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JOHNSON v. CHICAGO PLASTERING INSTITUTE HLT. & WELFARE FUND

October 19, 2004.

JEFF JOHNSON, et al., Plaintiffs,
v.
CHICAGO PLASTERING INSTITUTE HEALTH AND WELFARE FUND, et al., Defendants.



The opinion of the court was delivered by: SUZANNE CONLON, District Judge

MEMORANDUM OPINION AND ORDER

This case involves a group of employees ("the participants") who received health coverage from the Chicago Plastering Institute Health and Welfare Fund ("Plasterers fund" or "Plasterers plan"). After a vote to switch bargaining representatives, the participants obtained coverage from the Masons Health and Welfare Fund, Local 56 of DuPage County ("Masons fund" or "Masons plan") while maintaining coverage under the Plasterers plan. Each plan's coordination of benefits provision provides it is secondary to the other. The funds dispute which fund is primarily liable for payment of the participants' health care claims from the period of overlapping coverage. Jeff Johnson, et al., ("plaintiffs"), as trustees and fiduciaries of the Masons fund, sue Richard Dahm, et al., ("defendants"), trustees and fiduciaries of the Plasterers fund, under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(3); see also Winstead v. J.C. Penney Co., Inc. Voluntary Employees Beneficiary Assoc., 933 F.2d 576, 578-80 (7th Cir. 1991) (ERISA fund may sue another fund to enforce its plan provisions). Plaintiffs seek to enforce the Masons plan's coordination of benefit provision. Cross-summary judgment motions are before the court. BACKGROUND

The material facts are undisputed. The Masons and Plasterers plans are self-insured welfare benefit plans under ERISA, 29 U.S.C. § 1002(1). Masons Facts at ¶¶ 2-3, 7-8. The Plasterers fund is a third-party beneficiary of a collective bargaining agreement between the Journeymen Plasterers Protective and Benevolent Society of Chicago, Local No. 5 ("Local 5") and signatory employees. Plasterers Facts at ¶ 9. The Plasterers fund provides health benefits to eligible plaster employees and their beneficiaries; once employees become eligible, the coverage year runs from April 1st through March 31st of the year of eligibility. Id. at ¶¶ 11-13. An employee becomes eligible for coverage by the plan if 1200 contribution hours are reached in a given year. Id. at ¶ 13. The Masons fund similarly provides health benefits to eligible plasterers and their beneficiaries pursuant to collective bargaining agreements between Local 56 of the International Union of Bricklayers and Allied Craftworkers ("BAC 56") and various employers. Id. at ¶ 15. Many plastering employers were signatories to both the Local 5 and BAC 56 collective bargaining agreements. Id. at ¶ 16.

  In 2001, BAC 56 began an organizing campaign to become the exclusive bargaining representative of plastering employees in the Chicagoland area. Id. at ¶ 17. BAC 56 worked to convince plastering employees of dual-signatory employers to vote for BAC 56 and against Local 5 in National Labor Relations Board elections. Id. In any election BAC 56 won, the employer no longer had an obligation to contribute to the Plasterers fund pursuant to the Local 5 agreement. Id. at ¶ 18. The Masons fund sought to expand its number of participants and supported BAC 56's campaign. Id. at ¶¶ 20, 26. BAC 56's campaign was successful and in 2002 some employees voted to certify BAC 56 as their exclusive collective bargaining representative. Id. at ¶ 36. In addition, some employees opted to switch from the Plasterers fund to the Masons fund and all employer contributions on their behalf went to the Masons. Id. at ¶ 37. Specifically, seven participants and their beneficiaries obtained coverage under the Masons plan between April and August 2003. Masons Facts at ¶¶ 58-60. The coverage lasted through March 31, 2004 or later. Id. at ¶ 61. Pursuant to the eligibility provision of the Plasterers plan, the participants also remained covered by the Plasterers through March 31, 2004. Id. at ¶¶ 59, 63; Plasterers Facts at ¶ 39.

  A. The Plasterers Plan

  Faced with the loss of participants due to the BAC 56 campaign, and the resulting loss of their contributions, in 2002 the Plasterers plan was amended to read:
Notwithstanding any other provision of the plan, effective February 1, 2002, if an Employee covered by the plan is covered by any other group health plan as a result of work he or she performed pursuant to a collective bargaining agreement, this plan will only provide secondary coverage for such Employee and any eligible Dependents. The other group health plan will be the primary coverage.
Id. at ¶ 40. The amended language represents the Plasterers plan's terms governing coordination of benefits and applies only when an employee's coverage by another plan begins subsequent to the commencement of the employee's coverage by the Plasterers plan. Masons Facts at ¶¶ 22-23. The purpose of the coordination of benefits provision is to save money for the Plasterers fund. Id. at ¶ 27.

  B. The Masons Plan

  The Masons plan states:
Effective December 1, 1991, The Plan has been designed to be a secondary payer to all other health coverage . . . If an employee or dependent is covered by another self-insured medical plan which provides that it is secondary to all other policies, then this Plan will pay only 50% of the covered expenses that otherwise will be payable under this Plan.
Id. at ¶ 14. The following amendment was approved: If an employee or dependent is covered by another medical plan which provides that it is secondary to all other policies, then this Plan, in compliance with applicable law governing cases where both plans claim secondary status, without waiving its secondary status, will pay only 50% of the covered expenses that otherwise will be payable under this Plan. The Trustees further clarify that since January 1, 1991, these coordination of benefit rules provide that this plan is secondary if an employee or dependent is covered by another medical plan that provides that it is secondary to all plans of the type of this Plan, such as any plan that provides that it is secondary for an employee or dependent who is covered by any other group health plan as a result of work an employee performs pursuant to a collective bargaining agreement. Again, in compliance with applicable law governing cases where both plans claim secondary status, this Plan, without waiving its secondary status, will also pay only 50% of covered expenses otherwise payable under this Plan.
 Id. at ¶ 15. The January 1, 1991 date in the amendment was an error; the correct date was December 1, 1991. Id. at ¶ 16. The purpose of the coordination of benefits provision is to limit the Masons fund's costs of providing health care benefits to participants and beneficiaries. Id. at ¶ 17.

  C. Coordination of Benefits

  In 2003, the funds communicated about coordinating benefits for the shared participants. Plasterers Facts at ¶ 42. Based on its plan, the Masons fund asserted the Plasterers plan should provide primary coverage for the participants. Id. Likewise, the Plasterers fund, based on the February 2002 amendment to its plan, asserted the Masons plan should provide primary coverage. Id. at ¶ 43. Specifically, on June 25, 2003, Masons sent Plasterers a letter enclosing copies of: (1) the Masons plan's coordination of benefit provisions; and (2) the Plasterers plan's pre-2002 amendment coordination of benefits provisions. Masons Facts at ¶ 42. The letter noted Masons appeared to be secondary and the Plasterers primary for persons covered under both plans. Id. On July 1, 2003, the Masons faxed Plasterers the Masons Fund Summary Plan Description ("SPD") section dealing with coordination of benefits. Plasterers Facts at ¶ 44. In response, Plasterers requested a copy of the complete SPD. Id. at ¶ 45. The request was denied. Id. On September 15, 2003, Masons again faxed Plasterers and explained the Masons plan only pays 50% when a participant is also insured under another plan. Masons Facts at ¶ 45. The facsimile attached a letter from a Masons plan attorney, that stated: "[o]ur plan provides that it is secondary to all other health coverage. However, from time to time, we run into situations where another health care plan claims to be secondary to our plan. In that situation . . . our plan would pay 50% of the benefits it would otherwise pay, and then the member can go to the other plan for the other 50% of the benefits." Id. at ¶ 46.

  On September 23, 2003, Plasterers sent Masons a letter that stated: "[w]e are notifying all [dually covered participants] that any medical expense they incur as of the date they are covered with you should be sent first to your local, then to us." Id. at ¶ 47. Accordingly, between September 22nd and September 26th, 2003, Plasterers sent letters to the participants entitled "Denial of Primary Coverage." Id. at ¶¶ 69-72. The letters explained the Masons plan was primary and the Plasterers plan secondary for all claims incurred by the participants and beneficiaries on or after their Masons Plan effective date. Id.

  D. Payment of Claims

  In the fall of 2003, Masons directed Blue Cross and Blue Shield of Illinois, a third-party administrator, to pay claims as though the Masons fund provided primary coverage, but at 50% of the usual plan benefit. Plasterers Facts at ¶ 58. In contrast, on September 22, 2003, Plasterers advised several medical providers the Plasterers plan was secondary on claims for the shared participants and claims should first be submitted to the Masons fund. Id. at ¶ 60. In addition, on September 26, 2003, Plasterers advised some of the shared participants their claims had been denied on a primary basis. Id. at ¶ 61. In early 2004, Plasterers again requested a complete copy of the Masons SPD. Id. at ¶¶ 46, 65. Masons refused the request. Id. Shared participants began contacting Plasterers to inquire about the Masons fund's 50% payments. Id. at ¶ 66. On March 3, 2004, Plasterers responded to two participants as follows:
We have been faxed an Explanation of Benefits (EOB) for your dental claims from the [Masons fund]. Since you are a member of the [Masons fund] and also choose to be an employee of a [Masons fund] signatory company, the [Masons fund] is your primary benefit carrier. The [Plasterers fund] became your secondary carrier the day you became eligible at the [Masons fund].
As your primary carrier, the [Masons fund] should pay your claims as if there were no other benefit carriers involved. This is known as Coordination of Benefits. Paying half of your benefit is not Coordination of Benefits (COB). Just because they have written that on your EOB does not make it a COB.
I have personally called the [Masons fund] Administrator on your behalf to try and get you fair treatment with this matter. Their reply was to threaten a lawsuit against us. If you were promised benefits and have them in writing or even verbally, we may be able to use that to get your claim paid by the [Masons fund]. It's crucial that we all find out when the [Masons fund] plans to pay the other half of the benefit they promised you. You have to follow their appeal process outlined in the Summary Plan Description (SPD) that they were required to send you. You need to initiate this process as quickly as possible. You should not allow them to disregard you; you need to stay on them to keep the pressure up until you are treated fairly.
The [Plasterers fund] will gladly pay secondary benefits according to COB. We need to know the plan you are under with the [Masons fund] . . . Please understand that we cannot make up the difference between what the [Masons fund] should have paid under COB and what we are obligated to pay as secondary.
I am really sorry that the [Masons fund] is stonewalling us on getting your claims paid properly. We here at the [Plasterers fund] will help you any way we can.
Masons Facts at ¶ 83 (underline in original). Similarly, in May 2004, Plasterers responded to a bill from a participant's dentist by indicating that as a secondary carrier, it would not pick up coverage until the primary plan paid the claim as if no other carriers were involved. Id. at ¶¶ 85-86. In February 2004, counsel for the parties exchanged communications regarding the coordination of benefits for shared participants. Plasterers Facts at ¶¶ 69-77. On March 24, 2004, the Masons fund trustees filed this lawsuit. Id. at ¶ 79. Because the ...

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