Indiana Funeral Directors Insurance Trust v. Trustmark Insurance Corporation

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-1868
I NDIANA F UNERAL D IRECTORS I NSURANCE T RUST ,
Plaintiff-Appellant,
v.
T RUSTMARK I NSURANCE C ORPORATION ,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. IP 97-1248-C(G/Y)—John Paul Godich, Magistrate Judge.
____________
A RGUED S EPTEMBER 3, 2003—D ECIDED O CTOBER 21, 2003
____________
Before R IPPLE , R OVNER , and D IANE P. W OOD , Circuit
Judges.
R OVNER , Circuit Judge. The Indiana Funeral Direc-
tors Insurance Trust (“IFIT”) is an Indiana trust formed
by several small funeral directors to sponsor a self-fund-
ed employee welfare benefit plan. After purchasing insur-
ance from other providers, IFIT eventually bought a pol-
icy from Trustmark Insurance Corporation (“Trustmark”),
which agreed to reimburse IFIT for medical expenses that
exceeded a designated “stop loss” amount. IFIT brought this
suit against Trustmark in federal district court, claiming

-- 1 of 6 --

2 No. 03-1868
that Trustmark failed to provide indemnification as re-
quired by the policy. A magistrate judge, sitting by consent
of the parties, 28 U.S.C. § 636(c), entered summary judg-
ment in favor of Trustmark. IFIT appeals and we affirm.
Soon after IFIT formed in 1972, it retained Benefit Ac-
tuaries, Inc., to administer its welfare benefit plan. In 1980
Benefit Actuaries purchased “stop loss” health insurance on
IFIT’s behalf from Trustmark. Under a “stop loss” plan, em-
ployers pay for employee medical expenses, and the insurer
indemnifies the employer for expenses that exceed a
designated dollar amount. See generally Safeco Life Ins. Co.
v. Musser, 65 F.3d 647, 649 (7th Cir. 1995).
In 1997 four IFIT employees incurred significant medi-
cal expenses, all exceeding the $60,000 stop loss figure
designated in the policy. Unable to pay these bills in full,
IFIT asked Trustmark to indemnify it for the expenses as
charged; Trustmark, however, refused, asserting that it
only had a contractual obligation to indemnify IFIT for ex-
penses that IFIT had actually paid. IFIT then negotiated
lower costs with the medical service providers, and paid the
claims. The record is silent, however, as to how much IFIT
paid on each claim, which is significant because Trustmark
was obligated to indemnify only if IFIT paid more than
$60,000 on a claim.
In July 1997, IFIT filed suit against Trustmark and
Benefit Actuaries in federal district court seeking damages
under Indiana law and declaratory relief under the Em-
ployee Retirement Income and Security Act, 29 U.S.C.
§ 1001, et seq. IFIT alleged that Trustmark owes it approxi-
mately $150,000, the cumulative difference between the
four employees’ medical expenses and the designated stop
loss amount. After discovery, the magistrate judge entered
summary judgment in favor of Trustmark.
Nearly five months later, IFIT moved for leave to amend
its complaint under Fed. R. Civ. P. 15(a), seeking to add ad-

-- 2 of 6 --

No. 03-1868 3
ditional state-law claims. The magistrate judge, however,
denied this request and entered partial final judgment un-
der Fed. R. Civ. P. 54(b) as to Trustmark, enabling IFIT to
proceed with this appeal. IFIT’s claims against Benefit
Actuaries are still pending.
On appeal IFIT contends that the magistrate judge erred
by granting Trustmark’s request for summary judgment.
We review this decision de novo, viewing the facts and
drawing all reasonable inferences in the light most fa-
vorable to the nonmoving party. McCoy v. Harrison, 341
F.3d 600, 604 (7th Cir. 2003). Summary judgment is proper
when there is no genuine issue of material fact in dispute
and the moving party is entitled to judgment as a matter of
law. Fed. R. Civ. P. 56(c); Scott v. Trump Ind., Inc., 337 F.3d
939, 945 (7th Cir. 2003). Judgment as a matter of law is
appropriate when a party “fails to make a showing suf-
ficient to establish the existence of an essential element to
that party’s case, and on which that party will bear the
burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986). Indeed, if it is clear that a plaintiff will be
unable to satisfy the legal requirement necessary to estab-
lish its case, summary judgment is not only appropriate but
required. Id.
Under Indiana law, insurance contracts are governed by
the same rules of construction as other contracts. USA Life
One Ins. v. Nuckolls, 682 N.E.2d 534, 537-38 (Ind. 1997).
The interpretation of a policy is primarily a question of law,
even if the policy language is ambiguous. Id. The insured is
required to prove that its claims fall within the coverage
provision of its policy, but the insurance provider bears the
burden of proving specific exclusions or limitations to policy
coverage. See Erie Ins. Group v. Sear Corp., 102 F.3d 889,
892 (7th Cir. 1996) (applying Indiana law).
IFIT argues that Trustmark was required to reimburse
it for the face value of the medical expenses, to the extent

-- 3 of 6 --

4 No. 03-1868
the $60,000 attachment point was exceeded. Under the
terms of the policy, Trustmark was obligated to cover bills
that were actually paid in excess of the attachment point.
But IFIT submitted no evidence that it paid claims that ex-
ceeded $60,000; indeed, it submitted no evidence that it
made any payments at all. At oral argument, IFIT’s counsel
stated that two of the four employees’ costs exceeded
$60,000 even after the claims were negotiated downward,
but also acknowledged that there is no evidence of these
payments in the record. This failure of proof is fatal. See
Pugh v. City of Attica, Ind., 259 F.3d 619, 625 (7th Cir.
2001) (to survive summary judgment, plaintiff must submit
evidence to support its position).
IFIT also argues that the magistrate judge should not
have entered summary judgment because it was insolvent.
The policy provides:
Insolvency or bankruptcy of the Contract Holder. In-
solvency or bankruptcy of the Contract Holder shall not
release the Company from the payment of benefits for
loss incurred prior to the date of termination, to the ex-
tent such benefits would be payable in the absence of
such insolvency or bankruptcy, provided claim for such
benefit is submitted in accordance with the Section 21
of this Contract.
(App. at 005.)
The parties do not agree on the meaning of this provision.
IFIT argues that Trustmark is obligated to pay in the event
of IFIT’s insolvency, without regard to whether the claims
were actually paid by IFIT. Trustmark on the other hand
contends that it must pay only if IFIT has actually made
payments in excess of the attachment point. But we need
not resolve this dispute. The magistrate judge correctly
entered summary judgment in favor of Trustmark because
IFIT supplied no evidence that it was insolvent. Indeed,
IFIT paid the claims; it did not act as if it were insolvent.

-- 4 of 6 --

No. 03-1868 5
Without any evidence of its feeble financial status, IFIT’s
reliance on the policy’s insolvency provision to recover un-
der the policy is doomed under either interpretation; sum-
mary judgment in favor of Trustmark was appropriate.
Finally, IFIT argues that the magistrate judge erred by
denying its request for leave to amend its complaint, a deci-
sion we review for abuse of discretion. See Park v. City of
Chicago, 297 F.3d 606, 612 (7th Cir. 2002). IFIT sought to
add state-law claims for civil conspiracy and breach of good
faith, but the magistrate judge concluded that doing so
would be futile because these new claims were not action-
able under Indiana law. Under Rule 15, courts may deny an
amendment for undue delay, bad faith, dilatory motive, pre-
judice, or futility. See Rodriguez v. United States, 286 F.3d
972, 980 (7th Cir. 2002).
The magistrate judge did not abuse his discretion by
denying IFIT’s request to amend its complaint. IFIT’s pro-
posed amended complaint alleged that Trustmark and
Benefit Actuaries conspired to charge excessive premiums
in violation of Michigan law. But IFIT does not explain how
Michigan law is applicable to this dispute. IFIT is an Indi-
ana trust; Trustmark is an Illinois corporation; and while
Benefit Actuaries is a Michigan corporation, neither IFIT’s
nor Trustmark’s dealings at issue here had any connec-
tion with Michigan. IFIT also wanted to add a claim that
Trustmark breached its duty of good faith by failing to dis-
close its methodology for calculating premiums. Although
Indiana recognizes a duty for insurers to deal in good faith
with their insured, see Erie Ins. Co. v. Hickman, 622 N.E.2d
515, 518-19 (Ind. 1993), this cause of action has not been
extended beyond disputes regarding coverage. The allega-
tion in the proposed amended complaint centered on the
setting of premiums, not on recovering under the policy.
A FFIRMED .

-- 5 of 6 --

6 No. 03-1868
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—10-21-03

-- 6 of 6 --