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GERMANN v. LEVY

December 13, 1982

GEORGE H. GERMANN, ETC., PLAINTIFF,
v.
RICHARD DAVID LEVY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Shadur, District Judge.

MEMORANDUM OPINION AND ORDER

George H. Germann ("Germann"), as executor of the estate of Godfrey J. Carlson ("Carlson"), sues various defendants (collectively "Midland"), asserting Midland violated the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621-34, by providing Midland employee Carlson less life insurance coverage than similarly situated employees under age 60. Both sides have now moved under Fed.R.Civ.P. ("Rule") 56 for summary judgment. For the reasons stated in this memorandum opinion and order, Midland's motion is granted and Germann's is denied.

Facts*fn1

Except for the life and accidental death/dismemberment insurance components, the amount of Policy coverage afforded each Midland employee did not depend on age. But those two components involved a change once an employee reached age 60. Until that age the coverage was a function of the employee's occupational classification. Thus Carlson, as an auditor for Midland, would have had $20,000 in life insurance coverage had he been hired and died as a Midland employee before reaching 60. Such coverage was automatically reduced to $1,000 for any Midland employee (including Carlson) in the 60-64 age bracket (regardless of job category) and to $500 for any employee 65 or older.

Midland had not set out to acquire any life insurance coverage for its employees — like most employers in the competitive marketplace, it was looking to obtain one of today's expected "fringe benefits": group major medical and hospitalization insurance. It instructed its agent, Donchin-Hecht & Co. ("Donchin-Hecht"), to survey the field to enable Midland to provide those two types of coverage.

Donchin-Hecht solicited bids from numerous insurance carriers and ultimately selected Guardian January 28, 1972. All insurers surveyed by Donchin-Hecht included life insurance coverage in their package proposals (though not solicited to do so by Donchin-Hecht).*fn2 And each incorporated a provision cutting back such coverage with age as part of its non-negotiable insurance package. Guardian's interrogatory answer in this case characterized that cutback as "standard company procedure."

Guardian charged Midland the same composite rate for each employee covered by the Policy. Actuarial data — including the group's age composition — was used internally by Guardian to calculate the composite premium.*fn3 Guardian's rate thus reflects (1) the weighted average of the actuarial costs of insuring Midland employees in each age bracket and (2) its profit margin.

If Guardian's confusing (and at times contradictory) actuarial information is interpreted in the light most favorable to Germann,*fn4 a comparison between the effective costs to Midland (on which the composite rate was based) of insuring its employees in the 55-59 and 60-64 age brackets reveals:

    1. Costs of the basic health and major medical
  benefits provided to the older group were
  significantly higher than costs incurred for the
  younger group.*fn5
    2. Costs of the reduced life insurance (as well
  as accidental death/dismemberment insurance)
  afforded the older group were appreciably less
  than the costs of the life insurance coverage
  provided the younger group.
    3. Overall cost of covering a member of the older
  group was less than that incurred on behalf of an
  employee in the younger group (i.e., the cost
  differential in Paragraph 2 exceeded that in
  Paragraph 1).
    4. Had the difference in overall cost referred
  to in Paragraph 3 been applied to provide
  increased life and accident/dismemberment
  insurance coverage for each employee in the 60-64
  bracket (at the same rates used in Guardian's
  internal calculations of Midland's cost), an
  added $6,569 in insurance would have been
  furnished.

As already indicated at n. 3, Midland was never informed of the actuarial basis underlying the uniform composite rate charged per employee. It was wholly unaware of any negative differential in the cost of insuring an employee in the ...


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