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GHAZI v. FISERV

November 7, 1995

SYED I. GHAZI and SYEDA GHAZI, Plaintiffs,
v.
FISERV, INC. and UNUM LIFE INSURANCE COMPANY of AMERICA, Defendants.



The opinion of the court was delivered by: BUCKLO

 Defendants, Fiserv, Inc. ("Fiserv") and UNUM Life Insurance Company of America ("UNUM"), have filed a motion for summary judgment on the complaint filed by plaintiffs, Syed and Syeda Ghazi. *fn1" For the reasons stated below, the defendants' motion is granted.

 Background

 On November 29, 1994, the Ghazis filed suit in state court, alleging that Fiserv and UNUM had wrongfully refused to allow Mr. Ghazi to convert his employer-furnished group life insurance coverage to a personal life insurance policy. The Ghazis sought an order commanding defendants to provide them with a personal life insurance policy. On January 13, 1995, Fiserv and UNUM removed the action to this court, pursuant to 28 U.S.C. § 1441, on the basis of federal question jurisdiction under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (1985 & Supp.1995) ("ERISA"). *fn2" Defendants now move for judgment pursuant to Rule 56, FED. R. CIV. P., claiming that Mr. Ghazi lost the right to convert his group insurance coverage to a personal policy by failing to do so within the requisite time period.

 Prior to July 8, 1994, Mr. Ghazi was employed by defendant Fiserv. While employed by Fiserv, Mr. Ghazi received specific medical and life insurance benefits under an employee welfare benefit plan. The life insurance benefits were provided by defendant UNUM. UNUM has issued a group life insurance policy to Fiserv for the benefit of its eligible employees. When an employee is terminated from employment with Fiserv, he or she is no longer covered under the group policy. The terminated employee may, however, obtain a personal life insurance policy without evidence of insurability. Under the terms of Fiserv's group policy, a terminated employee has thirty-one days from the date of termination to convert the now-expired group policy to a personal policy. If an employee becomes "totally disabled" within the meaning of the policy before being terminated, the policy does not require the terminated employee to convert to a personal policy. Instead, the group coverage automatically continues for the duration of the disability.

 As an employee, Mr. Ghazi was covered by the UNUM group policy and was given a copy of Fiserv's employee benefit book. This book details the terms of the policy and includes a section titled "Life Insurance Conversion Rights." This section explains the conversion process and its 31-day time limit.

 Mr. Ghazi was terminated from his employment on July 8, 1994. On July 16, 1994, he received a letter informing him of his rights regarding, inter alia, the conversion of his group life insurance coverage to a personal policy.

 Mr. Ghazi did not contact either Fiserv or UNUM about converting his group life insurance coverage to a personal policy within the 31-day period. Mr. Ghazi sent a letter to UNUM, dated September 10, 1994 and received on October 14, 1994, requesting the necessary conversion forms and enclosing an estimated premium. In his letter requesting continuation of his life insurance, Mr. Ghazi did not provide his termination date. UNUM did not, therefore, immediately inform Mr. Ghazi that his conversion period had expired, but instead responded by mailing him a conversion application. The cover letter to the application informed Mr. Ghazi that his group insurance policy gave him only 31 days from the date of his employment termination to convert to a personal policy. The letter then erroneously informed Mr. Ghazi that he had until November 9, 1994, to return his application.

 UNUM received Mr. Ghazi's completed application for conversion and the appropriate premium on November 4, 1994. On November 10, 1994, UNUM rejected Mr. Ghazi's application because he had not filed it within the requisite 31 days from expiration of his group coverage. On November 15, 1994, Mr. Ghazi had a brain tumor surgically removed. On November 29, 1994, the Ghazis filed this action.

 Expiration of the Conversion Period

 Mr. Ghazi was terminated from his employment with Fiserv on July 8, 1994. Therefore, under the terms of Fiserv's group life insurance policy, he had until August 8, 1994 to convert his coverage to a personal policy. Mr. Ghazi's first contact with UNUM regarding this conversion right was by letter dated September 10, 1994. *fn3" Because he did not comply with the terms of his policy, Fiserv and UNUM do not need to provide the Ghazis with conversion coverage. Howard v. Gleason Corp., 901 F.2d 1154 (2d Cir. 1990) (affirming summary judgment for defendant insurer when insured failed to convert to a personal policy within requisite 31 days); Butler v. MFA Life Ins. Co., 591 F.2d 448 (8th Cir. 1979) (granting summary judgment for insurer where insured failed to convert his group life insurance to a personal policy within the 31 days required by the policy).

 Mrs. Ghazi argues that this rule should not apply to this case for two reasons. First, she points to an Illinois statutory notice requirement, which she contends was not satisfied. The statute extends the 31-day period in those instances in which an employee is not given notice. Second, she alleges that Mr. Ghazi became totally disabled before his life insurance expired. Mrs. Ghazi argues that she is entitled to a continued life insurance policy under the life disability benefits provision of Fiserv's group policy.

 Illinois Statutory Notice Requirement

 Mrs. Ghazi's argument in support of an extension of the 31-day conversion period is based on 215 ILCS 5/231.1(H)(4). *fn4" ...


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