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AQUILIO v. POLICE BENEVOLENT ASSN. OF THE NEW YORK

June 14, 1994

DOMINICK J. AQUILIO, Plaintiff,
v.
POLICE BENEVOLENT ASSOCIATION OF THE NEW YORK STATE TROOPERS, INC., JOHN R. CANFIELD and RICHARD FAIRCHILD, Defendants.



The opinion of the court was delivered by: NEAL P. MCCURN

 MEMORANDUM-DECISION AND ORDER

 INTRODUCTION

 Currently before the court is a motion for summary judgment by the defendant, the Police Benevolent Association of the New York State Troopers, Inc. ("PBA"). *fn1" Also before the court is the motion for partial summary judgment by the plaintiff, Dominick Aquilio, a retired New York State Trooper, who brings this action in connection with the PBA's administration of its group life insurance program. *fn2" Jurisdiction is predicated upon the existence of a federal question under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq.3

 BACKGROUND

 By way of background, the PBA is an employee organization representing active and retired members of the New York State Police. Affidavit of John R. Canfield (Mar. 30, 1992) at P 5. As an employee organization, the PBA undertakes a wide variety of responsibilities on behalf of its members, including the procurement of group term life insurance, which it has offered to its membership since at least 1961. Affidavit of Richard D. Fairchild (Mar. 25, 1992) at P 27; see also Canfield Affidavit at PP 17 and 18. Participation in the PBA's insurance plan is strictly voluntary. Canfield Affidavit at P 25; see also Affidavit of Caryl Erhardt (Mar. 27, 1992) at P 8. One advantage to plan participation is the fact that PBA members are able to purchase insurance at group rates, without the common requirement of a physical examination. Canfield Affidavit at P 24.

 Throughout the years, the PBA, through a competitive bidding process, has contracted with licensed life insurance companies to underwrite and provide this group term life insurance to its members. Id. at P 20; Fairchild Affidavit at PP 20, 21, and 23. This term life insurance is provided at fixed rates for a specific duration, usually one to three years. Canfield Affidavit at P 23. Many different companies have provided this insurance over the years; *fn4" and consequently, with each contract, there have been variations in the amount of insurance available, the cost, and the amount that can be "carried over" into retirement. Common to all of these insurance contracts and plan summaries, however, including the US Life policy, is that they set forth the circumstances which could result in disqualification, ineligibility, denial or loss of benefits.

 When the PBA changes life insurance carriers, its practice is to notify member plan participants in writing of the details of the new insurance programs, including any rate changes. Id. at P 28. Plan participants also receive written notification of the specifics pertaining to the new insurance programs, in the form of plan summaries. *fn5" Id. at P 29. These plan summaries give an indepth description of the terms and conditions of the current policy. Erhardt Affidavit at P 22. In addition, as required under ERISA, *fn6" the PBA annually files with the United States Department of Labor a reporting and disclosure form regarding the group life insurance program which it is offering at the time. Fairchild Affidavit at P 41. The insurance companies with whom the PBA has contracted must make the same filing. Id. at P 44.

 Insofar as plaintiff Aquilio is concerned, he was born March 8, 1925 and became a New York State Trooper in 1959. Defendant's exh. O (Deposition of Dominick Aquilio (Sept. 17, 1991) at 7 and 12). Soon after becoming a trooper, Mr. Aquilio joined the PBA and became aware of the availability of life insurance through that organization. Id. at 13-14. Early on in his career, the plaintiff voluntarily elected to purchase life insurance coverage beyond the minimal coverage he received by virtue of his status as a PBA member, and he has maintained coverage continuously up to the present time. Id. at 13-15.

 The US Life policy which is the subject of this litigation was in effect from June 1, 1985 through November 30, 1988. There are three separate documents beyond the policy itself and the plan summary upon which plaintiff relies to support his first cause of action. Thus a somewhat detailed review of those documents is necessary to an understanding of the parties' respective arguments as to the viability of that cause of action. The first document is a letter from PBA Treasurer Fairchild which plaintiff acknowledges receiving in the first part of 1985. *fn7" Aquilio Affidavit at P 7. Fairchild explains that he wrote that letter to announce the "new" PBA insurance program to be offered through US Life, which had "certain changes from previous PBA group life insurance plans." Fairchild Affidavit at P 51. That letter closed by stating, "any questions, you may have, please call the PBA office." Complaint, exh. A thereto at 2. According to Treasurer Fairchild, in the case of plaintiff Aquilio, those were not just empty words, because Fairchild was plaintiff's PBA delegate, as well as his personal friend. Fairchild Affidavit at P 54. Even given that relationship, Fairchild claims that he does not recall receiving any questions from plaintiff around the time this letter was sent. Id.

 Included with this 1985 letter was a chart comparing the "new" PBA insurance program offered through US Life with the PBA program then currently in place. Complaint, exh. A thereto. The attached "Comparison Chart" mentioned several times that the coverage would be "maintained until death." Id. Also included with that letter was a document entitled "Reduction Formula;" and it too made reference to coverage "till death." Id. In one brief synopsis, for example, it stated:

 
125,000 policy
 
You can take 125,000 into retirement which reduces to 43,750 at age 60, reduces to 37,500 at age 65. This coverage remains till death.

 Id. (emphasis in original). A similar provision was included for additional coverage offered through the "new PBA Tier Two" plan. Id. The "Reduction Formula" also summarized the coverage if a retired member took advantage of both the Tier One and Tier Two plans as follows: "You could take 250,00 [sic] into retirement which would reduce to 87,500 at age 60, reduced to 75,000 at age 65, which would remain until death[.]" Id. (emphasis added). Plaintiff Aquilio avers that "based on this information, I believed that by enrolling in both Tier One and Tier Two PBA coverage, I would have life insurance at the death benefit levels set forth in the communication until my death at the specified premium levels." Aquilio Affidavit at P 8. Mr. Aquilio therefore enrolled in the "new" PBA program and opted to take the dependent coverage described in that communication for his wife. Id.

 After the PBA contracted with US Life to underwrite the group term life insurance policy, as was its usual practice, the PBA asked US Life to prepare for distribution to all plan participants a plan summary, detailing the terms and conditions of the US Life policy. Fairchild Affidavit at P 55. US Life did not provide a draft summary, however, until mid-1986. Id. at P 56. Finally, in approximately March, 1987, the US Life generated plan summary received the required approval from the New York State Insurance Department. Id. at P 59. The plan summary was then mailed "to all participants." Id. As had previous plan summaries provided in conjunction with PBA sponsored insurance programs, *fn8" the US Life plan summary detailed the terms and conditions of the PBA's contract with US Life, including an explicit cancellation provision. Canfield Affidavit, exh. A thereto.

 Plaintiff Aquilio claims, however, that he never received this particular US Life plan summary. Complaint at P 18. Interestingly, apparently he is the only plan participant who claims not to have received this document. Canfield Affidavit at P 61; see also Erhardt Affidavit at P 27. In fact, after receiving this US Life plan summary, many PBA members contacted the PBA with questions about it. Id; see also Erhardt Affidavit at P 26.

 The second document upon which plaintiff relies to support his first cause of action is another PBA generated communication. This communication addressed various insurance coverage options, including the impact of the same in terms of retirement. In so doing, that letter expressly referred to "present available coverage" and "your current bi-weekly deduction." Id. Complaint, exh. B, thereto. Enclosed with that May, 1987 letter was an enrollment card and a payroll deduction card, which Mr. Aquilio filled out and returned to the PBA. Plaintiff's next communication regarding the PBA's new insurance program with US Life was a letter dated October 29, 1987 from PBA President Canfield. Complaint, exh. C thereto. Acknowledging receipt of plaintiff's notice of retirement, that letter expressly advised, among other things, "At age 60, your coverage will reduce to $ 87,400 at a cost of $ 367.50 annually plus your dues and dependent coverage premium. At your final reduction ($ 75,000) you will pay an annual premium of $ 315.00 plus dues and dependent coverage." Id.

 Effective September 3, 1987, plaintiff retired. Id. When making his retirement plans in the preceding spring, plaintiff Aquilio elected an irrevocable single life retirement annuity. Aquilio Affidavit at P 10, and exh. D thereto. More particularly, on the election form, Mr. Aquilio checked the box designated "Single Life Allowance," which states, "I elect to receive the maximum lifetime retirement allowance payable to me. Stop all payment at my death. DO NOT NAME A BENEFICIARY." Id., exh. D thereto (emphasis in original). Mr. Aquilio explains that he understood that under this option, if he predeceased his wife, she would receive no benefits. Aquilio Affidavit at P 10. He further avers that he "also understood that the PBA $ 75,000 death benefit was maintained "until death" at premiums the PBA set forth in the above-noted communications. I later learned that such was not at all the truth as to the PBA insurance." Id. Indeed, Mr. Aquilio further maintains that it was not until the deposition of office manager Erhardt, conducted as part of this litigation, that he became aware that his US Life insurance policy does not continue until his death, but terminates at age 85. Id. at P 14.

 After the US Life contract, the PBA entered into a contract with another insurance company - American International Life Insurance Company ("AI Life") - to provide similar coverage to its members. That contract was to provide group term life insurance for a three-year period commencing December 1, 1988 through November 30, 1991. Fairchild Affidavit at P 69. Under the terms of the AI Life contract with the PBA, term life insurance rates for retired members, such as Mr. Aquilio, were increased somewhat, and affected retirees were so advised in writing. Fairchild Affidavit at PP 74 and 76, exhs. K and L thereto.

 While the AI Life contract was in effect, AI Life advised the PBA that it intended to terminate that contract because supposedly the percentage of PBA membership participation had fallen below that required thereunder. Id. at P 78. The PBA disagreed with AI Life's interpretation of the relevant contractual provision, but nevertheless decided to change to another insurance company so as not to risk termination of coverage under the AI Life contract without a new plan being in effect. Id. at P 79.

 The PBA then decided to solicit bids for a new insurance company to provide coverage to its members. Procurement of a replacement insurance carrier was not easy. In fact, according to the Senior Vice President of the PBA's appointed broker, "only one insurance carrier was willing to underwrite term life insurance for the PBA out of the nine (9) major carriers which Jardine [the broker] solicited." Affidavit of Willis H. Griffith (Mar. 23, 1992) at P 9. Common to all of the submitted proposals was the carriers' insistence upon an age based rate structure. Id. at P 80. Somewhat surprisingly, age had not been a factor in PBA's prior insurance offerings. After much consideration, the PBA established a new rate structure that went into effect on October 1, 1990 with a new carrier - Preferred Life of New York ("Preferred Life"). Id. Because rates under Preferred Life's program are directly linked to age, the rates of many of PBA's retired members increased substantially. Id. at P 81. The PBA's stated justification for agreeing to that increase was that many younger members pay substantially lower premiums, thus encouraging greater overall participation in the plan, which in turn ensures the plan's long-term viability and allows the PBA to continue to provide, at competitive rates, low-cost life insurance. Id. at P 81. "[A] number of letters were sent to the PBA membership and plan participants notifying them of the impending changes[]" brought about as a result in the switch to Preferred Life. Id. at P 84, and exh. M thereto (copies of those letters).

 After receiving notification of this rate increase in October, 1990, when he received a reduced pension check, *fn9" plaintiff commenced this lawsuit. Before doing so, however, upon receipt of this reduced pension check, plaintiff claims to have immediately contacted the PBA, which allegedly advised him that the US Life policy was cancelled or terminated late in 1989. Complaint at P 13. Plaintiff further alleges that at that time the PBA told him that the for the six months following cancellation of the US Life policy, the PBA had contracted with another insurance company, but that policy too was supposedly cancelled. Id. Under plaintiff's version of events, the PBA purportedly sent him letters to this effect, which went unanswered. Lastly, the plaintiff asserts that the PBA informed him that after cancellation of the US Life policy, it obtained a $ 75,000 death benefit policy at a premium rate higher than that under the US Life policy. Id.

 At the heart of this lawsuit is plaintiff's belief that when he elected to receive additional group life insurance coverage through the PBA in July, 1987, just several months prior to his retirement, such coverage entitled him to receive life insurance coverage of $ 75,000 at a cost of $ 315 annually for the remainder of his life. As it turns out, however, at least according to the PBA, that was not the case. It is the PBA's position that it never agreed to provide life insurance at fixed rates for any of its plan participants, including the plaintiff. Indeed, the PBA's President, John Canfield, the Board Member responsible for many insurance-related issues, avers that during his tenure (since 1980), "all of the term life insurance contracts the PBA has entered into with life insurance companies . . . have been limited in duration, with rates that we could only maintain for a maximum of three (3) years." Canfield Affidavit at PP 4, 21, and 27. He further avers, "no term life insurance program that ever came to my attention offered fixed rates on a long-term basis, or for the life of the insured individual." Id. at P 26. According to Canfield, "the PBA's term life insurance program was never designed to be unlimited in duration at a fixed rate." Id. In fact, PBA Treasurer Fairchild goes so far as to aver that "the PBA has never provided its membership any cash value, dividends, loans or other mechanisms which might suggest that a participant was receiving anything other than term life insurance." Fairchild Affidavit at P 22.

 Along these same lines, it is interesting to note, although certainly not determinative, that Willis H. Griffith, the Senior Vice President of the PBA's appointed brokerage company, opines "that the New York State Insurance department does not permit lifetime coverage under group term life insurance policies." Griffith Affidavit at P 17. To allow such coverage would, in Mr. Griffith's opinion mean "that the plan's loss experience would deteriorate to the point that the insuring company would terminate the plan." Id. Finally, he opines, quite emphatically, that "in my entire experience, I have never seen a term life insurance policy that offers a guaranteed fixed premium rate with a level death benefit for the life of the insured, and, in my opinion, none exist." Id. at P 19.

 Plaintiff's complaint is divided into two "counts." The first is designated as an "estoppel" claim, wherein plaintiff contends, based upon the three PBA communications described earlier, that he is entitled to a non-cancelable life insurance with $ 75,000 of coverage at a cost of $ 315 annually for the remainder of his life. Put somewhat differently, based upon those three PBA communications, plaintiff alleges that the PBA is estopped from increasing the cost of his term life insurance. Plaintiff's second cause of action for alleged ERISA disclosure violations will be fully outlined in section II below.

 The PBA is moving for summary judgment on both counts of the complaint. The court will first address the estoppel based cause of action, and then go on to consider the second cause of action. Insofar as the estoppel cause of action is concerned, the PBA initially contended that ERISA preempts that claim because it is based upon common law contract principles of estoppel, which "relate to" an employee benefit plan and as such is specifically preempted under 29 U.S.C. § 1144(a). *fn10" The PBA further asserts that even if plaintiff's estoppel claim is construed as an ERISA claim, by its terms, the plan was clearly terminable and thus plaintiff acquired no vested rights thereunder. In response to plaintiff's opposition, the PBA expanded its estoppel argument and is now claiming that the plaintiff cannot rely upon estoppel principles to modify, by informal written communications (the three PBA communications in 1985, May, 1987, and October 29, 1987), the unambiguous, written terms of the US Life insurance contract.

 Notwithstanding the preemption doctrine, the plaintiff basically responds that estoppel remedies can be invoked under ERISA, and that the present record supports the availability of such remedies in this case. Thus, the plaintiff vigorously contends that the PBA's motion for summary judgment on the first cause of action must be denied.

 DISCUSSION

 I. ESTOPPEL

 On countless prior occasions, this court has recited the standard of review which governs a motion for summary judgment under Fed. R. Civ. P. 56. While the parties are undoubtedly aware of these rules, a few are worth stressing once again. Quite recently the Second Circuit took great pains to reiterate that the court's role on a summary judgment motion "is carefully limited to discerning whether there are any genuine issues of material fact to be tried, not to decide." Gallo v. Prudential Residential Services, 93-7556, 1994 U.S. App. LEXIS 9137, at *11 (2d Cir. April 27, 1994). The court's "duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution." Id. In engaging in this task there are four oft-repeated rules which must be heeded:

 Id. at *9 - *10 (citations omitted). As to this last point, put another way, "an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavit or as otherwise provided in [Rule 56], must set forth specific facts showing that there is a genuine issue for trial." Leon v. Murphy, 988 F.2d 303, 308 (2d Cir. 1993) (internal quotations omitted) (citations omitted). ...


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