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January 12, 1982

Ruth STUTELBERG, individually and as representative of the estate of Warren H. Stutelberg, Plaintiff,

The opinion of the court was delivered by: WEINFELD


Plaintiff, the widow of Warren H. Stutelberg ("Captain Stutelberg"), seeks to recover from the defendant, Farrell Lines Incorporated ("Farrell"), Captain Stutelberg's employer at the time of his death, $ 148,500 representing life insurance benefits payable under Farrell's Pension and Welfare Plan ("Farrell Plan" or "Plan"). *fn1" Farrell denies that Captain Stutelberg, although its employee at the time of his death, was covered by its Plan.

Captain Stutelberg was a merchant marine officer who died on September 4, 1980 as the result of injuries sustained while employed by Farrell as a port captain. Previously he had been employed by American Export Lines ("AEL") first as a sea-going officer and later as a land-based port captain until March 1978. At that time, as the result of the sale by AEL of some of its vessels to Farrell, he became a Farrell employee. At the time of his death, and for many years before, he was a member of the Brotherhood of Marine Officers ("BMO") which had a collective bargaining agreement with AEL pursuant to which AEL made contributions to the BMO Pension, Welfare & Insurance Plan ("BMO Plan"). The employees also made contributions to the BMO Plan. Captain Stutelberg was a participant in, and entitled to the benefits of, the BMO Plan. Farrell, upon taking over the AEL vessels, adopted the collective bargaining agreement and, thereafter, as Captain Stutelberg's employer, it made the required contributions to the BMO Plan.

 Following the acquisition of the AEL vessels by Farrell, a jurisdictional controversy developed between the Master, Mates & Pilots Union ("MM&P") and BMO over the continued representation by BMO of the former AEL personnel. The matter was submitted to the parent AFL-CIO which allocated jurisdiction over sea-going deck officers to the MM&P and upheld BMO's jurisdiction over engineering personnel. Since Captain Stutelberg was then engaged in shoreside duty, he was not required, as were the sea-going deck officers, to join the MM& P. Instead, pursuant to his rights under the collective bargaining agreement, he entered a "withdrawal status" whereby he retained his benefits package and seniority with the BMO but the union no longer served as his collective bargaining representative for other purposes.

 Subsequently, BMO attempted to become the collective bargaining agent for Farrell's shoreside employees for all purposes and Captain Stutelberg signed a BMO union authorization card. On April 17, 1979 Thomas J. Smith, President of Farrell, sent Captain Stutelberg a letter stating that he had become aware he had signed an authorization card and that "this may have been prompted by alleged inequities in wages and a lack of definite information as to your pension rights in the future." The letter continued that the company would not tolerate any management representative being represented by a union and that unless he revoked the authorization, he was to consider himself terminated effective April 27, 1979. Captain Stutelberg thereupon revoked his authorization. He and the ten or twelve other former AEL employees like him were, therefore, in the unique status of being covered by, and entitled to the benefits of, the BMO Plan, to which Farrell made employer-contributions, but since they were now shoreside managerial employees, they were not represented by BMO for other purposes.

 Prior to this time, in March 1979, Farrell had unilaterally attempted to redefine as nonunion personnel these ten or twelve former AEL employees, who, like Captain Stutelberg, were in shoreside positions and to include them in the Plan it maintained for its other employees who were not otherwise covered by union-sponsored pension and welfare plans. By letter dated April 4, 1979, Farrell advised Captain Stutelberg and the others that they would become participants in the Farrell Plan effective July 1, 1979 and, thereupon, ceased its contributions to the BMO Plan for these individuals. BMO grieved the cessation of Farrell's contributions and the matter was submitted to arbitration. The arbitration award, made on June 25, 1979, was against Farrell and held that the "shoreside members of the Brotherhood of Marine Officers (were to) remain in their pre-award Union status and that payments to the Brotherhood of Marine Officers Pension and Welfare Funds shall continue to be paid by Farrell on their behalf." *fn2" Notice of the grievance and copies of the decision were sent to Captain Stutelberg and Farrell resumed its contributions to the BMO Plan, including retroactive payments covering the period during which it had withheld contributions.

 Plaintiff contends that she is entitled to recover the life insurance proceeds under the Farrell Plan because the arbitration award did not foreclose his participation therein as well as in the BMO Plan; that he was enrolled in the Farrell Plan; and that he was never effectively terminated from it. Alternatively, she argues that even if it be found that in fact he was not enrolled in the Farrell Plan and further that the documents and letters referred to hereafter were sent to him in error, Farrell is precluded under the doctrine of equitable estoppel from denying that Captain Stutelberg was covered by its Plan for he was led to believe by its actions that he was included and relied upon such representations by, among other things, failing to purchase additional life insurance.

 Her claim is based in the main upon what is alleged to be a series of errors by Farrell that began when Captain Stutelberg was included on a list of its employees eligible for participation in the Farrell Plan. On June 18, 1979 Farrell sent him an enrollment card for the Farrell Retirement Plan, one of the five elements of its benefits package, *fn3" and notified him that he was automatically covered by a supplemental group life insurance policy in the amount of two and one-half times his base annual salary. Captain Stutelberg returned the enrollment card designating his wife Ruth Stutelberg as beneficiary. Farrell sent him a second letter on January 1, 1980, also allegedly by error, advising him of new short term disability benefits that had been added to the Plan. Finally in March 1980, Farrell mailed him a computer-generated benefits statement providing a detailed outline of his benefits under the Farrell Plan, including the $ 148,500 in life insurance coverage which is the subject of this action.

 The defendant, in resisting the claim, contends that Captain Stutelberg was not covered by its Plan and that his coverage under the BMO Plan rendered him ineligible. It asserts that the documents sent to him were the result of an initial clerical error that included him on a list of those eligible for the Plan and that he was never misled because he knew and acknowledged that the material had been sent to him in error and he was fully aware that he was not a participant in the Farrell Plan but only the BMO Plan. In short, the defendant asserts that the plaintiff seeks to take advantage of an error or series of errors.

 Equitable estoppel prevents one from denying his own expressed or implied admission which has in good faith been adopted and acted upon by the other. Thus in order for plaintiff to prevail upon her contention that Farrell is estopped from denying that Captain Stutelberg was a member of the Farrell Plan, she must establish with respect to Farrell: (1) conduct by it that amounts to a false representation or concealment of material facts; (2) intention or expectation that such conduct would be relied upon by the other party; and (3) knowledge of the real facts. Plaintiff must also establish with respect to Captain Stutelberg: (1) lack of knowledge of the true facts; (2) reliance on the conduct of Farrell, the party to be estopped; and (3) a prejudicial change in position. *fn4" A central element to plaintiff's recovery, therefore, is a showing that Captain Stutelberg believed he was covered by the insurance provided by the Farrell Plan. In support of her claim of estoppel, plaintiff relies principally upon the letters and documents sent by Farrell to Captain Stutelberg, particularly the computerized statement sent to him in March 1980 setting forth his individual benefits under the Farrell Plan, including life insurance of $ 148,500 (in case of accidental death). She also relies upon her own testimony that her husband told her that he felt the insurance provided by the Farrell Plan was adequate and that it was not necessary to purchase additional coverage.

 Farrell, on the other hand, not only relies upon the fact that the arbitration award determined that he was and remained a member of the BMO Plan and that Farrell was required to and did make contributions thereto of which Captain Stutelberg was aware; it also relies heavily on the testimony of two of its employees that Captain Stutelberg knew that the documents which stated that he was a member of the Farrell Plan had been sent to him in error. In short, that he knew the true facts, that he was not misled, that he did not rely upon the error, and that there was no prejudicial change of position.

 Daniel Cappazola, General Manager-Human Resources of the defendant testified that shortly after Captain Stutelberg received the March 1980 benefits statement, Captain Stutelberg called to ask about it and that Cappazola told him it had been sent in error and that he should not have received the statement for he was covered by the BMO Plan and that the benefits did not apply to him. *fn5" He also testified that Captain Stutelberg was never enrolled by Farrell in its Plan and that it never paid premiums for his coverage under the group insurance policy, as was the case in the instance of those employees who were covered under that policy, and that it never received proceeds from any such policy on account of Captain Stutelberg's death.

 Edward Morgan, General Manager-Industrial Relations of the defendant who was also a trustee of the BMO Plan, testified that sometime between July 28 and August 1, 1980, Captain Stutelberg, whom Morgan had known for approximately 15 years dating back to their tenure as employees of AEL, called him for assistance in withdrawing from the BMO Plan. The BMO Plan required its participants to contribute to the cost of the Plan and since the Farrell Plan was noncontributory (i.e., all costs were paid by the employer), Captain Stutelberg wanted to withdraw from the BMO Plan in order to participate in the Farrell Plan. He testified that Captain Stutelberg knew he was not then covered by the Farrell Plan for he stated that he wanted to get out of the BMO Plan so he could participate in the Farrell Plan. Morgan further stated that he advised Captain Stutelberg to write Mr. Egan, administrator of the BMO Plan, requesting he be allowed to terminate his contributions to the BMO Plan so that he could become a participant in the Farrell Plan and that such request be placed upon the agenda for the August 6, 1980 BMO Pension Plan Trustees' meeting.

 This conversation finds confirmation in a letter dated August 1, 1980 that Captain Stutelberg wrote to Mr. Egan, which is in accord with the instruction Morgan stated he gave to him, in order to effect his withdrawal from the BMO Plan. The letter states that he was having difficulty meeting the contributions he was required to make to maintain his coverage under the BMO Plan and described the Farrell Plan in terms that ...

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