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HARTENBOWER v. ELECTRICAL SPECIALTIES CO. HEALTH B

September 16, 1997

MILTON F. HARTENBOWER, as Guardian of John Hartenbower, a minor, Plaintiff,
v.
ELECTRICAL SPECIALTIES CO. HEALTH BENEFIT PLAN, through its Contract Administrator, Kepple & Company, Inc., N.R.O. ENTERPRISES, INVC., f/k/a Electrical Specialties, Co., an Illinois corporation, and NORTH ATLANTIC CASUALTY AND SURETY INSURANCE COMPANY, INC., a/k/a VASA NORTH ATLANTIC INSURANCE COMPANY, Defendants.



The opinion of the court was delivered by: WILLIAMS

 Plaintiff Milton F. Hartenbower, as guardian of John Hartenbower, *fn1" a minor, brings this declaratory judgment action against Defendants Electrical Specialties Co. Health Benefit Plan through its contract administrator Kepple and Co., Inc. ("the Plan"); N.R.O. Enterprises, Inc., f/k/a Electrical Specialties Co., an Illinois corporation ("N.R.O."); and North Atlantic Casualty and Surety Insurance Co., Inc., a/k/a VASA North Atlantic Insurance Co. ("VASA"). Hartenbower asks the court to declare that the defendants have an obligation to pay all or part of the medical and hospital expenses incurred because of injuries sustained by John Hartenbower when a motor vehicle struck him on November 13, 1992. Defendants have moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. *fn2" For reasons set forth below, the court grants summary judgment for N.R.O. and VASA and denies summary judgment for the Plan.

 Background

 On November 13, 1992, a car driven by Carolyn Dent struck John Hartenbower while he walked along Main Street in Losant, Illinois. (Am. Compl. P 4.) Because of this accident, John Hartenbower incurred medical bills of more than $ 85,000. (Id. P 6.)

 John Hartenbower is the minor son of Milton Hartenbower, who at the time of the accident was employed by Electrical Specialties Co. (Id. P 2.) Electrical Specialties established a Health Benefit Plan ("the Plan") for its employees, which was in effect at the time of the accident. (Plan's 12(M) P 3.) *fn3" The Plan is administered by Kepple and Co., (Am. Compl. P 3), and includes coverage for hospital and medical expenses, (Plan's 12(M) Ex. 2 at 1), for both employees and their dependents, (id. at 11). The Plan does not dispute that its plan covered John Hartenbower. Nevertheless, the Plan has refused to pay Milton Hartenbower any amount for John Hartenbower's medical and hospital expenses. (Am. Compl. P 8.)

 Less than nine months after John Hartenbower's accident, TranTechnology purchased Electrical Specialties, (Plan's 12(M) Ex. 10), and changed the name of Electrical Specialties to N.R.O. Enterprises, Inc., (Am. Compl. P 14). Shortly after the sale, N.R.O. canceled the Plan, (id.), without allocating any funds to pay for John Hartenbower's injuries, (Plan's 12(M) Exs. 10, 11). N.R.O. also stopped making payments on its stop-loss insurance policy with North Atlantic Casualty and Surety Insurance Co., a/k/a VASA North Atlantic Insurance Co. ("VASA"), (VASA's 12(M) P 17), and VASA terminated the policy, (id. PP 16, 18).

 Milton Hartenbower, as John Hartenbower's guardian, filed a lawsuit against Carolyn Dent. (Am. Compl. P 9.) Dent's automobile liability insurance company, State Farm Insurance Company, and Hartenbower's underinsured motorist policy, Pekin Insurance Company, have each agreed to pay $ 50,000 to Hartenbower if he releases them from any further liability. (Plan's 12(M) Exs. 5, 7.) Hartenbower wishes to allocate $ 25,000 of these settlement monies to medical and hospital expenses and the remainder to future medical costs and pain and suffering. (Id. Ex. 10.) Although the Plan recently joined this lawsuit, for more than four years it refused to get involved either to protect its interests or to assist its employee. (Id. Exs. 4, 6, 10, 12.) Neither did N.R.O. file a claim with its stop-loss insurer, VASA, to cover its potential liability for Hartenbower's injuries. (VASA 12(M) P 20.) Hartenbower's attorney fees for pursuing the claim against Dent are more than $ 33,000. (Pl. Resp. to Plan's Mot. Ex. A.)

 N.R.O.'s plan document contains a subrogation clause that allows the Plan to pursue reimbursement against third parties, who are liable for injuries, "in the event" that the Plan pays any benefits. (Plan's 12(M) Ex. 2 at 33.) Employees must execute subrogation agreements to assist the Plan in recovering its expenses. (Id. at 34.) Although the Plan has not made any payments to Hartenbower, it requested a signed subrogation agreement from him, which he has not yet executed. The Plan document also contains an excess insurance clause that makes the Plan secondary to other sources of indemnification. (Id.) Furthermore, N.R.O. has the authority to make reasonable, good faith interpretations of the plan language. (Id. at 50.)

 The purpose of N.R.O's Group Health Benefit Plan is to provide "hospital and medical benefits . . . for the benefit of [its] Employees." (Plan's 12(M) Ex. 2 at 1.) The Plan's excess insurance clause states in part:

 
If at the time of Injury or Sickness there is available to the Covered Person or Covered Dependent any other insurance, or other forms of indemnification, including but not limited to judgment at law or settlements, the benefits under this Plan shall apply only as excess insurance over such other sources of indemnification; by way of illustrating but not in limitation, this provision shall be applicable to those Expenses Incurred as the result of Sickness or Injury when:
 
(a) the Covered Person or Covered Dependent is injured by or in the course of operating a motor vehicle

 (Plan's 12(M) Ex. 2 § 7.8 at 34-35.) The Subrogation Clause states in pertinent part:

 
In the event any benefits or services of any kind are furnished to a Covered Person or Covered Dependent, or payment made or credit extended to or on behalf of any Covered Person or Covered Dependent for a physical condition or Injury caused by a third party or for which a third party may be liable, the Plan shall be subrogated and shall succeed to individual rights of recovery against any such third party to the full extent of the value of any such benefits or services furnished or payments made or credit extended. The Covered Person or Covered Dependent shall, at the Plan's request, take such action, furnish such information and assistance, and execute such documents as the Plan may require to facilitate enforcement of its rights hereunder. In the event of the covered Person's or Covered Dependent's failure to comply with any such request, the Plan shall be entitled to withhold benefits, services, payments or credits due under the Plan, or to initiate or maintain any legal proceedings it deems necessary to protect the rights of the Plan, as provided herein. The Covered Person or Covered Dependent shall do nothing after acceptance of benefits hereunder to prejudice the subrogation rights of the Plan.

 (Plan's 12(M) Ex. 2 § 7.7 at 33-34.)

 Hartenbower filed this amended complaint seeking a declaratory judgment that defendants N.R.O., the Plan, and VASA have an obligation to pay all or a portion of John Hartenbower's medical bills. The defendants originally filed this action in Illinois state court, (Plan's 12(M) P 25) and later removed it to this court.

 Analysis

 Electrical Specialties Co. Health Benefit Plan, through its contract administrator, Kepple and Co., Inc. ("the Plan"); N.R.O. Enterprises, Inc., f/k/a Electrical Specialties Co., an Illinois corporation ("N.R.O."); and North Atlantic Casualty and Surety Insurance Co., Inc., a/k/a VASA North Atlantic Insurance Co. ("VASA") have moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. *fn4" The court will render summary judgment only if the factual record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Bratton v. Roadway Package Sys., Inc., 77 F.3d 168, 173 (7th Cir. 1996) (quoting Fed. R. Civ. P. 56(c)). The court will not render summary judgment if "a reasonable jury could return a verdict for the nonmoving party." Sullivan v. Cox, 78 F.3d 322, 325 (7th Cir. 1996) (citing Anderson v. Liberty Lobby, 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986)). In ruling on a motion to dismiss for summary judgment, the court views the facts in the light most favorable to the nonmoving party. Bratton, 77 F.3d at 171 (citation omitted); Sullivan, 78 F.3d at 325 (citation omitted).

 On a motion for summary judgment, the moving party "bears the initial burden of showing that no genuine issue of material fact exists." Hudson Ins. Co. v. City of Chicago Heights, 48 F.3d 234, 237 (7th Cir. 1995) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). Then the burden shifts to the nonmoving party, which "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56 (e); accord NLFC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231, 234 (7th Cir.) (citations omitted), cert. denied, 515 U.S. 1104, 132 L. Ed. 2d 257, 115 S. Ct. 2249 (1995).

 The plaintiff filed this amended complaint against the defendants to declare that they have an obligation to pay all or part of John Hartenbower's medical bills. (Id. Count I, P 16 & Count II, P 20.) In response, the Plan argues that it has no obligation to the plaintiff because of the excess insurance and subrogation clauses in the plan document. N.R.O. argues that it is not a proper party to the suit: the plaintiff's claims are with the employee benefit plan, not with the employer. VASA argues that the plaintiff lacks standing because a privity of contract existed ...


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