The opinion of the court was delivered by: LEONARD D. WEXLER
John Novak ("Novak"), plaintiff in the above-referenced action, seeks relief under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., for the allegedly wrongful termination of his employment and the allegedly wrongful denial of up to $ 2,000,000 of medical benefits to his son. Plaintiff seeks, inter alia, reinstatement of his job, back pay, reinstatement of medical benefits, and related compensatory and punitive damages. TRW Title Insurance of New York ("TRW Title"), plaintiff's former employer, and TRW, Inc., the Administrator of TRW Title's employee welfare benefit plan ("defendants"), have filed a counterclaim, seeking reimbursement of medical benefits paid to plaintiff to the extent that plaintiff has or will receive such money from third parties. Now before the Court is defendants' motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure on plaintiff's claim. Also before the Court is plaintiff's motion for summary judgment and for Rule 11 sanctions on defendants' counterclaim. For the reasons stated below, defendants' motion for summary judgment is granted in part and denied in part; plaintiff's motion for summary judgment is granted in part and denied in part and its motion for Rule 11 sanctions is denied.
In 1984, Jonathan Novak, ("Jonathan") plaintiff's then two year old son, was the victim of a near drowning accident in a swimming pool. Jonathan sustained severe, permanent brain damage; his mental status today is that of a coma victim. He does not speak and it is uncertain whether he has any sight. Plaintiff contends that in order to avoid permanent hospitalization, Jonathan requires twenty-four hour skilled nursing care at home.
See Affidavit of Jonathan's treating physician, Dr. Robert D. Semlear.
On March 5, 1991, plaintiff, as guardian of his son's property, settled Jonathan's personal injury claims related to his accident against four parties. Under the terms of the settlement agreement, Jonathan will receive a total of $ 1,200,000 for his pain and suffering. The settlement agreement does not include any allocation for Jonathan's medical expenses.
Plaintiff did not inform TRW Title of the existence of the settlement. However, TRW Title's local attorney, Lester, Schwab, Katz & Dwyer, represented one of the defendants in that suit and therefore was fully aware of the terms of the settlement agreement.
Prior to October 27, 1989, plaintiff was employed by Title USA Insurance Corporation of New York ("Title USA") as underwriting counsel in Riverhead, New York. On October 27, 1989, Title USA was acquired by TRW Title through a stock purchase. Title USA was renamed TRW Title Insurance of New York and plaintiff continued working in the same Riverhead office for TRW Title as underwriting counsel. In July 1990, TRW Title renewed its Riverhead lease for a five-year term.
In the summer of 1991, TRW Title began a large-scale reorganization, which resulted in the closing of several offices and the laying off, transferring or relocating of numerous employees. In July 1991, TRW Title instructed plaintiff to lay off his secretary and to find new office space in a Riverhead law office. Plaintiff did so. However, in October 1991, when Novak was the only TRW Title employee remaining in the Riverhead office, he was orally notified that the office would soon be closed, and that TRW Title was transferring him to its Melville office.
Novak, who lives in Sag Harbor, New York, would not commit himself to accepting this transfer as it would increase his daily commute by nearly one hundred miles. Subsequently, in a letter faxed to Novak on November 8, 1991, TRW Title offered him an additional $ 150 per month as an automobile expense allowance if he would accept the Melville transfer. The letter also informed him that if he failed to report to the Melville office on November 12, 1991, he would be laid off. Plaintiff did not show up for work at the Melville office on the specified date, and on or about November 14, 1991, he was terminated.
At that time, plaintiff had the option to elect continuation of his health insurance coverage for eighteen months pursuant to the provisions in TRW Title's health plan and the Consolidation Omnibus Budget Reconciliation Act ("COBRA"). He asserts that he did not do so because he was not given statutory notice of his right to continue such coverage until September 1992.
Defendants, however, have supplied an affidavit of Kathy Clark, an employee in its Human Resources-Benefits Administration Department, and a computer print out of its business records, showing that a COBRA notice was mailed to plaintiff on or about December 11, 1991, within thirty days of Novak's termination as provided by statute. Moreover, the Court notes that even after plaintiff received a "second" notice in September 1992, he did not seek to extend his health insurance coverage.
While plaintiff was an employee of Title USA of New York, he was provided health care benefits by Title USA Corporation (Delaware) Health Plan
("USA Health Plan") which had a $ 1,000,000 cap for non-occupational injuries. The USA Health Plan became inactive in October 1989; it was terminated in 1990; and the sponsor of the plan, Title USA Corporation (Delaware), ceased to exist on March 1, 1991.
From October 27, 1989 (when TRW Title took over Title USA) to January 31, 1990, plaintiff was covered by a health plan established by TRW Real Estate Loan Services, Inc. ("RELS") a subsidiary of TRW, Inc. that is not a party to this action. The funds for these interim payments were apparently provided by TRW, Inc.
On February 1, 1990, TRW Title instituted the ChoicePlus plan, a self-insuring arrangement with a $ 2,000,000 cap, established to replace the USA Health Plan. By that time, plaintiff had received approximately $ 825,000 in payments under the interim plan, the USA Health Plan, and various predecessor plans.
In February 1990, TRW Title took the position that because plaintiff's son was in confinement at the time the ChoicePlus plan went into effect, medical expenses related to Jonathan's pre-existing condition would not be covered under the ChoicePlus plan. However, without informing plaintiff of its decision, TRW Title "voluntarily" committed itself to continue paying medical benefits to plaintiff for his son's injuries out of company funds until the $ 1,000,000 cap that had been provided by USA Health Plan was reached. Accordingly, TRW Title allocated $ 175,000 of company funds for the payment of plaintiff's claims.
On February 7, 1991, TRW Title informed plaintiff that the $ 1,000,000 commitment was satisfied and his son's medical expenses would no longer be paid out of company funds, but that plaintiff could seek coverage under the ChoicePlus plan which provided a $ 2,000,000 cap. However, when plaintiff submitted his claims under the ChoicePlus plan for the period from January 1991 through August 1992, Aetna, the ChoicePlus administrator, rejected them, determining that they involved custodial and/or maintenance care, which were specifically excluded from coverage.
Custodial Care is defined in the ChoicePlus Plan as follows:
Custodial Care means care made up of services and supplies that provide a level of routine maintenance for the purpose of meeting personal needs. That is, care that can be provided by a lay person who does not have professional qualifications, skills or training training.
Maintenance Care is defined as follows:
Maintenance Care is care made up of services and supplies furnished mainly to: Maintain, rather than improve, a level of physical or mental function, or Provide a protected environment free from exposures that can worsen the covered family member's physical or mental condition.
TRW's Administrative Committee concurred with Aetna, but in its discretion allowed payments for weekly visits by a registered nurse.
Moreover, because plaintiff had not elected continuation of his health insurance coverage under COBRA, the Administrative Committee only considered charges for services through May 1992, because the ChoicePlus plan automatically entitles employees to six months of coverage after termination from the company. Plaintiff made numerous appeals to the Administrative Committee regarding its denial his of medical benefits, all of which were denied.
Because plaintiff had not timely submitted Dr. Semlear's affidavit on the issue of custodial care to the Administrative Committee, this evidence was not considered in the Administrative Committee's original determinations. This Court directed that (1) Dr. Semlear's affidavit should be submitted to the Administrative Committee and considered by it; (2) Dr. Semlear could submit a supplemental affidavit for the Administrative Committee's consideration regarding the issue of whether Jonathan's medical care is "maintenance" as that term is defined in the ChoicePlus Plan; and (3) TRW should conduct its own medical examination of Jonathan for consideration by its Administrative Committee.
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party bears the burden of establishing the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Thompson v. Gjivoje, 896 F.2d 716, 720 (2d Cir. 1990). All reasonable inferences and ambiguities are drawn in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Thompson, 896 F.2d at 720 (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 8 L. Ed. 2d 176, 82 S. Ct. 993 (1961) (per curiam).
A. Defendants' Motion for Summary Judgment on Plaintiff's Wrongful ...