ORDER ALLOWING OBJECTION TO PRIORITY CLAIM
The matter before the court in this chapter 7 case is the objection to the $41,682.32 priority claim (Claim # 38) of Jefferson-Pilot Life Insurance Company filed by Automatic Vehicle Navigation, Inc. (AVN). AVN is a creditor of the chapter 7 debtor, AER-Aerotron, Inc. (Aerotron), that purchasеd the debtor’s assets and assumed many of its liabilities. A hearing was held in Raleigh, North Carolina on March 15, 1995.
The facts are not in dispute. Aerotron wаs in the business of manufacturing communications equipment, and it provided a group health, dental and term life insurance policy for its employees through Jefferson-Pilot. Aerotron was responsible for paying the insurance premiums, and when the premiums were not paid, Jeffеrson-Pilot canceled the policy on November 30, 1992.
Aerotron filed for chapter 11 relief on January 11, 1993, and its case was converted to chapter 7 on July 5, 1994. Jefferson-Pilot filed a priority proof of claim for $41,682.32, the unpaid amount of its final month of coverage undеr Aerotron’s policy, and the sole issue is whether Jefferson-Pilot’s claim is entitled to priority pursuant to 11 U.S.C. § 507(a)(4).
Section 507(a)(4) states in pertinent part:
(a) The following expenses and claims have priority in the following order ... (4) Fourth, allowed unsecured claims for contributions to an employee benefit plan—
(A) arising frоm services rendered within 180 days of the petition or the date of cessation of the debtor’s business, whichever occurs first ... [.]
11 U.S.C. § 507(a)(4).
Notwithstanding opiniоns from the United States Courts of Appeals for the First and Ninth Circuits to the contrary, the court concludes that an insurer is not entitled to the priоrity afforded by § 507(a)(4).
In re Saco Local Development Corp.,
Under the Bankruptcy Act of 1898, “only actual ‘wages and commissions’ had priority.”
Employers Ins. of Wausau v. Plaid Pantries, Inc.,
Partially in response to these cases, in the Bankruptcy Reform Act of 1978 Congress expanded the priorities for employee benefits to include fringe benefits other than wages. Thе priority Congress created in § 507(a)(4) includes contributions to employee benefit plans voluntarily established by employers, *727 but there is no indication in the statute or its legislative history that the priority extends to creditors other than the debtor’s employees.
Statutes must be interpreted according to their plain meaning, and sections of the Bankruptcy Code that establish priorities must be narrowly construed.
United States v. Ron Pair Enter., Inc.
First, § 507(a)(4) grants a priority to “contributions” to an employee benefit plan. In this ease, Jefferson-Pilot entered into a business agreement with Aerotron to provide insurance upon the рayment of premiums. Jefferson-Pilot certainly had no intention of making a “contribution” to the debtor’s employees. The § 507(a)(4) priority would аpply to contributions to an employee benefit plan that are made by both employees and by employers. The statute does not, however, provide a priority to third parties. Furthermore, even if a third party were to be subrogated to an employee’s claim under § 507(a)(4), that claim would be denied priority pursuant to § 507(d).
Secondly, “[sjection 507(a)(4) requires that the priority claim arise from a ‘service’ rendered 180 days prior to the debtor’s filing of the petition.”
In re HLM Corp.,
Finally, in examining the plain meaning of the Bankruptcy Code the court also finds it significant that the statutory cap on the еmployee benefits priority described in § 507(a)(4)(B) references the wage priority in § 507(a)(3) as a part of the cap’s calculation. If insurance companies were meant to be eligible to claim the § 507(a)(4) priority, the priority would not be limited by the amount that employees may collect under the wage priority.
Turning to the legislative history of § 507(a)(4), there are many indications that Congress’ main purposе in enacting this new priority was to benefit employees, with an incidental benefit to the employers. The House Report states that “[t]hе purpose of this [new] priority, as with the administrative expense priority, is in part to ensure that employees will not abandon a failing business for fear of not being paid. In that sense, it contributes to financial rehabilitation.” H.R.REP. No. 595, 95th Cong., 1st Sess. 187 (1977) reprinted in 1978 U.S.C.C.A.N. 5963, 6148. The House Report also noted that thе new employee benefits priority was “limited to the unused amount of the wage priority” but that the new enactment would also change the priority date from which to measure in order to “provide additional protection to the employees of a bankrupt enterprise.” Id. (emphasis added).
The Senate Report was more terse. The creation of the new рriority, it said, overruled
United States v. Embassy Restaurant, Inc.,
*728 Thus, in the absence of a statutory provision which clearly creates a priority for an insurer such as Jefferson-Pilot, it should be treated like the hypothetical general contractor who builds the breakroom, which is to say, like any other unsecured trade creditor. As the court stated in HLM:
Section 507(a)(4) is not to assure the insurance industry that insurers will be paid their money. It is to ensure that the employees will receive the benefits they bargained for in the course of acсepting employment with a debtor. The employees, in this case, will receive or have received their benefits regardless of whether the insurer is paid its premium.
In re HLM Corp.,
Accordingly, AVN’s objection to the priority claim of Jefferson-Pilot is ALLOWED, and Jefferson-Pilot’s claim will be ALLOWED as an unsecured claim in the amount of $41,682.32.
SO ORDERED.