United States District Court for the Eastern District of Michigan; Docket No. 98-74639;
Honorable Nancy G. Edmunds; Unpublished
Official Federal Reporter Citation: Not Applicable; Link to Opinion
In this Opinion by Judge Edmunds, the United States District Court granted summary disposition in favor of plaintiff no-fault insurer enforcing a coordination of benefits provision in plaintiff’s no-fault policy, making it secondary to defendant's ERISA health plan. Therefore, the defendant ERISA health plan was obligated to reimburse plaintiff no-fault insurer for medical expenses it had paid to a mutually insured auto accident victim. In reaching the decision to enforce the no-fault COB provision, and elevate the ERISA insurer into the primary pay position, Judge Edmunds noted that under federal common law, an ERISA plan will prevail over a no-fault policy, where the terms of the ERISA plan "expressly disavow" coverage. However, where an ERISA plan does not expressly disavow coverage, and the language of the no-fault policy subordinates its coverage, the no-fault policy will prevail. In this regard, Judge Edmunds concluded that defendant's ERISA plan did not expressly disavow coverage in situations involving no-fault automobile insurance because the plan was "internally inconsistent." In the coordination of benefits section of the plan, the language clearly contemplates the applicability of both ERISA coverage and no-fault coverage. However, in the exclusion section, the ERISA plan states that there is no coverage to the extent that medical expenses are in any way reimbursable through no-fault automobile insurance. In finding that the internal inconsistency of the ERISA plan rendered it primary, Judge Edmunds stated:
"The Sixth Circuit addressed the issue of conflicting insurance policies in Auto Owners Insurance Company v Thorn Apple Valley, 31 F.3d371 (6,hCir., 1994), holding that where an ERISA policy directly conflicts with an auto policy, the terms of the ERISA policy govern....
"Where an ERISA plan does not expressly subordinate its coverage to other coverage and an auto insurance policy does subordinate its coverage, there is no direct conflict between the policies. In these circumstances, the ERISA plan is the primary insurer and the auto policy is the secondary insurer....
"The [defendant's health plan] language here does not expressly disavow coverage when there is coverage by a no-fault carrier. Rather, the plan's language is internally inconsistent. On the one hand it purports to coordinate benefits with no-fault insurance carriers, and on the other hand it purports to exclude coverage when the insured has no-fault coverage.... The coordination of benefits clause and the exclusion clause of the [ERISA] plan cannot be reasonably reconciled with each other. The [ERISA] plan language is ambiguous, and internally inconsistent. The plan cannot be said to have expressly disavowed coverage as in Thorn Apple. Rather, as in Dayton-Hudson [Dayton-Hudson Department Store Company v Auto Owners, 9 53 F. Supp. 177 (W.D. Mich., 1995)] the plan's language is unclear and is not automatically entitled to priority over the no-fault policy. As the court in Thorn Apple reminded us, the fact that ERISA preempts state law does not necessarily mean that the ERISA plan must prevail. The court must apply federal common law which provides that the ERISA plan prevails where its language expressly disavows coverage in the face of other policies....
"The application of federal common law to the [defendant's] plan does not lead to the conclusion that it expressly disavowed coverage when an insured also has no-fault coverage. Accordingly, the [defendant's] plan is not entitled to priority."
Accordingly, summary disposition was entered in favor of plaintiff no-fault insurer.