Unpublished Disposition, 908 F.2d 977 (9th Cir. 1986)

MEMORANDUM^* 

Norma Rulison appeals the district court's order granting summary judgment in favor of Blue Cross on her claim for medical benefits under an ERISA plan brought pursuant to 29 U.S.C. § 1332(a) (1) (B). Rulison argues that a limitation on coverage in the Blue Cross group health policies obtained by her employer should not prevent her from receiving benefits because the limitation was not sufficiently conspicuous, and because the policies were ambiguous under California insurance law. She also claims that Blue Cross could not terminate coverage when she stopped working because her right to receive benefits for life vested under California insurance law. Blue Cross argues that ERISA preempts California law, and that Rulison is not entitled to benefits under the policies. We affirm.

* Norma Rulison worked for Rulison Auto Body. Her employer procured an insurance policy from Blue Cross on July 1, 1984 which covered her until May 1, 1985. In April of 1985, she was diagnosed as having multiple sclerosis.

Rulison Auto Body obtained another group health policy from Blue Cross to provide coverage to Rulison from May 1, 1985 to April of 1986. Blue Cross alleges that Rulison stopped working on May 23, 1985, but she claims that she did not quit until September 1, 1985. At any rate, coverage under the policy beginning May 1, 1985 was left in effect until September 1, 1985 when her employer ceased payments.

Both policies provided that coverage could be extended for a period of one year if a beneficiary became totally disabled.¹  Rulison sent Blue Cross evidence of her disability, and Blue Cross agreed to provide disability coverage from September 1, 1985 until May 18, 1986 when her doctor released her to return to work. She alleges, however, that she has been continuously disabled since September of 1985. She claims that she asked her doctor to give her a release only so that she "could obtain unemployment benefits, because she had no other means of sustenance."

Rulison argues that she should receive benefits for life despite the twelve-month limitation on benefits. She points to a provision in both policies which limits comprehensive benefits to a maximum amount of $2,000,000 during each member's lifetime. She maintains that the one-year limitation on benefits in the policies should not be enforced because it was not conspicuous and because it was misleadingly included in a section entitled "EXTENSION OF BENEFITS." Rulison brought suit in state court alleging, among other things, bad faith, breach of fiduciary duties, unfair business practices, and statutory violations.

Blue Cross removed the case to federal court.²  The district court initially granted Rulison's motion for summary judgment on her claim that her benefits vested for life under Fields v. Blue Shield of California, 163 Cal. App. 3d 570, 209 Cal. Rptr. 781 (1985). It rejected Blue Cross's contention that her vesting claim was preempted by ERISA. On reconsideration of summary judgment, however, the district court decided that the wording in Blue Cross's policies differed significantly from the policy in Fields and granted Blue Cross summary judgment on the vesting issue. Rulison appeals.

II

We review district court interpretations of state law de novo. Union Central Life Insurance Co. v. Wernick, 777 F.2d 499, 500 (9th Cir. 1985). We need not decide whether ERISA preempts the vesting doctrine established in Fields. Even if that doctrine were not preempted, it would not help Rulison.

The limitation on benefits at issue in Fields arose out of a modification in a subsequent policy. In this case, the limitation on benefits can be found in Rulison's original policy. She contends that it makes no difference whether an insurer attempts to terminate benefits in the policy which initially covers the disability or in a subsequent policy. We disagree. Benefits cannot vest for life under a policy which explicitly limits an extension of benefits to a period of twelve months. The district court, upon reconsideration of its order granting summary judgment to Rulison on the vesting claim, correctly held that Rulison's policy could be distinguished from the policy in Fields.

Rulison asks us to reject the district court's reasoning and disregard the twelve-month limitation on benefits for totally disabled beneficiaries. She maintains that she should not be bound by the limitation because it is not clear and conspicuous. She also claims that the policy is ambiguous and misleading. Regardless of whether we apply California law or federal common law under ERISA, we conclude that the limitation on benefits in this case is both sufficiently conspicuous and unambiguous.

Rulison submitted evidence regarding the conspicuousness of the limitation on benefits, but the district court did not find the limitation inconspicuous. We think that the limitation is sufficiently conspicuous.

Rulison further claims that the policy terms are ambiguous and misleading. Ambiguity determinations are questions of law subject to de novo review on appeal. Potter v. Ranger Insurance Co., 732 F.2d 742, 743 (9th Cir. 1984). Rulison relies primarily upon two cases which hold that limitations on benefits for the totally disabled included in clauses entitled "Extension of Benefits" are ambiguous and misleading under state law. See Houghton v. American Guaranty Life Insurance Co., 692 F.2d 289 (3rd Cir. 1982); Sparks v. Republic National Life Insurance Co., 132 Ariz. 529, 647 P.2d 1127, cert. denied, 459 U.S. 1070 (1982).

In Houghton, the court refused to examine the validity of a clause limiting benefits because the insurer failed to raise the argument at the district court level. In dicta included in a footnote, the court suggested that it had "serious reservations" about the section entitled "EXTENSION OF BENEFITS" because it appeared to be ambiguous and misleading under Pennsylvania law since the language under the section restricted coverage. 692 F.2d at 295 n. 5.³ 

Similarly, the Arizona Supreme Court in Sparks noted that the title "EXTENSION OF MAJOR MEDICAL BENEFITS PROVISIONS" was misleading for a section which restricted benefits. 647 P.2d at 1134. However, the provision in Sparks limiting benefits was also contradictory. The court noted that " [t]he first sentence of the paragraph seemingly provides for continuing payment of benefits after termination of insurance if the insured is 'wholly and continuously disabled,' but in the next sentence, provides that benefits will be terminated if the policy is terminated." Id. The provision limiting benefits in Rulison's policy is distinguishable because it is not internally inconsistent.

Rulison further notes that the $2,000,000 "lifetime" benefits clause and the one-year extension of benefits limitation are not easily reconcilable. She queries how anyone could accrue $2,000,000 of medical expenses within a one-year policy with a one-year extension of benefits. She does not understand the policy's "lifetime" benefits promise, because Blue Cross limits its coverage to, at most, two years.

We agree with the district court that the policy terms, when read together, are not ambiguous. The one-year limitation in the extension of benefits provision modifies the $2,000,000 cap. We choose not to follow the dicta in the Houghton footnote, and reject the reasoning in Sparks because the policy provision at issue there differed significantly from the provisions in Rulison's policies.

III

Rulison asks for attorneys' fees even if she does not prevail "in light of the strength of her case and the importance of the issues she has litigated." When deciding to award attorneys' fees under ERISA, we examine: "(1) the degree of the opposing parties' culpability or bad faith; (2) the ability of the opposing parties to satisfy an award of fees; (3) whether an award of fees against the opposing parties would deter others from acting under similar circumstances; (4) whether the parties requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and (5) the relative merits of the parties' positions." Hummel v. S.E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980). Fees are not appropriate in this case.

AFFIRMED.