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LESSARD v. METROPOLITAN LIFE INS. CO.12/28/1989
ial security benefits. The fact that [plaintiffs elected]
to satisfy the debt with the monies received from the Social
Security Administration is of no consequence; [Metropolitan]
has not attempted to reach those monies by any assignment of
rights or legal process, and that is all that Section 407
prohibits.
Plaintiffs argue that: 1) if the Plan Administrator's interpretation is correct then the Plan "would track the language of the reimbursement; and 2) Poisson was wrongly decided.
Plaintiffs' contentions are without merit. The Superior Court correctly determined that plaintiffs' obligation to reimburse Metropolitan for the overpayments grew, not out of the Reimbursement Agreements, but out of the Plan itself. Therefore, plaintiffs' reliance on the Reimbursement Agreements is misplaced. With respect to plaintiffs' contention that Poisson was wrongly decided, Poisson is in agreement with a majority of the cases deciding the issue. See, e.g., Lamb v. Connecticut General Life Ins. Co., 643 F.2d 108, 111 (3rd Cir. 1981), cert. denied, 454 U.S. 836, 102 S.Ct. 139, 70 L.Ed.2d 116 (1981) (holding that offset of monthly SSDIB payments does not violate § 407); Hurd v. Illinois Bell Tel. Co., 136 F. Supp. 125, 142 (N.D.Ill. 1955), aff'd 234 F.2d 942 (7th Cir. 1956). We find no error.
Count V
Count V alleges that Metropolitan's recoupment practice violates New York Insurance Law § 3212(c)(1) (McKinney 1985). That provision exempts disability insurance benefits from execution. The statute defines execution as follows:
The term `execution' includes execution by garnishee process
and every action, proceeding or process whereby assets of a
debtor may be subjected to the claims of creditors.
Id. § 3212(a)(4). The Superior Court ruled that the statute only applies in situations involving legal process and therefore does not apply in the case of a self-help offset. The court further ruled that the law was preempted by ERISA.
The Superior Court's rationale for ruling that § 3212(c)(1) did not apply in the case of a self-help offset was based on its interpretation of Wilkes v. Equitable Life Assur. Soc. of the United States, 289 N.Y. 63, 43 N.E.2d 812 (1942), and also on its construction of § 3212 in its entirety. In Wilkes, the New York Court of Appeals held in a one-page opinion that the then-prevailing version of § 3212(c)(1) prevented the defendant insurer from offsetting future disability benefits due on six life insurance policies to recover a judgment awarded based on the insured's fraud with respect to three other policies. Id. 43 N.E.2d at 813. The Superior Court ruled that the Wilkes holding was limited to situations where the insurer attempts to appropriate disability benefits by means of legal process, and thus did not apply to Metropolitan's self-help offset.
As further support for its interpretation, the court noted that § 3212(b), which affords protection to life insurance benefits, does not employ the term "execution" or any other to describe prohibited means, but instead protects those benefits generally "as against the creditors, personal representatives, trustees in bankruptcy and receivers in state and federal courts. . . ." N.Y.Ins.Law § 3212(b)(1) (McKinney 1985). The court reasoned that the juxtaposition of the broad language in subsection (b)
with the term "execution" in subsection (c) indicated a legislative choice to afford more limited protection in the case of disability benefits.
Plaintiffs argue that the Superior Court misread Wilkes. In plaintiffs' view, Wilkes does not support a distinction between non-judicial self-help offsets and execution through le
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