Opinion ID: 453346
Heading Depth: 2
Heading Rank: 2

Heading: Interpreting the Competing Other Insurance Provisions

Text: 58 Both insurance contracts at issue in the case at bar contain other insurance provisions. As a general matter, other insurance clauses fall into three categories: pro rata, excess, and escape (or no-liability). Only the latter two types of clauses are of importance here. An excess clause purports to provide an insured with only secondary (or excess) protection when coverage from another insurance policy is available. An escape clause, on the other hand, provides for an outright exception to coverage if the insured is covered by another insurance policy. See Insurance Company of North America v. Continental Casualty Company, 575 F.2d 1070, 1072 (3d Cir.1978); 16 Couch on Insurance 2d Secs. 62:48, 63:85. 59 We are presented here with a conflict between a type of excess clause, called a coordination of benefits clause, and an escape clause. The relevant provision in the Teamsters plan, set out in the margin, 9 is a coordination of benefits clause: rather than indicating that the fund intends to be an excess insurer in all cases in which a participant or beneficiary is covered by other insurance, it contains a set of rules setting out when the fund intends to be a primary insurer and when it intends to be only secondary to another insurer. See Starks, 182 N.J.Super. at 344-45, 440 A.2d at 1354 (discussing coordination of benefits clauses). Regarding persons in Mrs. Fazio's position, the Teamsters plan's coordination of benefits provision states that if an individual is covered by another group insurance plan, and that plan covers the patient directly, rather than as an employee's dependent, that plan is the primary insurer and the Teamsters Fund is the excess insurer. Thus, if Mrs. Fazio is covered by the ILGWU plan, the Teamsters plan intends to provide her with only excess coverage. 60 The ILGWU plan also has a coordination of benefits provision, which applies to conflicts with all insurance policies except group insurance coverage provided by another employer. 10 In this latter case, which is relevant here, a clause entitled Exception to Eligibility applies and supersedes the coordination of benefits approach. 11 This Exception to Eligibility provision is an escape clause: it indicates that the Fund intends to escape all liability whenever a participant or beneficiary is covered by a spouse's group insurer if less than 50% of the cost of such coverage is paid for by the insured. 12 Thus, if Mrs. Fazio is covered by the Teamsters plan, the ILGWU plan intends to provide her with no coverage at all. 61 The foregoing analysis of the two other insurance provisions reveals that they are plainly incompatible. The Teamsters excess clause purports to defer primary liability for Mrs. Fazio's bills to the ILGWU plan if the ILGWU plan provides Mrs. Fazio with coverage. Under the ILGWU escape clause, however, the ILGWU plan provides coverage to Mrs. Fazio only if the Teamsters plan does not. In other words, in light of the two other insurance provisions, each plan provides primary coverage unless the other plan provides primary coverage. Under such circumstances, discerning from the language of the plans and the intent of the trustees which plan provides coverage given the existence of both plans is simply impossible. 62 Construing the other insurance provisions and determining their compatibility, however, is only the first step of a two step analysis. As we stated in part IIIA, supra, an other insurance clause is enforceable only if it is consonant with the provisions and policies of ERISA. The Teamsters Fund contends that the ILGWU escape clause violates the ERISA mandate against arbitrary and capricious conduct on behalf of fund trustees. If so, the ILGWU clause would be unenforceable, the incompatibility between the plans would disappear, and the ILGWU Fund would be Mrs. Fazio's primary insurer. We thus proceed to an examination of the ILGWU escape clause. 13