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United Healthcare v Allstate Insurance Company; (US Dist. Ct. W. D.-Written, 11/15/2001, RB #2313)

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United States District Court, Western District of Michigan; Docket No. 1:01-CV-56; Written
Honorable Robert Holmes Bell
Official Michigan Reporter Citation: Not Applicable, Link to Opinion courthouse graphic


STATUTORY INDEXING:
Coordination with ERISA Plans [3109a]

TOPICAL INDEXING:
Employee Retirement Income Security Act


CASE SUMMARY:
In this written opinion, Judge Robert Holmes Bell resolved a priority dispute between a coordinated no-fault auto insurance company and a coordinated ERISA health plan. The court examined the coordination provisions of both policies and concluded that the ERISA health plan contained coordination language that clearly and unambiguously subordinated the plan to any applicable no-fault insurance coverage. Therefore, because there was no ambiguity in the coordination of benefits language contained in the ERISA plan, the coordinated no-fault policy was primary and the ERISA plan was secondary in accordance with the Sixth Circuit’s ruling in Auto-Owners Insurance Company v Thorn Apple Valley, Inc., 31 F3d 371 (6th Cir, 1994).

The next issue was whether the ERISA plan was precluded from obtaining reimbursement from the auto no-fault insurer because the injured person was not entitled to any no-fault benefits due to the fact that he failed to provide reasonable proof of his claim and, consequently, his claim was barred by operation of the one year statute of limitations set forth in section 3145 of the Act. Under these facts, the no-fault insurer argued that the ERISA plan’s claim, which is in the nature of a subrogation claim, is fatally defective because, as the subrogee of the injured person, the ERISA plan would have no greater rights than the injured person to recover from the no-fault insurer. Judge Bell held that this “subrogation analysis” lacks merit because, “Under federal common law, actions between an ERISA plan and a no-fault insurer arising out of conflicting COB clauses are not deemed subrogation claims and the ERISA plan is not bound by the procedural requirements under the state no-fault law.”

Finally, Judge Bell rejected the no-fault insurer’s argument that, because the no-fault insurer had a right to rescind ab initio the no-fault insurance policy due to the material misrepresentations of the insured person, the ERISA plan was barred from obtaining reimbursement from the no-fault insurer. In rejecting this argument, Judge Bell held that even though the no-fault insurer may have had a legal right to rescind the policy ab initio, in fact, the no-fault insurer did not rescind the policy but rather merely cancelled the policy approximately one and one-half years after the accident. Therefore, the injured person did have a right to collect no-fault benefits under the no-fault policy prior to the cancellation. Consequently, with respect to those benefits, the no-fault insurer is primary and owes reimbursement to the ERISA plan. In this regard, Judge Bell held:

This choice by Allstate to cancel rather than rescind the policy is demonstrated by Allstate’s underwriting notice. Following the investigation of the Stallworth policy, the underwriting response indicates that it has taken the following action: cancellation. Notably, the term ‘rescission ab initio’ has been crossed out, and instead, the term cancellation is checked. Defendant Allstate has offered no evidence that the cancellation was retroactive to the effective date of the policy. Neither has Allstate offered any evidence that the premiums were returned. Based upon the unrefuted evidence of record, this Court must conclude that the cancellation was not effective until June 5, 2000. Because Mr. Stallworth’s right to benefits accrued prior to the effective date of the cancellation of the policy, this Court concludes that there was valid no-fault insurance coverage as of January 28, 1999, the date of the accident, that this case does present a COB issue, and that under Thorn Apple Valley the no-fault policy is the primary insurer.”

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