Opinion ID: 1988795
Heading Depth: 1
Heading Rank: 7

Heading: Counts VI, VII & VIII

Text: Counts VI, VII & VIII allege causes of action that arose prior to January 1, 1975 and therefore are not governed by ERISA. Because plaintiffs assign no error in the Superior Court's ruling respecting counts VII & VIII, these claims are not before this Court on appeal. Count VI is a claim for breach of the group insurance contract. It alleges that there is no contractual language creating an overpayment of Plan benefits upon receipt of a retroactive SSDIB award, and also that there is no language authorizing Metropolitan to withhold Plan benefits to satisfy an overpayment; thus, under familiar rules of contract construction, summary judgment should be granted in their favor. As mentioned above, New York law controls this claim. The Superior Court declined to apply a contra proferentem construction, asserting that under New York law a group insurance policy is considered a contract between the employer and the insurer, with the employees as third-party beneficiaries. See Blue Cross of Northeastern New York, Inc. v. Ayotte, 35 A.D.2d 258, 315 N.Y.S.2d 998 (1970) (declining to apply a contra proferentem construction to an employer-funded group hospitalization policy). Instead, the court looked to the actual language of the contract, and to the intent of the parties to the contract, finding that the original and continuing intent and interpretation of both Metropolitan and Borden was that a retroactive award of SSDIB created an overpayment of Plan benefits and that such overpayment could be recouped by withholding future benefits. We conclude that the Superior Court erred by failing to apply a contra proferentem construction to the Borden policy. In Danzig v. Dikman, 53 N.Y.2d 926, 440 N.Y.S.2d 925, 423 N.E.2d 402 (1981), the New York Court of Appeals upheld the Appellate Division's application of a contra proferentem construction to a group health policy purchased by the plaintiff subscriber through his association in the Queens County and Nassau County Bar Associations. See Danzig v. Dikman, 78 A.D.2d 303, 434 N.Y.S.2d 217 (1980). While the Borden policy was not entirely employeefunded, the fact that employee contributions accounted for 85% of the premiums brings this case much closer to Danzig than to Ayotte. Moreover, as a Court of Appeals decision, we recognize Danzig as more authoritative. The expression contra proferentem signifies the familiar principle that terms in an insurance policy which are ambiguous, equivocal, or uncertain ... are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured[.] 43 Am.Jur.2d Insurance § 283 (1982). See also Danzig, 440 N.Y. S.2d at 926, 423 N.E.2d at 403; Tonkin v. California Ins. Co., 294 N.Y. 326, 62 N.E.2d 215, 216 (1945). The effect of a contra proferentem analysis regarding the Borden policy is illustrated by considering the case of Bush v. Metropolitan Life Ins. Co., 656 F.2d 231 (6th Cir.1981). In Bush, the court construed a similar policy in closely analogous circumstances. [12] In addition to the integration of benefits provisions discussed above, the policy at issue in Bush contained a recoupment provision. That provision read as follows: If it is determined that any benefits paid to an Employee under the Group Policy should not have been paid or should have been paid in a lesser amount, the Insurance Company shall be entitled to a refund of the amount of the overpayment. If the Employee fails to repay such amount ..., the Insurance Company may recover the amount of the overpayment by making an appropriate deduction or deductions from any future benefit payment or payments payable to the Employee under the Group Policy. Id. at 232. (emphasis in original). The plaintiff argued that [a]t the time of payment the benefits were not benefits that `should not have been paid,' but were absolutely due her at the time she received them. Id. at 233. Metropolitan argued that the language should be read to include situations in which later developments render the earlier payments incorrect; according to Metropolitan, such a situation was one in which benefits `should have been paid in a lesser amount[.]' Id. at 232-3. The court held that the above provision, when read with the integration of benefits provisions, was ambiguous and thus resolved the ambiguity in favor of the plaintiff. We find the analysis in Bush persuasive. Further, plaintiffs' construction in this case is strengthened by the absence of any future benefits. Accordingly, we vacate that portion of the Superior Court's order granting Metropolitan's motion for summary judgment on count VI and order that plaintiffs' motion for summary judgment be granted on the issue of liability subject only to a determination of the statute of limitation defenses set forth in defendant's answer. The entry is: Order affirmed in part and vacated in part. Remanded for further proceedings consistent with the opinion herein. All concurring.