cases than the case before this court because they interpreted statutes that drew the line at "state agencies" or "political subdivisions," both terms that more precisely differentiate between the public and private spheres than does the term "instrumentality." In addition, the fact that ERISA includes all three terms suggests that each term may mean something different. Although Mooney and Philadelphia National Bank provide this court with a great deal of guidance, they do not squarely address the precise issue raised in Lincoln's motion to dismiss.
While this court has discovered no statutory language, legislative history or cases providing specific guidance in interpreting the term "instrumentality" in ERISA, there are generalized indications that Congress contemplated a fairly narrow exception to ERISA for plans "established by state and local governments" to cover "municipal and state employees." Feinstein v. Lewis, 477 F. Supp. 1256, 1261 (S.D.N.Y. 1979), aff'd. 622 F.2d 573 (2d Cir. 1980). Nothing in the legislative history suggests that Congress intended "instrumentality" to broaden the reach of the "governmental plan" exception. Indeed, the legislative history's frequent reference to the exception simply as the "governmental plan" exception, see, e.g., H.R. Rep. No. 807, 93d Cong., 2d Sess., reprinted in 1974 U.S. Code Cong. & Admin. News 4674, 4684, 4713, 4830; S. Rep. No. 127, 93d Cong., 2d Sess., reprinted in 1974 U.S. Code Cong. & Admin. News, 4965, without ever elaborating on the significance of the individual terms chosen to describe the scope of the exception, suggests that the exception was meant to cover the entire range of organizations traditionally characterized as governmental organizations, but not to expand the range to include organizations having some significant relationship with a government but not themselves viewed as governmental.
The Supreme Court of Pennsylvania's interpretation of Temple's near-identical act makes clear that Lincoln, characterized as a "state-related institution," cannot be recharacterized as a governmental or public institution. The court's declaration in Mooney that Temple's status did not change when its Commonwealth Act was enacted applies equally well to Lincoln. As a "non-profit corporation chartered for educational purposes," Lincoln remains outside the reach of ERISA's governmental plan exception. Lincoln's motion to dismiss will therefore be denied.
II. Travelers' Motion to Dismiss the Third-Party Complaint
Lincoln has filed a third-party complaint against Travelers and Massachusetts Mutual, seeking contribution for all sums awarded in favor of the Krupps in the original action against Lincoln. Lincoln contends that any continuing obligation it is found to owe the Krupps for Joanna Krupp's medical care was created by the insurance carriers' misapplication of the terms of the group health policy they had agreed to provide Lincoln's LUC-AAUP employees in the years before Lincoln was self-insured. On October 30, 1986, a stipulation and order was entered dismissing Massachusetts Mutual from the third-party action.
In its motion to dismiss, Travelers argues that Lincoln's third-party complaint fails to state a claim upon which relief can be granted. F.R.C.P. 12(b)(6). Travelers contends that, whether or not the payments it made to Joanna Krupp were made in error, "the fact that payments were made does not impose upon . . . Travelers any duty owed to Lincoln which would serve as the basis for liability." Memorandum of Law in Support of Travelers' Motion at 1-2. Travelers further states that "we have found no support for the proposition that after a contract of insurance comes to an end in accordance with its terms, an insurer has some contingent duty to subsequent insurers such as Lincoln arising out of claims paid during the coverage period." Id. at 4.
In considering a motion to dismiss under Rule 12(b)(6) a court is to presume all facts alleged in the complaint to be true, and should not dismiss the complaint for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); see also Miree v. DeKalb County, 433 U.S. 25, 27 n.2, 53 L. Ed. 2d 557, 97 S. Ct. 2490 (1977).
Although Lincoln asserts claims against Travelers for both negligence and breach of contract, both claims appear to be derived from Travelers alleged breach of the insurance contract. As the representative who negotiated the insurance contract for the benefit of all employees covered by the plan, Lincoln can properly assert a claim for breach of contract. See Layman v. Continental Assurance Co., 416 Pa. 155, 205 A.2d 93, 96 (1964) ("in group insurance the master contract or policy is between the insurance company and the employer -- the latter being the holder of the policy"). Lincoln's complaint is based on Travelers alleged failure to follow the terms of the group insurance policy which deny eligibility to individuals, like Joanna Krupp, who have been disabled from birth.
Lincoln's breach of contract claim is an unusual one, because the alleged breach resulted in the overpayment of benefits to one of Lincoln's employees, at no apparent direct expense, under the terms of the policy, to Lincoln. Under ordinary circumstances, Travelers' alleged breach would have hurt only Travelers, and Lincoln would not have felt aggrieved by the error. Under the circumstances presented in this case, however, the alleged misapplication of the terms of the policy is linked, at least indirectly, to Krupp's claim for damages against Lincoln.
Lincoln contends that any obligation a judgment may impose on Lincoln to continue paying Joanna Krupp's medical bills was created by the insurance carriers' failure properly to apply the eligibility standards as provided in the policy. When Lincoln switched to self-insurance, it negotiated a contract with its employees that promised to provide the same coverage, with certain exceptions irrelevant to the issue presently before the court, that was then being provided by the insurance companies. Steven Krupp allegedly agreed to the terms of the new self-insurance group health policy with the understanding that his daughter would continue to be covered. When Lincoln terminated Joanna's coverage, the Krupps filed the original action in this case. Lincoln argues that, if it is found liable to Joanna for continuing health coverage in the original action, that liability stems from Travelers' breach. Relying on Travelers' agreement to fulfill the terms of the insurance contract as drafted, Lincoln promised to continue providing what the insurance companies had provided. Lincoln's claim is not that Travelers owes "some contingent duty to subsequent insurers . . . after a contract of insurance comes to an end," but that, while Travelers' contract was still in effect, Travelers violated its terms, to Lincoln's subsequent detriment.
To recover on a claim for breach of contract, a plaintiff must show, not only that the breach occurred, but also that the damage for which compensation is sought was foreseeable by the alleged breacher. See Rusiski v. Pribonic, 511 Pa. 383, 515 A.2d 507 (1986). The Second Restatement of Contracts explains the requirement that damages be foreseeable as follows:
§ 351. Unforeseeability and Related Limitations on Damages