UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

ALLSTATE INSURANCE COMPANY,

Plaintiff,

v.

WEYCO, INC., and PECKHAM

VOCATIONAL INDUSTRIES, INC.,

as Plan Administrator and

Sponsor,

Defendants.

Case No. 1:99-CV-538

HON. DAVID W. McKEAGUE

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This case presents a coordination of benefits ("COB") dispute between two insurers. Plaintiff Allstate Insurance Company ("Allstate") provides no-fault automobile insurance under Michigan law. Defendant Weyco, Inc., ("Weyco") is the administrator for a self-funded group health plan ("Plan") organized pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., sponsored by defendant Peckham Vocational Industries, Inc., ("Peckham").

On May 2, 1998, an employee of Peckham, Jia Yang, and his wife, Pai Xiong, sustained injuries in an automobile accident. Allstate has paid medical benefits to Yang in an amount totaling $4,218.17 as of August 30, 1999, as the named insured. Allstate has also compensated Xiong, as Yang's dependent, for medical

expenses in an amount totaling $10,804.52. Allstate now seeks both a declaratory judgment that defendants are primarily liable for the medical expenses of the claimants, as well as judgment for the compensation it has paid Yang and Xiong to date.

In response, defendants argue that because both the Peckham plan and Allstate's policy contain COB clauses that attempt to subordinate coverage to other available insurance, the Court should resolve this irreconcilable conflict by giving full effect to the ERISA plan's COB, rendering its coverage secondary to Allstate's.

The parties agree no genuine issue of material fact exists, and have submitted their dispute to the Court on the briefs in lieu of trial. For the reasons set forth below, the Court finds in favor of defendants, and a judgment order will issue to that effect.

ERISA preempts Michigan law when a conflict exists. See Auto-Owners Ins. Co. v. Thorn Apple Valley, Inc., 31 F.3d 371, 374 (6th Cir. 1994). The conflict must be resolved by reference to the body of federal common law arising under ERISA. Id. If an irreconcilable conflict arises between a traditional insurance policy and an ERISA plan on account of conflicting COB clauses, the terms of the ERISA plan, including the plan's COB clause, must be given full effect.

Accordingly, the Court first inquires whether the language of

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the COB clauses is in direct conflict. If so, the Court proceeds to determine whether the Plan expressly disavows coverage for medical expenses covered by the no-fault insurance carrier. See Auto-Owners, 31 F.3d at 375.

Allstate's COB clause clearly subordinates its coverage to that of any other health or medical insurance plan. Defendants argue the Plan's COB, particularly its "Automobile Insurance, Including No-Fault Insurance" provision unambiguously subordinates the Plan's coverage to any available no-fault insurance, creating an irreconcilable conflict with Allstate's policy. The Plan's "Automobile Insurance, Including No-Fault Insurance" clause provides:

(Sum. Plan. Des. at 36).

Allstate, relying upon a line of analysis first offered in Dayton Hudson Dept. Store Co. v. Auto-Owners Ins. Co., 953 F.Supp. 177 (W.D. Mich. 1995), argues the above provision "is truly an excess clause, and does not expressly disavow coordination with Michigan no-fault policies." (Def. Br. at 19). Allstate further contends the Plan's Automobile Insurance clause indicates only that an insured must first exhaust any coverage it has under an

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automobile no-fault policy of insurance before the Plan will extend benefits, and does not expressly subordinate itself to Michigan no-fault policies. Indeed, Allstate maintains that "[t]o read these provisions as requested by defendant would create definite ambiguities within the Plan, and render its provisions meaningless and inconsistent." (Def. Br. at 20).

This Court disagrees. The language of the Plan's Automobile Insurance clause is clear and unambiguous. While the plain language of the provision suggests that it may function as an "excess clause," it may also be reasonably characterized as a COB clause due to the function it serves. Indeed, in an earlier opinion on similar language this Court has concluded that no meaningful distinction can be drawn between an excess clause and a COB clause. See Citizens Ins Co. of America v. Northstar Print Group, Inc., and Northstar Print Group, Inc. Health Plan, No. 2:97-CV-144 mem. op. at 13-15 (W.D. Mich. Feb 24, 1998) . The Plan's "Automobile Insurance, Including No-Fault Insurance" clause clearly sets forth the order of payment in the event that more than one policy covers the insured--namely, that the Peckham Plan will provide secondary coverage where other coverage is available--and thus both Allstate's policy and the Plan contain COB clauses that are axiomatically opposed.

Allstate proceeds to argue, however, that the ordinary and popular understanding of the term "available" means "present or

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ready for immediate use," and then reasons that if the Peckham Plan intended its Automobile Insurance clause to subordinate itself to Michigan no-fault benefits, it should have said so expressly, rather than merely subordinating itself to "'no-fault benefits." (Def. Br. at 21). Allstate further contends that the only no-fault benefits this clause addresses are those that provide full medical coverage. Because Allstate's policy contains a COB clause that attempts to subordinate Allstate's coverage to other coverage available to Jang and Xiong, it reasons no benefits were "available" as defined by the Peckham Plan.

This Court declines to adopt Allstate's strained construction and circular reasoning. The Court's responsibility in construing ERISA plan language is to ascertain and effectuate the underlying intent. See Wulf v. Quantum Chemical Corp., 26 F.3d 1368, 1376 (6th Cir. 1994). This interpretive task begins with reference to the plan's language itself, but may also include consideration of reasonable inferences and presumptions under the circumstances. See id.

Allstate's argument that the Plan's Automobile Insurance clause fails to subordinate itself because it does not expressly reference "Michigan" in connection with no-fault insurance is an unpersuasive, hyper-technical interpretation that cuts against the Plan's plain language. Similarly, the Court can discern no basis in the Plan's language or any reasonable inference for Allstate's

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conclusion that the Plan's Automobile Insurance clause purports to subordinate itself only if full medical benefits are available from another insurance policy. Rather, the Court finds the Plan's Automobile Insurance clause clearly contemplates that its insured may also be covered under a no-fault policy, like the Allstate policy in question, and expressly disavows coverage where such dual coverage exists until the coverage under the no-fault policy is

exhausted. Moreover, the Court finds adopting defendants' interpretation does not result in ambiguities of construction, but rather accords with the plain meaning of the Plan's language.

Allstate next argues that the Peckham Plan's Summary Plan Description explicitly contemplates coordination with other "plans," a term Allstate contends includes a mandatory no-fault insurance policy.¹ Allstate thus suggests that even if the Plan's Order of Payment provision controls the determination of whether

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