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Evangelical Benefit Trust v. Lloyd's Underwriters Syndicate Nos. 2987

February 3, 2012

EVANGELICAL BENEFIT TRUST, BRANDSOURCE BENEFIT TRUST, CALPASC GROUP BENEFIT TRUST, TRUST FOR CMTA, THE CUSTOM RAIL EMPLOYER WELFARE TRUST FUND, IDA GROUP BENEFIT TRUST, IEC GROUP BENEFIT TRUST, MIDAS DEALERS EMPLOYEE BENEFIT TRUST, N3A GROUP BENEFIT TRUST AND PREMIER CLUB BENEFIT TRUST, PLAINTIFFS,
v.
LLOYD'S UNDERWRITERS SYNDICATE NOS. 2987, 1607, 1183 AND 2001, DEFENDANTS.



The opinion of the court was delivered by: Judge Ronald A. Guzman

MEMORANDUM OPINION AND ORDER

This breach of insurance contract case is before the Court on: (1) plaintiffs' motions to strike defendants' expert testimony and supplement the record; (2) plaintiffs' motion for summary judgment on Counts I, II, VI and VII of their complaint and Count III, the only remaining count of defendants' amended counterclaim; (3) defendants' motion for summary judgment on Counts I, II, VI and VII of plaintiffs' complaint;*fn1 and (4) third-party defendant Ronald J. Wilson & Associates' motion for summary judgment on Counts I-V of the amended third-party complaint. For the reasons set forth below, the Court strikes as moot plaintiffs' motions to strike and supplement, denies plaintiffs' motion for summary judgment, grants in part and denies in part defendants' motion for summary judgment and denies third-party defendant's motion for summary judgment.

Facts

Plaintiffs Evangelical Benefit Trust ("EBT"), Brandsource Benefit Trust ("Brandsource"), CALPASC Group Benefit Trust ("CALPASC"), Benefit Trust for CMTA ("CMTA"), Custom Rail Employer Welfare Trust ("CREW"), IDA Group Benefit Trust ("IDA"), IEC Group Benefit Trust ("IEC"), Midas Dealers Employee Benefit Trust ("Midas"), N3A Group Benefit Trust ("N3A") and Premier Club Benefit Trust ("Premier") are multi-employer welfare association trusts established to secure health benefits for the employees of participating employers. (Pls.' LR 56.1(b)(3)(B) Stmt. ¶ 2.) Defendants are underwriters with Lloyd's, a British insurer, that issued identical, or virtually identical, certificates of insurance to plaintiffs. (Id. ¶¶ 1, 3-5.) Third-party defendant Ronald J. Wilson & Associates ("RJW") was defendants' coverholder, i.e., the entity authorized to bind insurance on their behalf, for the Trusts. (Id. ¶ 18; see Pls.' LR 56.1(a) Stmt., Ex. R, RJW Medical Benefits Binding Authority ("Binding Authority").) Ronald J. Wilson is the majority shareholder and president of RJW. (Pls.' LR 56.1(b)(3)(B) Stmt. ¶¶ 15-16.)

Subject to certain conditions and limitations, the certificates: (1) require defendants to "reimburse [plaintiffs] for Claims Incurred by [them] under the terms and provisions of the Summary Plan Description provided to employees of the participating employers of the . . . Trust (hereinafter referred to as the 'Program') during the [insurance] period"; (2) make defendants directly liable to program participants for claims incurred that are not paid in full by plaintiffs within thirty days after final claim determination ("30 claims"); (3) makes defendants liable, if a plaintiff becomes insolvent, for claims incurred during the insurance period that exceed the terminal fund; and (4) makes defendants liable, if a program terminates or is not renewed, for claims incurred during the insurance period that exceed the terminal fund. (Jones Aff. Mar. 25, 2011, Ex. 3, Brandsource Certificate of Insurance ("Certificate"), Insuring Clause, Limits of Liability 2, 4-5.) The insurance period for were: (1) December 1, 2005 to December 1, 2006 for CREW; (2) May 1, 2006 through September 1, 2007 for Brandsource, EBT and N3A; (3) June 1, 2006 to September 1, 2007 for Midas; (4) September 1, 2006 to September 1, 2007 for IDA; (5) October 1, 2006 to October 1, 2007 for Premier; (6) November 1, 2006 to November 1, 2007 for IEC; (7) February 1, 2007 to February 1, 2008 for CALPASC; and (8) April 1, 2007 to April 1, 2008 for CMTA. (Am. Answer ¶ 23.)

Each of the Trusts appointed either Medical Benefits Administrators of Maryland ("MBA") or Dayspring Management LLC ("Dayspring") as its plan administrator and MBA or Insurers Administrative Corporation ("IAC") as its claims administrator. (Pls.' LR 56.1(b)(3)(B) Stmt. ¶¶ 49, 58, 60-61.) Ron Wilson is the Chief Executive Officer of MBA and a Managing Director of Dayspring. (Id. ¶¶ 52, 63.)

The plan administrators adopted virtually identical summary plan descriptions ("SPDs") for the benefit plan associated with each Trust, all of which contain the following provision:

Subrogation/Right of Reimbursement. As a condition to receiving benefits under this Plan, Plan Participant(s) agree to transfer to the Plan their rights to recover damages to the extent of benefits paid by the Plan when an Injury or Illness occurs through the act or omission of another person. If a Plan Participant received payment from another person or business entity because of an Injury or Illness, Plan Participant agrees to reimburse the Plan to the full extent of benefits paid. If a repayment agreement is required to be signed, all rights of recovery are transferred to the Plan regardless of whether it is actually signed. It is only necessary that the Injury or Illness occur through the act or omission of another person. The Plan's rights of full recovery may be from a third party, any liability or other insurance covering the third party, the Plan Participant's own uninsured motorist insurance, underinsured motorist insurance, any medical payments, no-fault or school insurance coverage's [sic] which are paid or payable. The Plan may enforce its reimbursement rights by requiring the Plan Participant to assert a claim to any of the foregoing coverage to which he/she may be entitled. Plan Participant(s) shall provide all requested accident and insurance information to Plan representatives. . . . (Defs.' LR 56.1(b)(3)(B) Stmt. ¶¶ 17, 20; see Pls.' LR 56.1(a) Stmt., Ex. D1B, Brandsource SPD, § XI(2)(d).)

On May 10, 2007, defendants told plaintiffs they would not issue them new certificates of insurance when the current certificates expired. (Pls.' LR 56.1(b)(3)(B) Stmt. ¶ 86.) After the certificates expired, all of the Trusts, except CMTA, obtained other insurance and continued to provide benefits to plan participants. (Id. ¶¶ 88-89.)

In June 2009, Ron Wilson filed this suit on behalf of the Trusts to recover money defendants purportedly owe to them under the certificates.

Discussion

Motions to Strike and Supplement

Plaintiffs move to strike as untimely the expert testimony of David Ives and to supplement the record with additional evidence on their Count VII claim. Because Ives' testimony is not required to resolve any issue in the parties' summary judgment motions, and the additional evidence is not sufficient to do so, the Court strikes both motions as moot.

Summary Judgment

To prevail on a summary judgment motion, "the movant [must] show[] that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."

Fed. R. Civ. P. 56(a). At this stage, we do not weigh evidence or determine the truth of the matters asserted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). We view all evidence and draw all inferences in favor of the non-moving party. Michas v. Health Cost Controls of Ill., Inc., 209 F.3d 687, 692 (7th Cir. 2000). Summary judgment is appropriate only when the record as a whole establishes that no reasonable jury could find for the non-moving party. Id.

Authority to Sue

Defendants argue that Ron Wilson, who filed this suit on the Trusts' behalf, lacked the authority to do so because he is not, and never has been, one of the Trusts' trustees.*fn2 The trust documents and the law that governs them give the trustees power to file suit. (Pls.' LR 56.1(a) Stmt., Ex. G1, Brandsource Agreement & Decl. of Trust ("Trust"), Art. VII, § 1(e) (giving the trustees power to take any legal action that is "necessary [to] . . . protect[] . . . the Trust, the Fund . . . or to secure the benefits contemplated [by the Trust]"); id., Art. XV, § 1 (stating that the law of the District of Columbia governs "all questions pertaining to [the] validity, construction and administration" of the Trust); see DC Code § 19- 1308.16 (24) (stating that a trustee may "[p]rosecute or defend an action, claim, or judicial proceeding in any jurisdiction to protect trust property"). But, as defendants admit, they also permit the trustees to delegate various powers. Id.

§ 19-1308.07(a) (stating that "[a] trustee may delegate duties and powers that a prudent trustee of comparable skills could properly delegate under the circumstances"); (Pls.' LR 56.1(a) Stmt., Ex. G1, Brandsource Trust, Art. VII, § 1(g) (stating that the trustees may "delegate such of their administrative or ministerial duties and powers to . . . agents . . . as may, in the opinion of the Trustees, be advisable."); see Defs.' Reply Mem. Supp. Mot. Summ. J. 4 ("[Defendants] do not dispute plaintiff's general contention that a trust may delegate its authority to sue another party." (emphasis omitted)).) Moreover, there is no dispute that the trustees did so by entering into administration agreements with plan administrators Dayspring and MBA. (Defs.' LR 56.1(b)(3)(B) Stmt. ¶¶ 98-100; Jones Aff. Mar. 25, 2011, Ex. 16, Administration Agreement between Brandsource and Dayspring ("Administration Agreement").) Defendants argue, however, that the duty to file lawsuits for the Trusts was not one the trustees delegated.

The Court disagrees. The Administration Agreement delegates to the plan administrators: (1) the powers and duties set forth in Article X of the Trust, including the duty "to perform any and all functions which may from time to time be mutually agreed with the Trustees"; and (2) the power to "[s]ubmit and collect all eligible claims due from the insurers of the Plan or Plans on behalf of the Trust." (Jones Aff. Mar. 25, 2011, Ex. 16, Administration Agreement, Art. I(A), (11); Pls.' LR 56.1(a) Stmt., Ex. G1, Trust, Art. X, ยง 2(m).) Given the language of these provisions and the lack of evidence to suggest that, in spite of it, ...


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