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VALLONE v. CNA FINANCIAL CORP.

November 10, 1999

MICHAEL J. VALLONE AND JOYCE E. HEIDEMANN, AND JAMES J. O'KEEFE, ON BEHALF OF THEMSELVES AND ALL OTHER PLAINTIFFS SIMILARLY SITUATED KNOWN AND UNKNOWN, PLAINTIFFS,
v.
CNA FINANCIAL CORPORATION, A/K/A CNA CASUALTY OF ILLINOIS, AND THE CONTINENTAL INSURANCE COMPANY, AND ALL THEIR SUBSIDIARIES, PARENT COMPANIES, PARTNERSHIPS, AND CORPORATIONS, DEFENDANTS.



The opinion of the court was delivered by: Moran, Senior District Judge.

MEMORANDUM AND ORDER

This lawsuit is a purported class action brought on behalf of individuals who elected early retirement from the Continental Insurance Company in 1992. Plaintiffs allege that health care benefits promised to them as part of the early retirement package were terminated in violation of federal and state law. Defendants move to dismiss the complaint for plaintiffs' alleged failure to exhaust the benefit plan's appeal procedures before filing this lawsuit. For the reasons stated below, we deny defendants' motion.

BACKGROUND

According to the complaint, Michael J. Vallone (Vallone), Joyce E. Heidemann (Heidemann), and James J. O'Keefe (O'Keefe) (collectively "plaintiffs") are former employees of Continental Insurance Company (Continental). In October 1991, plaintiffs received a document entitled "A Brief Description of the Voluntary Special Retirement Program" ("brief description"), which described an early retirement package offered by Continental as part of a restructuring of its workforce. Along with hundreds of other Continental employees nationwide, plaintiffs elected to accept the package from Continental known as the Voluntary Special Retirement Program (VSRP).

In 1995, Continental merged with CNA Insurance, now known as CNA Financial Corporation (CNA).*fn1 As part of the business combination, CNA subsumed Continental as a subsidiary entity and assumed responsibility for maintaining Continental's retiree benefit programs. The transition into one company resulted in a merger of Continental's and CNA's health care plans in 1996. In August 1998, CNA informed all retired Continental employees that, as a result of the merger of health care plans, the retiree health care allowance contributions would end on December 31, 1998.

Upset by the termination of the health care allowance, some early retirees under the VSRP decided to challenge CNA's actions. In August and September 1998, plaintiffs Vallone and Heidemann telephoned officials at CNA, arguing that the early retirees were given a lifetime health care allowance and inquiring about whether there would be a review of the termination of benefits. They were informed that CNA's actions were appropriate and final, and that no reconsideration or other remedy was available. Other early retirees also complained of the termination of the health care allowance, and at least two individuals filed written appeals to the Plan administrator. The Plan administrator responded to these appeals with substantially the same information given to Vallone and Heidemann over the telephone — that the early retirees were not provided with a lifetime health care allowance and that CNA's decision to terminate those subsidies was final.

Dissatisfied with the responses they received from CNA officials, plaintiffs filed this purported class action lawsuit on behalf of the approximately 500 or more persons nationwide who retired under the VSRP. In their complaint, plaintiffs allege that the termination of the retiree health care allowance violated the Employee Retirement Income and Security Act (ERISA) and state common law. Defendants have moved to dismiss the complaint, arguing that plaintiffs have failed to exhaust the appeal procedures provided under the Plan before filing this lawsuit.

DISCUSSION

Defendants move to dismiss the complaint under Fed.R.Civ.P. 12(b)(1) and (6). On such a motion to dismiss we take plaintiffs' well-pleaded factual allegations as true and construe them in their favor. See Dawson v. General Motors Corp., 977 F.2d 369, 372 (7th Cir. 1992). Dismissal is proper only if it appears beyond doubt that the plaintiffs cannot prove any set of facts consistent with the complaint that would entitle them to the relief requested. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

In support of their motion to dismiss defendants argue that the health care allowance was provided pursuant to the Plan, which contains an appeal procedure for retirees dissatisfied with a company decision regarding benefits. They argue that plaintiffs' failure to exhaust that appeal procedure bars this lawsuit. Plaintiffs respond that their health care allowance subsidies were provided under the VSRP, a contract separate and distinct from the Plan and one which does not contain any appeal procedures or requirements. Alternatively, plaintiffs argue that they have satisfied any appeal procedures required under the Plan. Therefore, we must determine whether the Plan's appeal procedures apply to plaintiffs and, if so, whether plaintiffs have exhausted or otherwise satisfied those procedures.

I. The Plan and the VSRP

A fair reading of the contracts relating to plaintiffs' health care benefits indicates that the appeal procedures contained in the Plan apply to all Continental retirees, including individuals who elected early retirement under the VSRP. See Murphy v. Keystone Steel & Wire Co., 61 F.3d 560, 565 (7th Cir. 1995) (related contract documents must be read together in order to give them their proper construction). We look first to the documents relating to the VSRP. The VSRP documents contain language specifically directing early retirees to the Plan's contract documents. For example, the brief description of the VSRP, which sets forth the features of the early retirement package, expressly refers to "A Guide to Benefits for Employees Considering Retirement During 1991" (Guide) and "Your Benefits in 1991" (SPD). The VSRP election forms, by which plaintiffs accepted early retirement, similarly advise retirees: "Before you make your Retiree Elections, you may wish to familiarize yourself with the information contained in the current [Guide]." The Guide and SPD discuss and summarize the benefits provided by the Plan. These documents also describe the appeal procedures established by the Plan for retirees who are dissatisfied with company decisions regarding their benefits. Having been described in documents expressly referred to by the VSRP contract materials, the Plan's appeal procedures are applicable to plaintiffs in this case.

Other health benefit documents also indicate that the Plan's appeal procedures apply in this case. For example, in an information packet which accompanied CNA's August 1998 announcement regarding the termination of the health care allowance, the defendants advised retirees: "Please note that the Plan contains a formal claims procedure through which you can file a claim for Plan coverage with the Plan Administrator. If you believe you are entitled to continued benefits under the Plan for any reason, you may send a written request to the Plan Administrator. . . ." This information confirms the understanding embodied in ...


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