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FORTUNE v. MEDICAL ASSOCS. OF WOODHULL

October 13, 1992

WILLIAM FORTUNE, individually and as Executor of the Estate of Paul Paroski, Plaintiff, against MEDICAL ASSOCIATES OF WOODHULL, P.C., BCS LIFE INSURANCE COMPANY, and FRANK DECEMBER, Defendants.


The opinion of the court was delivered by: STERLING JOHNSON, JR.

 Johnson, District Judge:

 Plaintiff William Fortune brings this action individually and as Executor of the Estate of Paul Paroski pursuant to Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1132(a)(1)(B), (a)(2), (a)(3), (e)(1) alleging breach of contract, breach of fiduciary duty, and negligence in procuring an insurance contract. In lieu of answering the complaint, defendant Medical Associates of Woodhull, P.C. moves for an order pursuant to Fed. R. Civ. P. 12(b)(6) dismissing the First and Second Causes of Action against it, or in the alternative, for summary judgment pursuant to Fed. R. Civ. P. 56. Defendant BCS Life Insurance Company also moves for summary judgment dismissing the complaint against it.

 For the reasons stated below, the motion by Medical Associates of Woodhull, P.C. is granted in part and denied in part. The motion by BCS Life Insurance Company is denied.

 I. BACKGROUND

 In July 1984, Medical Associates of Woodhull, P.C. ("Woodhull") hired Dr. Paul Paroski as a physician. Dr. Paroski was appointed Director of Ambulatory Care pursuant to an August 1987 contract. Schedule B of the contract lists the following benefits: Life Insurance/Accidental Death; Hospital & Surgical Coverage; Major Medical Coverage; Long Term Disability; Dental Coverage; Annual Leave; Personal Days; Holidays; Conference Days; Retirement Plan; and Travel & Accident Insurance. According to Schedule B, Dr. Paroski was entitled to a $ 200,000 initial life insurance benefit and an Accidental Death benefit equal to two times the insured benefit. The contract expressly provides that "all benefits are subject to modification by the Corporation in its sole and exclusive discretion."

 Pursuant to the contract with Woodhull, Dr. Paroski became insured under a group life insurance policy issued by John Hancock Mutual Life Insurance Company. The John Hancock Certificate ("Hancock Certificate") also expressly states that "no amendment, renewal or termination of the Policy shall require the consent of or notice to any employee or beneficiary or other person having a beneficial interest thereunder."

 In or about March 1989, Dr. Paroski became ill. By August 1989, Dr. Paroski was totally disabled and unable to perform his duties as Director of Ambulatory Care. On or about November 21, 1989, Dr. Paroski sent a memo to the President and Executive Director of Woodhull stating he was resigning as Director of Ambulatory Care subject to several stipulations. Dr. Paroski allegedly withdrew that resignation when Woodhull refused to meet his conditions. Nevertheless, Woodhull continued to list his status as "active". Although Dr. Paroski sporadically participated in his professional duties until his death on March 3, 1990, he never worked more than 20 hours in any week after August 1989.

 In or about late summer/early fall 1989, Woodhull's benefits consultant, Williams, Thacher & Rand, Inc. ("WTR") began soliciting quotations on new health and life insurance policies covering Woodhull's employees. The best bid was submitted by Empire Blue Cross and Blue Shield ("Empire"). Empire would provide health coverage and BCS would provide life insurance coverage. On September 20, 1989, Woodhull's Benefits Committee met to discuss the proposed health and life insurance plans. Frank December ("December"), an Empire representative, attended the meeting to discuss the policies.

 On October 13, 1989, WTR sent December a the following letter:

 In view of the upcoming November 1 consolidation, we would like to know how your contract responds (by way of continued coverage) when an employee is on short or long term disability. How are the life, dental, medical, and LTD coverages affected?

 December responded by following letter dated October 30, 1989:

 In response to your letter concerning the Life, Medical and Dental coverages should a member of the above group be out on long tern disability.

 As long as Medical Associates continues to carry the employee on their group and remits premiums for that individual, there is no change in the aforementioned programs.

 On or about October 31, 1989, Woodhull terminated its group life insurance with John Hancock and purchased a substitute group life insurance policy from BCS Life Insurance Company with an effective date of November 1, 1989. WTR sent December the following letter dated December 20, 1989:

 Confirming our luncheon date with Woodhull, the Hancock group life contract did not contain a conventional "waiver of premium" provision; therefore it is imperative that your contract pick up disabled employees on 11/1/89 even though they were NOT "actively at work." These employees were on the census data supplied to for your quotation. Furthermore, Woodhull has continued to pay premiums for these disabled employees as "active participants" as verified by your letter of 12/14/89. As agreed, your life contract through your subsidiary will contain no "waiver of premium" clause but will allow Woodhull to carry the employee on the group as long as they remit premiums for this individual.

 Please indicate your concurrence with this letter by signing the copy enclosed and returning it to my attention.

 Although the letter was never signed and returned to WTR, Woodhull paid and BCS accepted premiums on behalf of Dr. Paroski. The next day Gary Aspenberg, Director of Personnel & Labor Relations at Woodhull, sent Dr. Paroski a letter stating:

 Life insurance, unlike the above items must be continued under our new policy with Blue Cross/Blue Shield. This means that the P.C. must continue to fund this item as an active expense. We are doing so at present, but I cannot at this time give you a prediction as to how long this benefit will be provided. You will be notified in advance of any changes in this insurance.

 Dr. Paroski passed away on March 3, 1990. William Fortune, the named beneficiary under the policy and executor or Dr. Paroski's estate, ...


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