OPINION
This action involves the interpretation of a coordination of benefits clause (“COB”) contained in an Employee Retirement Income Security Act (“ERISA”) health care plan. Defendants, Agency Rent-A-Car Employees Health Care Plan and Employees of Agency Rent-A-Car Hospital Association (hereinafter referred to collectively as “Agency” or defendants) assert that the COB clause in the Agency Plan permits the Plan to refuse to pay valid health care claims in light of the insolvency of the primary ERISA plan. The district court granted plaintiffs motion for summary judgment finding that defendants’ coverage “dropped down,” requiring defendants to pay the amount due for the medical care above and beyond that amount paid by the insolvent primary ERISA insurer. For the rеasons that follow, we affirm the order of the district court.
Summary judgment is appropriate where “there is no genuine issue as to any material fact and [ ] the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). We review a district court’s grant of summary judgmеnt
de novo. Pinney Dock & Transp. Corp. v. Penn Cent. Corp.,
The facts of this case are straightforward. Jeffrey and Karen Westra had separate policies of medical insurance through their respective employers. Mr. Westra’s insurance was through Agency Rent-A-Car Health Care Plan. Mrs. Westra was insured through a 65 Security Plan. Both policies are governed by ERISA. In 1991 and 1992, the Westra family incurred substantial medical bills related to the care of their infant son who was treated at the University of Michigan’s Medical Center. After the medical care was provided, each ERISA plan, citing the COB clause in its respective contract, claimed that the other company’s coverage was primary and that its own coverage was excess. Accordingly, each declined payment of the claims, and the Westras eventuаlly sued both companies.
On March 11, 1993, the district court held that the 65 Security Plan was the primary insurer, 1 and that the Agency Plan coverage was excess. Approximately three months after this ruling, a number of creditors of the now-insolvent 65 Security Plan filed claims against thе Plan in federal district court in New York. Jeffrey and Karen Westra assigned all of their rights against the Plan to the University of Michigan Medical Center, which participated in the district court proceedings as a creditor. Agency was not a creditor of the Plan and did not participate in those proceedings. The district court ordered the 65 Security Plan to pay 10% of the medical expenses owed to the Hospital. The 65 Security Plan has paid some of the 10% owed.
The Regents of the University of Michigan brought this action against Agency pursuant to ERISA, 29 U.S.C. §§ 1132(a)(1) and (3) and 1132(d), to obtain payment of the remainder of the bills owed. Agency defended, relying upon this language of its COB clause:
DO BENEFITS UNDER OTHER PLANS AFFECT THESE BENEFITS? Yes. Some individuals have medical or dental expense coverage in addition to coverаge under this Plan. When this happens, the benefits from the “other plans” will be deemed to provide primary coverage. This may require a reduction in benefits under this Plan, so that the combined benefits will not be more than the expenses recognized under these рlans.
An “other plan” means any plan of medical or dental expense coverage provided by: 1. Group insurance or any other arrangement of medical/dental coverage available *339 to a member or enrolled eligible dependents.
According to Agency, this language means that Agency’s coverage is excess in nature, and is not triggered until the primary insurer has paid claims in the amount of the policy limits. Because the 65 Security Plan has never paid the full extent of its coverage, Agency has no obligation to pay at all.
The distriсt court, in a published opinion, granted plaintiffs motion for summary judgment, finding Agency liable for all medical bills not covered by the 65 Security Plan.
Regents of University of Michigan v. Employees of Agency Rent-A-Car Hosp. Ass’n,
plan language provides that the “benefits” from the “other plan” will reduce the benefits to be provided under Agency’s plan.... [T]he language refers to benefits “received” from the “other plan” because the language specifically directs itsеlf to the concern that benefits will not exceed expenses. Furthermore, the language of Agency’s plan specifically refers to coverage “available.”
Id. at 493-94. In essence, the district court held that because the 65 Security Plan is insolvent, thеre are no funds “available” from the “other plan,” and therefore Agency is liable for payment of the medical bills remaining due.
Agency argues that the term “available” means only that the insured had coverage under another insurance plan; the tеrm does not require that other plan be solvent or able to pay claims. Therefore, Agency says, since the Westras had coverage under the 65 Security Plan, the Westras had other coverage available. Since that coverage was available, it was primary, and the Agency Plan’s coverage is not triggered until the primary insurance has paid claims in the amount of its policy limits. That the primary insurer can never make payment in that amount because of insolvency is irrelevant. Furthermore, Agеncy says, even if “available” were read to mean that the primary insurer must have the funds actually to pay the policy limits, “availability” must be determined as of the time the medical bills were incurred. In this case, since the primary insurer was not declared insolvеnt until after the bills were incurred, the coverage was available at that time; the primary insurer has not paid out the full extent of its coverage, and Agency’s liability has not been triggered.
Both parties agree that ERISA does not address COB clause interpretations. In those limited situations where ERISA fails to address a particular issue, federal courts are expected to develop a body of federal common law to fill the interstitial gap in the statutory mandate.
Auto Oumers Ins. Co. v. Thom Apple Valley, Inc.,
The state law to which the federal court may look in this cаse is that of Michigan, which follows general contractual rules when interpreting insurance contracts.
Under Michigan law, insurance policies are to be construed in a manner consistent with the ordinary and popular sense of the language used thеrein. A technical construction of a policy’s language which would defeat a reasonable expectation of coverage is not favored____ Accordingly, an insurer has a duty to express clearly the limitations in its policy; any ambiguity will be cоnstrued liberally in favor of the insured and strictly against the insurer.
Ford Motor Credit Co. v. Aetna,
Thus, the federal common law, to the extent that it has been developed on this issue,' and the Michigan law are essentially the same, and application of either leads to the same result. Construing the language of the COB clause in Agency’s plan according to the ordinary sense of its language and resolving ambiguities against the drafter, we think it is inescapable that Agency’s reading of the clause is wrong. Certainly our reading the clause as Agency does would frustrate the purpose of ERISA, which is to protect “the interests of participants in employee benefit plans and their beneficiaries.” 29 U.S.C. 1001(b);
see also Auto Owners,
Agenсy’s fall-back position — that even if other insurance is “available” only if the other insurer has the ability to pay the claims, the determination of availability must be made at the time the medical care is provided — is also untenable. Agency relies on
Terminix v. Safety Mutual Casualty Co.,
No. 91-6329,
The defendants make two other arguments which deserve some mention. The first аrgument is that Agency’s plan should be treated as an umbrella policy. Defendants again cite
Terminix
in support of this proposition. Rather than supporting defendants’ argument, however,
Terminix
clearly depicts the difference between a true “umbrella” poliсy and the Agency plan. In a true umbrella policy, a prearranged dollar figure is written into the insurance contract and the insurance company is liable only for amounts in excess of that prearranged dollar figure. In
Terminix,
the insurance policy in question clearly stated that its coverage would not be triggered unless a prearranged dollar amount of liability was met.
Id.
at **1-3. The court found that the prearranged dollar figure was not reached, and therefore the language of the contract unambiguously did not cover the loss.
Id.; see also Morbark Indus., Inc. v. Western Employers Ins. Co.,
Agency relies upon Michigan law for its second argument. COB clauses in Michigan, and elsewhere, have been divided into three categories:
1. A pro-rata clause, which purports to limit the insurer’s liability to a proportionate percentage of all insurance covering the event;
2. An escape or no-liability clause, which provides that there shall be no liability if the risk is covered by other insurance; and
3. An excess clause, which limits the insurer’s liability to the amount of loss in *341 excess of the coverage provided by the other insurance.
NALC Health Benefit Plan v. Lunsford,
We think one final observation is in order here. The bottom line of Agency’s position is this: although the Westra family had health insurance through not one but two plans, and the Medical Center provided medical services with that understanding; and although the sole reason that the medical bills were not paid is that both plans refused to pay the claims for a sustained period of time, during which one of the plans became insolvent and unable to pay; nevertheless, the burden of these health сare expenses ought to be borne either by the family or the Medical Center rather than by the Agency Plan, which was paid to insure this risk. It is difficult to imagine a result better calculated to frustrate ERISA’s underlying purpose, which is to protect “the interests of participants in employee benefit plans and their beneficiaries.” 29 U.S.C. § 1001(b).
The order of the district court is AFFIRMED.
Notes
. The 65 Security Plan’s COB clause stated, ”[i]f your dependent children are covered under two plans, their 'primary' plan is the coverage provided by the father's plan.” The district court held the 65 Security Plan's COB clause invalid because it violated Title VII and was discriminatory. The court then held that the 65 Security Plan, having no COB clause, was primary. That ruling is not at issue here.