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DUFNER v. PENN CENT. TRANSP. CO.

March 15, 1974

Francis X. Dufner, Plaintiff
v.
Penn Central Transportation Company, Defendant


Fogel, D.J.


The opinion of the court was delivered by: FOGEL

FOGEL, D.J.

 This is an action brought by Francis X. Dufner, an employee of the Penn Central Transportation Company (Penn Central), pursuant to provisions of the Military Selective Service Act of 1967, as amended, 50 U.S.C. App. § 459 (hereinafter referred to as the Act). *fn1" Jurisdiction is conferred upon this Court by 50 U.S.C. App. § 459(d). *fn2"

 The case presents the following issue for resolution, apparently one of the first impression in the courts: Whether a returning veteran must be immediately restored to coverage under his employer's group medical insurance policy, or whether he may be compelled to undergo a waiting period before coverage resumes, pursuant to a requirement of "compensated service" in the month prior to resumption of coverage, which waiting period is in fact imposed without discrimination between veteran and non-veteran returnees to employment. Resolution of this matter turns upon the characterization of the insurance coverage sought by the employee, and interpretation of the "seniority" and "insurance or other benefits" clauses of §§ 459(b) and 459(c), in the context of the factual situation presented by the litigation.

 The following facts are relevant to an ultimate determination of the case:

 Plaintiff Dufner was first employed by the Pennsylvania Railroad Company, predecessor of defendant Penn Central, on December 30, 1964, in the position of clerk, a position which was other than temporary. On July 15, 1965, Dufner left this position in anticipation of his induction into the Armed Forces of the United States on or about July 30, 1965. Thereafter he was honorably discharged on or about February 20, 1969, and received a certificate of satisfactory completion of training and service, pursuant to the provisions of 50 U.S.C. App. § 459(a). He made timely application for restoration to his pre-service employment on March 14, 1969, and accordingly was restored to active employment at Penn Central on March 17, 1969. At some time following his restoration to employment at Penn Central, but prior to April 1, 1969, Dufner was involved in accidents which resulted in medical treatment and hospitalization, for which he incurred expenses of $828.35. He applied for benefits under a group insurance policy known as "Group Policy Contract No. GA-23,000", which covered the class of employees to which Dufner belonged, but payment was denied on the ground that Dufner, who had not rendered "compensated service" until the month of March, 1969, did not qualify under the provisions of the policy until the month following his return to active service with Penn Central, and hence did not become insured until April 1, 1969. As a result of this denial of benefits, the instant action was instituted in Dufner's behalf by the United States Attorney for the Eastern District of Pennsylvania under the provisions of 50 U.S.C. App. § 459(d).

 During the entire period of plaintiff's employment with Penn Central, both before and after his service in the armed forces, he was one of a class of employees covered by Group Policy Contract No. GA-23,000 (hereinafter referred to as the Contract), which constituted one of the agreements entered into as part of the collective bargaining process between Penn Central and the Brotherhood of Railway, Airline and Steamship Clerks, the union representing clerical employees, of which Dufner was one. Pertinent portions of the contract are set forth in the footnote. *fn4"

 First: Article IV requires Penn Central to make premium payments each month with respect to each "Qualifying Employee . . . who rendered compensated service to or received vacation pay from a signatory Employer in the preceding month."

 Second: Article V requires transmission to the insurer of "the appropriate amount stipulated in Article IV hereof as to each of its Qualifying Employees who shall have rendered compensated service to or received vacation pay from the Employer in the preceding calendar month."

 Third: Article II of the Contract defines the term "Qualifying Employee", and imposes a thirty day waiting period for new employees.

 Fourth: Article VI defines eligibility for benefits in language which states that an employee is insured "during and only during a month in which the Signatory Employer by which he is employed is required to make the appropriate payment to the insurer" described in Article V. There are three exceptions to this general provision, one of which is relevant to the present case. Article VI(A) (1) (a) (iii) provides that "an Employee who is placed on furlough . . . shall continue to be insured for Employee Benefits . . . during furlough until the end of the fourth month following the month in which the Employee last rendered compensated service to or received vacation pay from the Employer". *fn5" Article VI(A) (1) (a) (iv) further provides that "an Employee who returns to compensated service with or receives vacation pay from the Employer while insured under (i), (ii) or (iii) above shall continue to be insured for Employee Benefits . . . during the month in which he returns to such service or receives such pay."

 Fifth: Article VI(A) (2) (a) provides that, subject to a number of exceptions, "an Employee shall be eligible for Employee Benefits . . . with respect to bodily injuries occurring while he is insured hereunder . . . ." Subsection (c) of the same section provides that no benefits will be payable "after an Employee has failed to render compensated service or receive vacation pay for a period of One Calendar Year (Two Calendar Years with respect to benefits under Article VII, Parts E and F) until such time as the Employee again renders compensated service or receives vacation pay and becomes insured in accordance with Paragraph 1 above . . . ."

 Thus, the over-all parameters of insurance coverage under the Contract clearly emerge from the delineated provisions.

 In essence, the following scheme is created:

 (1) A new employee must complete thirty continuous calendar days of employment in a capacity covered under the Contract.

 (2) On the first day of the calendar month thereafter he becomes a "Qualifying Employee".

 (3) If he thereafter ceases to be a "Qualifying Employee" because he leaves his employment, he again becomes a "Qualifying Employee" in the month of his return to compensated service or receipt of vacation pay.

 In sum, there is only one waiting period before becoming a "Qualifying Employee", even though there may be an interruption in the employment relationship. It is conceded that Dufner was a "Qualifying Employee" in the month of his return to active employment on March 17, 1969.

 However, a second requirement exists for coverage under the terms of the Contract. Article VI provides coverage for an employee only during a month in which a premium is paid by the employer with respect to that employee, while Article IV mandates payment of the premium in the ensuing calendar month after the employee performs compensated service or receives vacation pay. In the case of a furloughed employee, coverage ceases after four months, and the requirement for a premium payment arises only in the month following the month in which the employee returns to compensated service or receives vacation pay. Thus, a returning employee is subject to a second waiting period before coverage resumes under the Contract, unless he is within the sweep of one of the exceptions of Article VI(A) (1) (a) (i)-(iii).

 Although Dufner became a "Qualifying Employee" immediately upon his return to active employment on March 17, 1969, no premium became payable by Penn Central before the month commencing April 1, 1969, and therefore he did not have insurance coverage until the latter date. This lawsuit has its genesis in the circumstances which gave rise to plaintiff's injury between March 17, 1969, and March 31, 1969, an interim period during which premiums were not payable and insurance coverage was therefore not available to plaintiff under the controlling terms of the Contract.

 It is clear from the above analysis that the provisions of Group Policy Contract No. GA-23,000 proscribe an award of any benefits to Dufner for the accident which occurred before April 1, 1969. The government maintains, however, on Dufner's behalf, that benefits must be conferred pursuant to statutory rights created by the Military Selective Service Act of 1967, the relevant portions of which provide as follows:

 
(b) Reemployments rights
 
In the case of any such person who, in order to perform such training and service, has left or leaves a position (other than a temporary position) in the employ of any employer and who (1) receives such certificate, and (2) makes application for reemployment within ninety days after he is relieved from such training and service or ...

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