The opinion of the court was delivered by: MILTON I. SHADUR
Steven Andre ("Andre") suffered a heart attack just after leaving a job at Stepan Company ("Stepan") for a new job at Salem Technical Services ("Salem"). Both companies denied insurance coverage for that misfortune: Salem because Andre was not yet officially enrolled in its health plan, and Stepan because Andre's coverage under its plan had lapsed. Andre claims that the Employee Retirement Income Security Act ("ERISA," 29 U.S.C. §§ 1001-1145
) requires one company or the other to provide him with retroactive coverage.
All three parties have moved for summary judgment under Fed. R. Civ. P. ("Rule") 56.
For the reasons stated in this memorandum opinion and order, Andre's and Stepan's motions are denied, while Salem's is granted. This action will continue only as between Andre and Stepan.
Andre worked for Stepan and received health insurance through the company's plan (Andre 12(m) P 4). In late 1990 he accepted a new job with Salem to begin on January 2, 1991 (id. P 6). Salem is a contract agency that places technical personnel with other companies on a temporary basis, and Andre's contract specified that he would be assigned to B.F. Goodrich Chemical Company (id.).
Andre left Stepan's employ on December 28, 1990 (id. P 5). Before starting his new job at Salem, Andre went through the paperwork routines that typically accompany such a transition. Three documents from the transition period bear on the case:
1. Andre's employment contract with Salem stated (id. P 12):
Hospitalization and life insurance is available for $ 22.97 per week. FBE and dependency coverage will cost $ 68.30 per week. Effective on 2/02/91.
2. Salem provided Andre with a form headed "Prudential Insurance Request" (the "Request Form"). Just beneath that heading these words appeared:
IF YOU WISH TO PARTICIPATE IN THE INSURANCE PROGRAM, PLEASE FILL OUT THE INFORMATION BELOW AND AN INSURANCE PACKAGE WILL BE FORWARDED TO YOU.
Andre signed his name in the space just below that directive and returned the document to Salem. Relatedly, he left blank another portion of the form where he could have indicated his intention not to join the insurance program (id. PP 9-10).
3. Salem also provided Andre with a brochure prepared by its corporate parent, The SEC Companies, entitled "Your Flexible Benefit Program." That brochure read in relevant part (id. P 14, emphasis added):
Among the benefits offered by The SEC Companies are the Basic Life Plan and the Medical Plan.
Similarly, all new employees who become eligible to participate (eligibility is determined by the individual Basic Life Plan and Medical Plans themselves) after September 1, 1986 will automatically be enrolled in the Flexible Benefit Plan on the date they become eligible unless they reject coverage.
You are automatically enrolled in the Plan when you first become eligible for coverage under the above Benefit plans. If you do not want to participate in the Plan, you will have to reject coverage by completing a rejection of coverage form.
As for Stepan, every employer subject to ERISA must make post-employment health insurance available to its departing employees for up to one year after termination (see Sections 1161-1167, popularly known as "COBRA"
). Stepan offered such continuing coverage to Andre. On January 14, 1991 Andre returned a form electing that coverage (Andre 12(m) P 44).
Andre's election guaranteed him 30 days of insurance coverage, retroactive to his December 28 departure date. After that 30-day period Andre could maintain the coverage through Stepan by making monthly premium payments. Andre paid for coverage through January 31 (id. PP 45-46), but he made no payment for February because he thought his coverage with Salem would begin automatically on February 2 (id. P 34). At least in Stepan's view, then, his COBRA coverage automatically lapsed on February 1.
Andre went to work for Salem and at B.F. Goodrich as scheduled. From February 17 to February 24, 1991 he took a week's bereavement leave to attend his mother's funeral in New Jersey and deal with related family business (id. P 30-31).
Salem conceded that Andre had completed the Request Form, but it said that he had failed to return another form necessary for his actual enrollment in the company's plan (the "Enrollment Form"). Salem has offered sworn testimony that the Enrollment Form was mailed to Andre as part of the "insurance package" referred to in the Request Form (Salem Supp. 12(m) P 11). Andre swears that he never received the package (Andre 12(m) P 17).
Because Salem believed that it had made no error, it refused to enroll Andre retroactively--a step that it had taken in two earlier cases of administrative error involving other employees (id. PP 23, 25).
Andre then turned to Stepan to see if it were possible to reinstate his COBRA coverage. But Stepan maintained that the coverage had lapsed automatically when he failed to make the premium payment for February on the first of that month, as the policy required (complaint Ex. A). Consistent with company policy, Stepan had not sent Andre any sort of notice before allowing his coverage to lapse: no monthly bill, no warning of cancellation.
COBRA permits reinstatement of coverage if the former employee pays the monthly premium within 30 days of the due date (Section 1162(2)(C)). But Andre did not inquire about reinstating his coverage until March 4 at the earliest--that would have been the day after his discharge from the hospital on Sunday, March 3 and the 31st calendar day after his February payment came due (Andre 12(m) P 60). There is some dispute about just when Andre made his inquiry, about which more later. It is undisputed that Stepan promised to look into the matter and call Andre back. When it did not, Andre tendered a check for the premium on March 12. Stepan refused to reenroll Andre and returned his check 10 days later, and within a few days it again refused to accept premium payments that Andre then retendered (id. PP 61-64).
Andre finished his assignment at B.F. Goodrich on April 19. He has been unemployed ever since (id. P 35). Stepan's refusal to renew COBRA coverage left Andre where he is today: in debt to his medical providers for more than $ 16,342.72 (id. P 36), with no health insurance whatever to reduce his personal liability for that sum. Andre then commenced this lawsuit.
Does Andre Have ERISA Standing?
Salem denies that Andre is entitled to sue it, much less recover, under ERISA (its Mem. 6-7).
Section 1132(a)(1)(b) permits a "participant or beneficiary" to recover benefits due under a plan. Andre claims to be a "participant" as that term is defined by Section 1002(7):
The term "participant" means any employee or former employee of an employer . . . who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer. . . .
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117-18, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989) (citations omitted) expands upon that statutory definition:
Because Andre no longer works for Salem, he does not fall within the statutory provision for suits by current "employees." Nor does he claim to have any expectation, reasonable or otherwise, of returning to work for the company. That leaves him only with the possibility that he is a "former employee . . . with a colorable claim to vested benefits" (id.). Though the first part is easy--Andre is obviously a "former employee"--whether he states a "colorable" claim to "vested" benefits poses not one but two somewhat more difficult questions.
Whether Andre's claim is "colorable" in the Firestone sense is a question that is quickly answered. By imposing that requirement Firestone made it clear that a plaintiff cannot become a "participant" under ERISA merely by filing an ERISA lawsuit. Some threshold analysis of the merits is necessary to prevent such bootstrap jurisdiction. But Kennedy v. Connecticut Gen. Life Ins. Co., 924 F.2d 698, 700 (7th Cir. 1991) (citation omitted, emphasis added) teaches that the threshold inquiry is not very demanding:
But as Firestone held, subject-matter jurisdiction depends on an arguable claim, not on success. Only if [the claim] must be frivolous is jurisdiction lacking.
All that this Court need do at this stage, then, is to determine that Andre's case has some potential merit.
Andre passes that test easily as to both Salem and Stepan. To be "colorable" a claim need not be established beyond all doubt, or even beyond most doubt, on the face of the pleadings. Andre's legal theories are somewhat novel,
but they are not so novel--that is, not so bizarre or so out of line with existing precedent--that he necessarily stumbles over the low threshold of the "colorable" requirement. Certainly his theories are rooted in existing ERISA law, and he alleges facts sufficient to support those theories. Thus his claim is "colorable" under Firestone.
As to whether Andre's "colorable" claim is one seeking recovery of a "vested" benefit, that is ordinarily defined as a right that is ( Rhee v. Witco Corp., 762 F. Supp. 211, 214 (N.D. Ill. 1991), quoting Black's Law Dictionary 1401 (5th ed. 1979)):
Fixed, accrued, settled, absolute. Having the character or given the rights of absolute ownership; not contingent . . . To be "vested," a right must be more than a mere expectation based on an anticipation of the continuance of an existing law. . . . Said of pension plan benefits that are not contingent on the employee continuing to work for the employer.
For example, pension benefits vest as a matter of law under ERISA. Any employee who works the required number of years and contributes the required amount to a pension fund becomes entitled to a fixed and irrevocable benefit on the date of his or her eligibility.