Court Opinion

ID: 9785633
Source: CourtListenerOpinion
Date Created: 2023-08-30 22:14:40.870738+00
Date Added: 2024-06-11T07:35:59.868163
License: Public Domain

Lockett, J.,
dissenting: I respectfully dissent with the majority’s finding that the National Education Association-Topeka’s (NEAT) objection to the Unified School District No. 501’s (District) failure to distribute the divisible surplus is subject to the grievance procedure of the Professional Agreement (PA).
It is important to note that we have previously determined that a divisible surplus accumulated under a group health insurance policy, containing a divisible surplus rider, purchased by a school board pursuant to a negotiated agreement with teachers is not subject to additional mandatory negotiation under K.S.A. 72-5413. See U.S.D. No. 259 v. Kansas-National Education Ass’n, 239 Kan. 76, Syl. ¶ 1, 716 P.2d 571 (1986). Who is entitled to the surplus under a written contract is a question of law for the courts. See Hollenbeck v. Household Bank, 250 Kan. 747, 829 P.2d 903 (1992).
The majority quotes U.S.D. No. 259 v. Kansas-National Education Ass’n, 239 Kan. 76, Syl. ¶ 2, 716 P.2d 571 (1986), for the statement of law that “ ‘[w]here a contractual provision in a group health insurance plan specifies the method of distribution of a divisible surplus, that provision controls.’ ” 269 Kan. 544 (2000). The majority then states that the Rider in this case specifies the method of distribution of the divisible surplus but does not govern NEAT’S rights, if any, to it. The majority fails to consider the express language of the Rider. The BCBS group contract defines “Contract Holder” as “USD 501 Single Active Employees.” The Rider provides, in part:
“Distribution of Divisible Surplus.
“Divisible Surplus is distributed in this manner:
“1. To meet the Contract Holder’s [teachers’] minimum group reserve needs (if any) for the benefits of the Group Contract.
*551“2. The remainder, if any, is paid in cash to the Contract Holder [teachers] or upon written request [of the teachers] applied as an adjustment of future premiums.
“Any part of the Divisible Surplus that is paid in cash and is in excess of the Contract Holder’s [teachers’] share of the premiums shall be applied for the sole benefit of the Insureds.
“Distribution of any Divisible Surplus in accordance with this provision shall completely discharge the Company from liability with respect to the adjustment of premiums so distributed.”
Clearly, the Rider provides for more than the “method of distribution”; the Rider specifically designates the party to whom any surplus will be distributed and who obtains the benefit of the distribution.
BCBS refunded to the District $731,046.47 as divisible surplus. The teachers made no written request that the surplus be applied to adjust the teachers’ portion of future premiums. The District distributed half of this amount among plan participants. The remainder was placed in the District’s premium stabilization fund to adjust future premiums. NEA-T claims that the health insurance contract purchased by the District provides that the Contract Holder(s) (teachers) are entitled to the surplus and the Rider to the contract states the surplus is to be distributed to the insureds (teachers).
In U. S.D. No. 259,239 Kan. 76, a factually similar case, a dispute arose as a result of a divisible surplus paid by BCBS to the school district as trustee. The teachers’ contract with the Board of Education of Unified School District No. 259 (Board) provided that any divisible surplus from the teachers’ health insurance plan provided for the teachers as part of their benefit package would be paid to the teachers as extra earnings in regular payroll checks.
The divisible surplus rider that was part of the health insurance contract was substantially similar to the rider in this case, with the exception that the U.S.D. No. 259 rider provided that where the divisible surplus was paid and was in excess of the contract holder’s share of the dues, it was to be applied for the sole benefit of the “subscribers.” 259 Kan. at 78. Unlike our case, the contract holder in U.S.D. No. 259 was the Board, not the insureds.
*552The teachers’ associations, the Kansas-National Education Association (K-NEA) and National Education Association-Wichita (NEA-W), contended that only those individuals enrolled in the BCBS health plan during the plan year in which the divisible surplus accumulated were entitled to share in a prorated distribution of the surplus. The Board contended that the surplus was a “plan asset” available for the benefit of the group on the date of the distribution (the subsequent plan year). The trial court agreed with the Board, holding that teachers constituted a voluntary association entitled to share as a group in the benefit of the divisible surplus. 239 Kan. at 79. K-NEA and NEA-W appealed.
First, we noted that a divisible surplus accumulated under a group health insurance policy containing a Divisible Surplus Rider, purchased by a school board pursuant to a negotiated agreement with teachers, was not subject to additional mandatory negotiation under K.S.A. 72-5413.
The resolution of the issue in U.S.D. No. 259 turned on the definition of “subscribers,” i.e., the teachers employed at the time the surplus accumulated or the teachers enrolled in the plan at the date of distribution of the surplus. We stated that where a contractual provision in a group health insurance plan specifies the method of distribution of a divisible surplus, that provision controls. 239 Kan. at 80. As to the identification of the “subscribers,” we noted that the BCBS contract defined subscribers as the individuals who were covered by the health insurance. 239 Kan. at 80. We reasoned that the surplus occurred as the result of lower use of insurance benefits by the subscribers than was anticipated when the premiums were determined; therefore, those who overpaid their insurance premiums created the surplus and should receive the refund. 239 Kan. at 80. We concluded that all the subscribers for the year in which the surplus occurred were entitled to the surplus. 239 Kan. at 81.
The District negotiated with NEA-T to provide a single low-option insurance benefit as part of its cafeteria plan. The District then contracted with BCBS to provide the employee health insurance. The Rider provides that the surplus is to be paid in cash to the Contract Holder (teachers) and that any part of the divisible *553surplus that is paid in cash and is in excess of the Contract Holders’ (teachers’) share of the premiums shall be applied for the sole benefit of the insureds. The terms of the contract purchased are disputed. A contract purchased pursuant to the negotiation with the teachers is not subject to additional mandatory negotiation. Who is entitled to the surplus under the contract purchased is a question of law for the courts.
Allegrucci, J., joins the foregoing dissent.