U.S District Court for the Western District of Michigan; Docket No. 1:99-CV-439;
Honorable Robert Holmes Bell; Unpublished
Official Reporter Citation: Not Applicable; Link to Opinion
In this written Opinion by Judge Bell, the court concluded that an "escape clause" in a self-funded ERISA plan purporting to decline coverage where a state has a no-fault insurance requirement, is valid and enforceable, thus making the no-fault insurer in this case primary for medical expenses arising from a motor vehicle accident.
The injured party was the spouse of an employee covered under Celia Corporation's health insurance benefits plan, a self-funded ERISA plan. The employee was also covered under Farm Bureau's no-fault automobile insurance policy. That policy contained a coordination of benefits clause that states that it will not pay personal injury protection benefits if its insured has other individual or group health coverage. The health plan had language contained under its "general exclusions clause," which the court deemed to be an "escape clause" rather than an exclusion. An escape clause provides that a plan does not provide coverage if other insurance exists. An exclusion denies benefits without regard to the existence of other insurance. Here, the clause excludes health insurance benefits for auto-related expenses in states with no-fault insurance laws.
Judge Bell declined to accept the authority of Northeast Department ILGWU v Teamsters Local Union #229, 764 F2d 147 (3rd Cir, 1985), which had determined that the incorporation of such escape clauses reflected "arbitrary and capricious conduct by the plan's trustees in violation of their fiduciary duties." Judge Bell pointed out that the Sixth Circuit has not adopted the reasoning of the Third Circuit regarding such escape clauses. Therefore, the clause in the Celia Corporation plan declining coverage where a state has a no-fault insurance requirement is valid and enforceable. Because the ERISA plan expressly disavows coverage, the Farm Bureau policy is primary