ROBERT HOLMES BELL, UNITED STATES DISTRICT JUDGE.
Jeffery T. Crose was injured in an automobile accident on February 7, 1998. At the time of the automobile accident, Mr. Crose was insured under a coordinated automobile no-fault policy issued by Farm Bureau General Insurance Company of Michigan. The policy was issued pursuant to M.C.L.A. § 500.3109a, and provided excess coverage, only. Farm Bureau paid $8,059 in medical benefits to Crose as a result of the injuries he sustained in the February 7, 1998, accident.
The Farm Bureau policy contains the following Coordination of Benefits ("COB") provision:
In consideration of the reduction in premium:
1.When "Excess Medical Payments" is indicated in the Declarations, the Company shall not be liable to the extent any Personal Protection Insurance allowable expenses benefits are available, paid, payable, or required to be provided to or on behalf of the person named in the policy, their spouse or any relative of either domiciled in the same household under the provisions of any valid and collectible:
a. individual, blanket or group accident disability, health maintenance organization hospitalization or similar insurance or health plan;
b. medical, surgical, or similar reimbursement plan;
c. worker's disability compensation or disability laws of a similar nature or any other state or federal government law; or
d. automobile or premises insurance affording medical expense benefits.
Farm Bureau Policy, Section IV Limits of Liability, ¶ B.
At the time of his accident Mr. Crose was also eligible to participate in the National Automatic Sprinkler Industry Welfare Fund ("the NASI Welfare Fund"), a self-funded plan governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. The NASI Welfare Fund excludes from coverage expenses for medical services to the extent benefits are available under no-fault motor vehicle insurance.
The NASI Welfare Fund contains the following provision under "General Exclusions:"
The plan does not pay medical or non-medical charges in connection with the following:
5. services or supplies to the extent covered by state or federal no-fault insurance or expenses which are covered under third-party liability insurance coverage, such as homeowners, or automobile insurance, or expenses for which a third party is liable.
NASI Welfare Fund, p. 51.
Farm Bureau filed this action for declaratory relief against Michael W. Jacobson, Fund Administrator for the NASI Welfare Fund. Farm Bureau seeks a declaration that it is entitled to recoup from the NASI Welfare Fund all amounts Farm Bureau has paid on behalf of Crose as a result of the injuries he suffered in the February 7, 1998, accident. Farm Bureau seeks a further declaration that the NASI Welfare Fund is the primary health care benefit provider for all future medical expenses incurred by Crose as a result of the accident, and that Farm Bureau is liable only to the extent that the amounts paid on behalf of Crose exceed the available coverage under the NASI Welfare Fund.
This matter is currently before the Court on Defendant's motion to dismiss pursuant to FED. R. CIV. P. 12(b)(6) Defendant contends that Farm Bureau's action must be dismissed because Farm Bureau failed to invoke or exhaust the NASI Welfare Fund's internal claims review and appeal procedures. In the alternative, the NASI Welfare Fund contends that Plaintiff's claims must be dismissed because claims grounded on the Michigan No-Fault Act are preempted by ERISA. Because the parties have presented and relied upon matters outside the pleadings, the motion will be treated as one for summary judgment under FED. R. CIV. P. 56.
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.
In this case there are no material facts in dispute. The Court is presented with a conflict between a no-fault policy with a coordination of benefits provision and a self-funded ERISA plan which excludes coverage where there is no-fault coverage. The parties agree that because the NASI Welfare Fund is a self-funded ERISA plan, federal common law rather than the Michigan Federal Kemper Rule controls on the issue of which plan is primary. See Auto Owners Ins. Co. v. Thorn Apple Valley. Inc., 31 F.3d 371, 374 (6th Cir. 1994).
The Federal Kemper Rule provides that when there is a priority dispute between a no-fault insurer which has issued a coordinated policy under § 3109a of the Michigan No-Fault Act, M.C.L.A. § 500.3109a; M.S.A. § 24.13109(1), and an accident victim's other health coverage provider, both of which contain a coordination of benefits provision, the health insurer will be deemed primary.Federal Kemper Ins. Co. V. Inc, v. Health Ins. Admin., Inc., 424 Mich. 537, 551, 383 N.W.2d 590 (1986).
Plaintiff Farm Bureau contends that under federal common law, the NASI Welfare Fund must be deemed primary because the exclusion the NASI Welfare Fund depends on is an invalid escape clause.
An escape clause is one which "provides for an outright exception to coverage if the insured is covered by another insurance policy." Northeast Dept. ILGWU v. Teamsters Local Union No. 229, 764 F.2d 147, 160 (3rd Cir. 1985). In ILGWU, supra, and McGurl v. Trucking Employees of North Jersey Welfare Fund, Inc., 124 F.3d 471, 477 (3rd Cir. 1997), the Third Circuit held that escape clauses are unenforceable as a matter of law. The Third Circuit reasoned that because a participant of a plan with an escape clause loses expected coverage in the presence of another insurance plan, a decision by a plan's fiduciary to include an escape clause is "arbitrary and capricious" and unenforceable under ERISA's regulatory scheme. McGurl, 124 F.3d at 476-77 (citing ILGWU, 764 F.2d at 163). Plaintiff contends that this Court should follow the Third Circuit and declare the escape clause to be invalid.
As this Court recently stated in Farm Bureau Mut. Ins. Co. v. Celia Corp. Employee Benefit Plan, Case No. 1:99-CV-439 (W.D.Mich. Feb. 22, 2000), "[t]he Sixth Circuit has not adopted ILGWU's conclusion that it is impermissible for the trustees of a multi-employer plan to adopt an escape clause because it reflected `arbitrary and capricious conduct, by the trustees." Id. at p. 6. In Musto v. American General Corp., 861 F.2d 897 (6th Cir. 1988),cert. denied, 490 U.S. 1020 (1989), the Sixth Circuit rejected the assumption that escape clauses in ERISA welfare plans are automatically invalid. Id. at 912. The Court observed that at least with respect to single employer plans, it was not a breach of fiduciary responsibility for the company to adopt an escape clause. Id.
Although Musto distinguished between single and multi-employer plans, the Sixth Circuit rejected this distinction in Pope v. Central States S.E. S.W. Areas Health and Welfare Fund, 27 F.3d 211, 213-14 (6th Cir. 1994). In Pope the Sixth Circuit held that when an employer decides to amend a benefits plan, as opposed to managing and administering the plan in accordance with its terms, its actions are not to be judged by fiduciary standards, regardless of whether the plan is a single or a multi-employer plan. Id. (citing Adams v. Avondale Indus., Inc., 905 F.2d 943, 947 (6th Cir.), cert. denied, 498 U.S. 984 (1990).
The Pope court declined to follow the dictum in Musto that trustees who amend a multi-employer plan affect the allocation of a finite asset pool between participants and hence act as plan administrators subject to a fiduciary duty. Pope, 27 F.3d at 213 (citing Musto, 861 F.2d at 912).
In this case, we are dealing with the formation rather than the amendment of a plan. Nevertheless, the standards are the same.
The fiduciary duties owed to participants and beneficiaries under ERISA apply only to the administration of a plan, not to its formation, amendment, or modification. Milwaukee Area Joint Apprenticeship Training Committee for Elec. Industry v. Howell, 67 F.3d 1333, 1338 (7th Cir. 1995). Fiduciary duties do not apply to the formation of an ERISA plan because, while ERISA imposes on welfare benefit plans a number of reporting and disclosure requirements, ERISA "does not regulate the substantive content of welfare benefit plans." Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 732 (1985); Michigan United Food and Commercial Workers Unions v. Baerwaldt, 767 F.2d 308, 311 (6th Cir. 1985). "Congress never intended ERISA to dictate the content of welfare benefit plans, much less for the federal courts to determine the content of such plans." Hickey v. A.E. Staley Mfg., 995 F.2d 1385, 1393 (7th Cir. 1993).
Because fiduciary duties do not apply to the formation of the plan, and because ERISA does not regulate the substantive content of ERISA welfare plans, it appears to this Court that pursuant to Sixth Circuit authority there is no basis for holding an escape clause in an ERISA plan to be unenforceable as a matter of law. In this case, just as in Celia Corp., this Court "declines Farm Bureau's invitation to follow the Third Circuit, which stands alone among the courts of appeals in considering escape clauses in ERISA plans as per se invalid." Celia Corp., supra, at pp. 6-7.
For the reasons stated, this Court rejects Plaintiff Farm Bureau's assertion that the NASI Welfare Fund escape clause is unenforceable as a matter of law. This Court will give effect to the NASI Welfare Fund's exclusion of medical benefits to the extent covered by state no-fault insurance. Because Crose is not entitled to medical benefits under the NASI Welfare Fund, there is no coordination of benefits issue, and Farm Bureau is liable for Crose's medical expenses.
In view of this Court's ruling in Defendant NASI Welfare Fund's favor on the escape clause issue, the Court need not address Defendant NASI Welfare Fund's alternative argument that Plaintiff's action is barred by its failure to invoke or exhaust the NASI Welfare Fund's internal claims review and appeal procedures.
An order and judgment consistent with this opinion will be entered.