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BROMENN HEALTHCARE v. N.W. NAT. LIFE INS.

November 13, 1992

BROMENN HEALTHCARE, AN ILLINOIS CORPORATION, AS SPONSOR OF BROMENN HEALTHCARE EMPLOYEES' GROUP MEDICAL DENTAL PLAN, PLAINTIFF,
v.
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY, A MINNESOTA CORP., AND SELF ASSURANCE COMPANY, AN ILLINOIS CORP., DEFENDANT.



The opinion of the court was delivered by: Mihm, Chief Judge.

ORDER

This Cause is before the Court on the motion of Plaintiff Bromenn Healthcare [Bromenn], as sponsor of Bromenn Healthcare Employees' Group Medical/Dental Plan [Plan], to remand this case to the Circuit Court of the Eleventh Judicial Circuit, McLean County, Illinois, following removal by Defendants, Northwestern National Life Insurance Company [Northwestern] and Self Assurance Company [Self Assurance]. Also pending before the Court is the motion of Defendant Northwestern to dismiss Count I of Bromenn's complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and the motion of Plaintiff Bromenn to strike Self Assurance's second affirmative defense. For the reasons set forth below, the Motion to Remand is GRANTED, the Motion to Dismiss and the Motion to Strike are DENIED as moot.

BACKGROUND

On November 27, 1992, Bromenn filed a two count complaint in state court against Northwestern and Self Assurance Company. Count I alleges a breach of contract claim against Northwestern for refusing to reimburse the Plan fund pursuant to its obligations under a subscription agreement between Northwestern and Bromenn for excess risk insurance coverage. Count II alleges a breach of contract claim against Self Assurance for making or approving unacceptable Plan benefit payments. The claim against Self Assurance is premised upon an administrative services agreement between Bromenn and Self Assurance.

The Plan is a self-funded employee welfare benefit plan as defined and governed by ERISA. Bromenn sponsors the Plan for the benefit of Brokaw and Mennonite hospital employees. On October 1, 1988, Bromenn, as plan sponsor, entered into a Subscription Agreement for Excess Risk Insurance with Northwestern. Pursuant to that agreement, Northwestern agreed to pay benefits to the Plan in the amount that the eligible risk expenses paid by the Plan exceeded the Aggregate Stop Loss Deductible. The Subscription Agreement set forth a formula establishing the Aggregate Stop Loss Deductible at two million two thousand five hundred thirty eight and 76/100 dollars ($2,002,538.76). Bromenn contends that the Plan paid out benefit expenses amounting to two million seven hundred forty nine thousand six hundred twenty nine and 27/100 dollars ($2,749,629.27) during the policy period.

On October 30, 1989, Bromenn presented to Northwestern a claim for reimbursement in the amount of six hundred ninety two thousand six hundred and 97/100 ($692,600.97). Northwestern refused to reimburse the Plan and subsequently conducted an audit of Self Assurance, the Plan Administrator. Northwestern also retained the Equifax Service Company to conduct an audit of the Brokaw and Mennonite Hospitals' records. Brokaw contends that during the course of the Equifax audit, Equifax refused offered and necessary assistance from Bromenn employees. Northwestern asserts that the audits show the total amount of claims paid from the Plan did not exceed the stop loss deductible figure.

Subsequently, Bromenn conducted an internal audit to support its reimbursements claim to Northwestern. As a result of that audit, Bromenn voluntarily reduced the reimbursement claim to six hundred seventy one thousand one hundred ninety one and 00/100 dollars ($671,191.00). Northwestern still refused to reimburse the Plan.

On October 1, 1988, Bromenn also entered into an Administrative Services Agreement with Self Assurance. Pursuant to that agreement, Self Assurance agreed to administer the Plan in accordance with the terms of the Plan document. Bromenn alleges that Self Assurance breached the Administrative agreement by failing to properly calculate amounts due and payable and failing to promptly process claims in accordance with Plan terms. Bromenn seeks contractual indemnification from Self Assurance for the amount allegedly overpaid in benefit claims from the Plan to participants and beneficiaries.

On January 2, 1992, Northwestern, joined by Self Assurance, removed this action to federal court pursuant to provisions 28 U.S.C. § 1331, 1441 and 29 U.S.C. § 1132. On January 31, 1992, Bromenn moved for remand back to state court for lack of subject matter jurisdiction by this Court. On February 24, 1992, Northwestern moved to dismiss Count I of Bromenn's complaint pursuant to Rule 12(b)(6). On February 27, 1992, Bromenn moved to strike Self Assurance's Second Affirmative Defense.

Based on these arguments and the briefs now submitted, the Court reconsiders and withdraws the holding of September 11, 1992, and GRANTS Bromenn's Motion to Remand. The Court's reasoning and findings are discussed below.

DISCUSSION

ERISA governs the self-funded employee welfare benefit plan involved in this case. Congress created ERISA to "protect . . . the interests of participants in employee benefit plans and their beneficiaries, . . . by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts." 29 U.S.C. § 1001(b). ERISA comprehensively regulates "`employee welfare benefit plan[s]' . . . established or maintained by an employer . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, . . . medical, surgical, or hospital care or benefits, . . ." 29 U.S.C. § 1002(1). In determining whether ...


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