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January 15, 1992

P.I.A. MICHIGAN CITY, INC., Plaintiff,


The opinion of the court was delivered by: WILLIAM T. HART


Presently pending is defendant Principal Mutual Life Insurance Company's motion to dismiss. On such a motion, all the well-pleaded allegations of the complaint are assumed to be true and all reasonable inferences from the facts alleged are drawn in favor of plaintiff. Gomez v. Illinois State Board of Education, 811 F.2d 1030, 1039 (7th Cir. 1987). The motion will be granted only if defendant can demonstrate that the facts alleged cannot support a claim. See id. at 1039-40.

 Plaintiff P.I.A. Michigan City, Inc. d/b/a Kingwood Hospital ("PIA") provided medical services to Earl Wilson from May 12 through June 11, 1990. Wilson was employed by National Porges Radiator Corporation ("National Porges"). *fn1" National Porges provided health insurance for its employees through defendant Automobile Wholesalers of Illinois ("AWOI") which had a Group Medical Plan (the "Plan") as part of its Automobile Wholesalers Group Insurance Fund (the "Fund"). Defendant Principal Mutual Life Insurance Company ("Principal Mutual") underwrote the health insurance. The Trustees of the Fund and James Porges ("Porges"), president of National Porges, are also named as defendants.

 At the time Wilson was first admitted to PIA on May 12, 1990, an employee of PIA contacted AWOI and Principal Mutual to obtain authorization to provide medical treatment. On May 12, Barb at Principal Mutual telephonically approved nine days of treatment. On May 14, Patti Wanless at AWOI telephonically verified that the Plan covered 80% of Wilson's treatment costs up to $ 5,000 and 100% of the amount over $ 5,000. On May 20, Tricia Hoffman of Principal Mutual telephonically approved continuing Wilson's treatment until May 29. Dana White of Principal Mutual verified this by a letter dated May 22. On May 29, Hoffman telephonically authorized treatment until June 5 and White again followed up with written approval. On June 4 and 7, the same Principal Mutual employees approved treatment through June 9.

 On June 8, AWOI first informed PIA that National Porges had failed to pay its May premium and that National Porges had withdrawn from the Plan. Porges had called AWOI on May 29 to inform AWOI National Porges would not be paying the May premium and instead had obtained insurance for its employees through Pan American Life Insurance Company ("Pan American"). The same day she learned of this change, a PIA employee telephoned Pan American and discovered Wilson's treatment was not covered under the new medical insurance policy. Prior to being informed by Michael O'Neil of PIA on June 8, Wilson had not known that his employer had changed Wilson's medical coverage. Also, throughout this period of time, payments for the Group Medical Plan were being deducted from Wilson's pay. On June 11, the last day of Wilson's treatment, Porges informed O'Neil of PIA that National Porges had no intention of paying for any of Wilson's treatment. Since that time, PIA has made demands for payment on all of the defendants and the demands have been refused.

 On February 6, 1991, Wilson assigned any claim for benefits that he may have to PIA. PIA's complaint contains three counts. The first two counts are both brought pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., and are brought as the assignee of Wilson. Count I is a claim for breach of fiduciary duty and Count II is based on equitable estoppel. Count III is a claim brought directly by PIA and is a pendent state law claim pursuant to the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill. Rev. Stat. ch. 121 1/2, 261 et seq. Principal Mutual moves to dismiss all the claims against it. It argues that Count I must fail because Principal Mutual is not a fiduciary; Count II because ERISA does not recognize a claim for equitable estoppel; and Count III because plaintiff is not a consumer or, alternatively, because there is no basis for retaining jurisdiction over the state law claim. The other defendants have not moved to dismiss any claims, though they have indicated in court that certain rulings on Principal Mutual's motion could have an effect on the vitality of the claims against the other defendants.

 As to Count II, Principal Mutual argues that ERISA does not permit provisions of plans to be modified by equitable estoppel. *fn2" It is true that, under ERISA, promissory estoppel generally is not recognized as a ground for orally modifying a written benefit plan. See Rizzo v. Caterpillar, Inc., 914 F.2d 1003, 1007 n.1 (7th Cir. 1990). The Seventh Circuit, however, has also held that equitable estoppel is applicable under certain circumstances. Black v. TIC Investment Corp., 900 F.2d 112, 115 (7th Cir. 1990). See also Reid v. Gruntal & Co., 760 F. Supp. 945, 950-51 (D. Me. 1991). Specifically, the Seventh Circuit held that "estoppel principles are applicable to claims for benefits under unfunded single-employer welfare benefit plans." Black, 900 F.2d at 115. The rationale of that holding is that estoppel should be recognized, as it is generally recognized in other areas of the law, unless applying estoppel would threaten the actuarial soundness of an ERISA plan and thus harm persons other than the one against whom it is appropriate to apply estoppel. See id.; Reid, 760 F. Supp. at 951. Thus, estoppel generally will not be applied when dealing with funded pension plans, but will often be applicable when dealing with unfunded welfare benefit plans.

 Unlike Black, the present case involves a multi-employer plan. Like Black, however, this case involves an unfunded welfare benefit plan. Presently before the court is the claim against the insurer for the plan. *fn3" Since the claim under consideration is not a claim against the Fund itself, granting relief to plaintiff would not directly threaten the actuarial soundness of the Fund. Principal Mutual argues that granting relief would affect other employees because awarding benefits for Wilson's medical expenses would affect the actuarial determination of future rates to be charged to the Fund. There is, however, a qualitative difference between simply affecting future rates based on actuarial projections and actually threatening the actuarial soundness of a Fund. In any event, there is nothing alleged in the complaint that would indicate awarding the $ 25,766 of benefits claimed would affect future rates so as to make it impossible for participating employers to continue to afford medical coverage for their employees. Also, if plaintiff should succeed on its claim, the amount awarded is the proper amount if National Porges had continued with this insurer. Any effect on rates would be the same as would have happened if National Porges had remained in the Group Medical Plan. Therefore, any affect on rates is neither unexpected nor unusual and is an expense that should have been actuarially anticipated by the insurer. This is unlike a situation in which estoppel results in an award of benefits in excess of what the coverage ordinarily provided.

 The present situation is one in which principles of estoppel can be applied under the federal common law of ERISA. Count II will not be dismissed.

 The question as to Count I is whether Principal Mutual is a fiduciary under the facts alleged in the complaint. Under ERISA,

 a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, . . . or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.

 29 U.S.C. § 1002(21)(A).

 In making a claim under ERISA for violation of fiduciary duties, see 29 U.S.C. §§ 1104, 1132(a)(3), it is not sufficient merely that the defendant be a fiduciary; the alleged misconduct must also fall within the area of conduct in which the defendant is a fiduciary. See Schulist v. Blue Cross of Iowa, 717 F.2d 1127, 1131-32 (7th Cir. 1983); Chicago Board Options Exchange, Inc. v. Connecticut General Life Insurance Co., 713 F.2d 254, 259 (7th Cir. 1983). For example, if a defendant is only a fiduciary with respect to investing assets of a plan, there can be no fiduciary violation claim against such a defendant for failing to pay a benefit, unless, perhaps, such failure to pay is related to the violation of a duty regarding investing assets.

 A copy of the Group Medical Plan is attached as an exhibit to the complaint. The Plan states that "We [Principal Mutual] will administer payment of all medical claims under both parts of the plan." Consistent with this provision, it is alleged in the body of the complaint that Principal Mutual "exercised its discretion regarding insurance coverage under the Group Medical Plan." Also, it is alleged that Principal Mutual advised PIA as to coverage for Wilson and authorized continued treatment. Principal Mutual is a fiduciary because it has discretionary authority or responsibility in the administration of the plan, specifically in approving or denying claims for benefits. See Eversole v. Metropolitan Life Insurance Co., 500 F. Supp. 1162, 1165 (C.D. Cal. 1980). See also American Federation of Unions, ...

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