:: Wal-Mart SPD Deemed To Be “The Formal Plan Document” But Release Terms Leave Open Issue On Remand
In our opinion, the label of summary plan description on the Associate Benefits Book is not dispositive. The Plan Wrap Document contemplates a formal plan document, stating, “only the terms of the formal plan document of each such arrangement [are] incorporated herein.” But this case presents a circumstance where there is a welfare program specified but no formal document with the same label, and no source of benefits exists aside from the written Associate Benefits Book. Where no other source of benefits exists, the summary plan description is the formal plan document, regardless of its label. Administrative Committee of Wal-Mart Stores, Inc. v. Gamboa, — F.3d —-, 2007 WL 675472 (8th Cir.(Ark.)) (March 7, 2007)
Gamboa presents another saga in Wal-Mart’s troubles with its “wrap document”, i.e., the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan Wrap Document , amended and restated on January 1, 2001. See, e.g., :: SPD Saves Plan’s Subrogation Rights
The Facts
The essential facts were typical of most ERISA subrogation and reimbursement cases.
In 2002, while Nancy Gamboa was a Wal-Mart employee covered under the Plan, a drunk driver collided with the Gamboas’ car, causing serious injuries to Nancy and her family. Her husband, Jose, is now permanently disabled as a result of injuries sustained in the accident. Pursuant to the benefits listed in the 2002 Associate Benefits Book, subtitled, “Summary Plan Description,†the Administrative Committee paid health care benefits totaling $177,136 on Jose’s behalf. The Gamboas filed a dram shop action for damages, and in December 2004, Nancy, Wendy, and Lucas Gamboa all settled their individual claims against the tortfeasor for a total of $1 million. In consideration for the settlement proceeds paid to those family members, Jose executed a written release of his claims arising from the accident.
One notable exception: the payment was in settlement of the individual claims of Nancy, Wendy and Lucas in exchange for a release by Jose. This will be an issue as discussed further below.
The Wrap Document Deficiencies
In the district court’s opinion, the “plain language of the Plan Wrap Document” required a welfare program to be established by either:
- a formal written arrangement listed by name in Appendix A, or
- where there is no formal document, an applicable insurance contract or policy, plus its description in the Associate Benefits Book.
The reimbursement provision was not part of the “plan”, in the estimation of the district court, because it existed only in the Associate Benefits Book “which is a summary plan description not specifically listed as a welfare program in Appendix A, and it does not accompany an applicable insurance policy or contract.”
Latent Ambiguity Requires Factor Analysis
The Eighth Circuit reversed, holding that the documentation lapses presented a “latent ambiguity”. Citing Miller v. Taylor Insulation Co., 39 F.3d 755, 760 (7th Cir.1994), the court held that the doctrine of latent ambiguity applies in the ERISA context. “A latent ambiguity arises when the contract on its face appears clear and unambiguous, but collateral facts exist that make the contract’s meaning uncertain.†Connect Commc’ns v. Sw. Bell, 467 F.3d 703, 709 (8th Cir.2006).
Applying the Finley Factors
In the face of a latent ambiguity, the dispute cannot be resolved by reference to the apparently plain language of the document, stated the Court, and thus, it must consider all of the factors listed in Finley v. Special Agents Mut. Benefits Ass’n, 957 F .2d 617, 621 (8th Cir.1992). Under that approach, if a plan adminstrator has discretionary authority (as did the Wal-Mart Administrative Committee) the court considers:
- whether the interpretation is consistent with the goals of the Plan,
- whether the interpretation renders any language in the Plan meaningless or internally inconsistent,
- whether the interpretation conflicts with the substantive or procedural requirements of the ERISA statute, and
- whether the administrator interpreted the words at issue consistently, and whether the interpretation is contrary to the clear language of the Plan. Finley (citing De Nobel v. Vitro Corp., 885 F.2d 1180, 1188 (4th Cir.1989) (citing cases)).
Discretion Leads Court To Favor Plan’s Interpretation
The Court opined that the case presented a circumstance where “there is a welfare program specified but no formal document with the same label, and no source of benefits existed aside from the written Associate Benefits Book.” Adopting the interpretation of the plan, the Court held that “[w]here no other source of benefits exist[], the summary plan description is the formal plan document, regardless of its label.”
The court stated:
This interpretation is also consistent with the requirements of ERISA. Absent a written arrangement specifying how benefits are to be paid, no ERISA welfare plan exists. See 29 U.S.C. § 1102(b)(4) (requiring an employee benefit plan to specify the basis on which payments are made to and from the plan). The group health benefits were provided as specified in the Associate Benefits Book, which informs the participants that portions of the book serve as part of the official plan document for the Plan. To hold that the only document providing health benefits is not a plan document would be to inappropriately permit an employer to “avoid the written instrument requirement by treating this written document describing employee benefits as merely a summary of a plan that is nowhere else in writing.†Feifer v. Prudential Ins. Co. of Am., 306 F.3d 1202, 1208 (2d Cir.2002). ERISA requires a written arrangement, and no other document exists by which group health benefits are provided. In this situation, the Administrative Committee’s interpretation is consistent with the requirements of ERISA. It would be nonsensical to conclude that the plain language of the Plan requires an interpretation that renders no plan at all under the terms of ERISA.
Effect of Release Uncertain
In an interesting development, however, the Court remanded the case to the district court for further proceedings as to the effect of a release executed by Jose.
Finally, while the Associate Benefits Book requires reimbursement of benefits in certain circumstances, the district court never resolved the Gamboas’ assertion that reimbursement is not permitted because of Jose’s written release, and this issue was not briefed on appeal. Consequently, on remand, the district court is directed to address and rule upon the effect, if any, of Jose’s written release, as well as any other remaining affirmative defenses.
Note: The Eighth Circuit viewed the broader interpretation of plan documents as appropriate in the sense of parity:
Thus, regardless of its label as a summary plan description, if a dispute had arisen over the amount of benefits due, the Administrative Committee would no doubt have been bound to provide benefits in accordance with this document . . . Having received medical benefits in accordance with the Associate Benefits Book, we will not permit a participant to deny the corresponding responsibilities and obligations that are clearly imposed on the participant in the same document-what is good for the goose is good for the gander.
Actually, the Eighth Circuit recently rejected a participant’s claim based upon SPD inaccuracies. See:: Eighth Circuit Requires “Detrimental Reliance†For Employee To Recover Based Upon Inaccuracy in Summary Plan Description. The Eighth Circuit has proven to be a very pro-plan jurisdiction on plan language interpretations as noted in the foregoing article.
Effect of Release - The remand for further consideration on the effect of the plan beneficiary’s release comes as something of a surprise. There is authority that an ERISA plan participant “cannot unilaterally allocate settlement proceeds to something other than medical expenses in order to evade subrogation or to buttress an argument that a double recovery would not have resulted.” See, Moore v. Blue Cross and Blue Shield of Nat. Capital Area, 70 F.Supp.2d 9 (D.D.C.,1999)
Whether similar notions will prevent allocation of a recovery to other parties in an exchange for a release presents a variation of the theme and an interesting issue to follow. Cf. B.P. Amoco Corp. v. Connell, 320 F.Supp.2d 1368 (M.D.Ga.) (June 01, 2004) (fact that parents were beneficiaries of trust and did not control trust funds did not prevent plan from obtaining restitution from trustee) (a pre-Sereboff decision).
Document Ambiguities - Ambiguity in plan documents rarely escape controversy. Though the Eighth Circuit cited Fourth Circuit authority, a recent Fourth Circuit case actually interpreted the document ambiguities against the plan administrator where the plan administrator was an insurer. See :: Fourth Circuit Interprets Ambiguous Policy Language Against Insurer
