effective until midnight, March 26, 1989. On May 12, 1989, Blue Cross & Blue Shield of Georgia (BCBS), a defendant in this case, issued a policy with retroactive coverage beginning March 27, 1989. The district court determined that all of the medical expenses for which Branch seeks coverage are traceable to the injuries that Bell received on March 25, 1989, when only PALIC's policy was in effect, and thus BCBS is not liable in this case. Branch, 764 F.Supp. at 1542. We find no error in this determination
Branch contends that this case differs from those in which courts required reliance because the summaries in those cases misrepresented the plans' terms while G. Bernd's summary omitted the plan's 60-day election period. Branch bases this argument on the district court's finding that, despite the fact that G. Bernd's summary expressly allowed the employee 31 days in which to elect continued coverage, it actually "set[ ] out no specific election period." See Branch, 764 F.Supp. at 1531 (emphasis added). We assume that the district court believed that a 31-day period, which is not "at least 60 days" as required by section 1165(1)(B), is not an "election period" under COBRA. Branch contends that we should not require reliance on a summary that omits or fails to provide information because such an omission can never inspire reliance and denies the beneficiary of information necessary to make a decision. But a beneficiary who receives a summary that omits the plan's limit on the election period could prove reliance with evidence that the beneficiary received and read the summary and failed to make a timely election based on the belief that there was no time limit. It is thus irrelevant in this case whether the summary misrepresented or omitted the election period
The only decision other than that of the district court in this case that we have found even related to this issue is Sirkin v. Phillips Colleges, Inc., 779 F.Supp. 751 (D.N.J.1991). In Sirkin, the district court of New Jersey held that, "where an insured misses a premium deadline under COBRA due to the insured's incapacity to know of or meet her obligation, the deadline for that premium payment is tolled for a reasonable period of time until the insured or her legally appointed guardian is able to cure the deficiency." Id. at 758. Sirkin timely elected to continue health coverage under her employer's plan after leaving her job, and sent a check toward payment of the premium. Prior to the date on which the next payment was due, Sirkin was hospitalized and became mentally incapacitated. After Sirkin's second premium payment was more than 30 days late, Phillips Colleges terminated Sirkin's coverage as provided by 29 U.S.C. § 1162(2)(C)