Central States, SE v. Student Assurance Services

This appeal arises out of an insurance coverage dispute between Central States,

Southeast and Southwest Areas Health and Welfare Fund, an ERISA plan, and two

insurance companies, Columbian Life Insurance Company and Security Life

Insurance Company of America. In essence, both sides contend that the other bears

primary responsibility to cover medical expenses incurred by their common insureds.

Central States brought suit to enforce the terms of its plan under § 502(a)(3) of

ERISA. The district court dismissed the complaint 1 because the relief sought by

Central States was legal rather than equitable. Agreeing with several other circuits

that have addressed the same legal argument of Central States, we affirm.

Central States, a multi-employer trust fund governed by ERISA, provides

health and welfare benefits to participants in the teamster industry and their

dependants. Columbian Life and Security Life are insurance companies that sell,

among other things, medical insurance for accidents suffered by students. Student

Assurance Services processed claims for policies issued by Columbian Life and

Security Life. For purposes of this opinion, we refer to these three entities

collectively as “Student Assurance.”

Central States’s complaint identifies thirteen junior high, high school, and

college student-athletes who were covered dependants under its plan. These students

also were covered under policies issued by Student Assurance. After the students

sustained athletic injuries, Central States paid the students’ medical expenses and

sought reimbursement from Student Assurance. Student Assurance refused to pay.

In total, Central States paid $137,204.88 in benefits. Central States alleges that

according to the coordination of benefits provision of its plan, the student accident

policies supply primary coverage for the students’ covered medical expenses.

Student Assurance insists, however, that the student accident policies are excess

policies, and that they are not obligated to pay until Central States has reached the

maximum contribution under its plan.

1The Honorable Ann D. Montgomery, United States District Judge for the

District of Minnesota.

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Central States sued, invoking federal common law and § 502(a)(3) of ERISA.

The complaint includes claims for declaratory relief, restitution, and the imposition

of an equitable lien and constructive trust to secure reimbursement for the benefits

paid on behalf of the common insureds. Student Assurance moved to dismiss on the

ground that Central States’s claims, while ostensibly seeking equitable remedies,

were actually for legal relief that is unavailable under § 502(a)(3). See Great-West

Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002). The district court granted

the motion and dismissed the complaint.

We are the fifth circuit to consider substantially identical claims brought by

Central States against insurance providers who are not governed by ERISA. Central

States seeks to employ § 502(a)(3) to enforce its coordination of benefits provision

against other insurers. In response, the insurers have argued that Knudson forecloses

the claims, because Central States requests legal, not equitable, relief. Four circuits

have agreed with the insurers and held that Central States’s claims are not permitted

under § 502(a)(3). See Central States, Se. & Sw. Areas Health & Welfare Fund v.

Gerber Life Ins. Co., 771 F.3d 150 (2d Cir. 2014); Central States, Se. & Sw. Areas

Health & Welfare Fund v. Bollinger, Inc., 573 F. App’x 197 (3d Cir. 2014); Central

States, Se. & Sw. Areas Health & Welfare Fund v. First Agency, Inc., 756 F.3d 954,

959-62 (6th Cir. 2014); Central States, Se. & Sw. Areas Health & Welfare Fund v.

Health Special Risk, Inc., 756 F.3d 356 (5th Cir. 2014).

In Knudson, an ERISA plan sued a participant for restitution under § 502(a)(3)

to recover benefits paid before a settlement of a personal injury lawsuit between the

participant and an auto manufacturer. 534 U.S. at 207-08. The Supreme Court held

that an ERISA plan can bring a claim under § 502(a)(3) only for “those categories of

relief that were typically available in equity.” Id. at 210 (internal quotation omitted).

The Court then distinguished legal claims for restitution from equitable claims. A

plaintiff could seek restitution at law when he “could not assert title or right to

possession of particular property, but . . . he might be able to show just grounds for

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recovering money to pay for some benefit the defendant had received from him.” Id.

at 213 (internal quotation omitted). Restitution was available at equity, and thus

available under § 502(a)(3), only “where money or property identified as belonging

in good conscience to the plaintiff could clearly be traced to particular funds or

property in the defendant’s possession.” Id. (emphasis added). In Knudson, the

settlement proceeds were paid not to the plan participant, but to his attorney and to

a trust for medical care. Since the plan participant never had the funds in his

possession, the Supreme Court held that the ERISA plan’s claim for restitution was

legal rather than equitable. Id. at 214.

Following the analysis of Knudson, our sister circuits have concluded that

Central States’s claims for restitution and for an equitable lien or a constructive trust

are legal rather than equitable claims, because the fund seeks compensation out of the

general assets of the non-ERISA insurers, and does not assert the right to particular

property in the possession of the insurers. See Gerber Life, 771 F.3d at 154-55;

Bollinger, 573 F. App’x at 200-02; First Agency, 756 F.3d at 960-61; Health Special

Risk, 756 F.3d at 366-67. We agree with their analysis, and we likewise conclude that

the district court properly dismissed those claims in this case.

Central States’s complaint also seeks declaratory relief as to both past and

future covered medical expenses incurred by the common insureds. The district court

properly dismissed these claims as well. With respect to past expenses, Central

States’s complaint seeks ultimately to recover the $137,204.88 that it paid on behalf

of the common insureds. Central States “does not seek a declaration of liability under

conflicting plans, but a judgment through which it can continue to pursue its goal of

receiving monetary compensation not authorized by § 502(a)(3).” Health Special

Risk, 756 F.3d at 368; see also Gerber Life, 771 F.3d at 154 (“Central States’ claims

are, in essence, legal ones for money damages even though they are covered by an

equitable label. Litigants are not at liberty to plead around ERISA’s limitations by

resorting to common law or declaratory judgment claims.”); Bollinger, 573 F. App’x

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at 200 n.5 (“We think it clear, however, that such requests [for declaratory relief]

simply seek a recovery equal to the sum of money that Central States had paid though

it does so by using equitable nomenclature.”). As to a declaratory relief addressing

future expenses, assuming for the sake of analysis that § 502(a)(3) permits such a

claim, Central States’s claim is not ripe for review, because “[t]he complaint contains

no allegation that any of the [thirteen] insureds have sustained new injuries creating

a dispute over who must pay their claims.” Health Special Risk, 756 F.3d at 368.

For these reasons, the judgment of the district court is affirmed.