Slamen v. Paul Revere Life Ins. Co.

• Decision Date: 01 February 1999
• Docket Number: No. 98-6147,98-6147
• Parties: 22 Employee Benefits Cas. 2688, 12 Fla. L. Weekly Fed. C 466 Herbert A. SLAMEN, Plaintiff-Appellant, v. PAUL REVERE LIFE INSURANCE COMPANY, a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1102

166 F.3d 1102

22 Employee Benefits Cas. 2688, 12 Fla. L.

Weekly Fed. C 466

Herbert A. SLAMEN, Plaintiff-Appellant, v. PAUL REVERE LIFE INSURANCE COMPANY, a corporation, Defendant-Appellee.

No. 98-6147.

United States Court of Appeals, Eleventh Circuit.

Feb. 1, 1999.

Nolan E. Awbrey, Bruce J. McKee, Birmingham, AL, for Plaintiff-Appellant.

Mark D. Hess, London & Yancey, LLC, Birmingham, AL, for Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before DUBINA and BARKETT, Circuit Judges, and JONES ^*, Senior Circuit Judge.

BARKETT, Circuit Judge:

Appellant Herbert Slamen appeals from an adverse post-trial order dismissing his claim for disability insurance benefits under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001, et seq. ("ERISA"). ¹ Slamen contends that his disability insurance policy was not governed by ERISA and that the federal district court lacked subject matter jurisdiction over his suit against the Paul Revere Life Insurance Co. for refusing to pay benefits under Slamen's policy. Slamen contends that the district court should have remanded the case to the Alabama state courts, permitting Slamen's state law breach of contract and tort claims to proceed.

BACKGROUND

On February 1, 1981, Slamen's solely-owned dental practice established a health plan providing health and life insurance coverage from the Centennial Life Insurance Company for Slamen and his employees. ² This plan did not provide disability benefits to any employee. In 1985, Slamen purchased a disability insurance policy from Paul Revere, which only covered himself. As with the health and life insurance policies, the premiums under the disability insurance policy On December 11, 1996, as a result of Paul Revere's refusal to pay benefits under Slamen's disability insurance policy, Slamen filed this action in the Circuit Court for Jefferson County, Alabama alleging that Paul Revere's refusal to pay was in breach of contract and was tortious. Paul Revere removed the case to federal court and Slamen sought a remand to the state courts. The district court denied the motion to remand and dismissed Slamen's state law claims as preempted by ERISA, allowing Slamen leave to amend for the purpose of stating an ERISA claim. After a bench trial, the district court entered judgment for Paul Revere on Slamen's ERISA claim. This appeal followed.

were paid by Slamen's professional corporation, "Herbert A. Slamen, D.M.D., P.C."

DISCUSSION

The sole issue raised on appeal is whether Slamen's disability insurance policy is an ERISA employee welfare benefit plan. If Slamen's disability insurance policy is governed by ERISA, the district court correctly recharacterized Slamen's claims as ERISA claims and denial of the motion to remand was proper because ERISA claims arise under federal law. Whitt v. Sherman Int'l Corp., 147 F.3d 1325, 1329-30 (11th Cir.1998). However, if Slamen's disability insurance policy is not an ERISA plan and Slamen was not entitled to seek relief under ERISA, "no federal question jurisdiction exists" and the case must be remanded to the state courts. Id. at 1330.

ERISA defines an employee welfare benefit plan as

any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, [or] disability....

29 U.S.C. § 1002(1). In Donovan v. Dillingham, 688 F.2d 1367 (11th Cir.1982) (en banc), we set forth five requirements that must be established for an employee welfare benefit plan to fall within ERISA's scope. "[A] welfare plan requires (1) a 'plan, fund, or program' (2) established or maintained (3) by an employer or by an employee organization, or by both, (4) for the purpose of providing medical, surgical, hospital care, sickness, accident, disability ... benefits ... (5) to participants or their beneficiaries." Id. at 1371. "[A] 'plan, fund, or program' under ERISA is established if from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits." Id. at 1373.

However, not all welfare benefit plans that meet these five criteria are governed by ERISA. As Donovan explains,

[t]he gist of ERISA's definitions of employer, employee organization, participant, and beneficiary is that a plan, fund, or program falls within the ambit of ERISA only if the plan, fund, or program covers ERISA participants because of their employee status in an employment relationship, and an employer or employee organization is the person that establishes or maintains the plan, fund, or program. Thus, plans, funds, or programs under which no ... employees or former employees participate are not employee welfare benefit plans under Title I of ERISA.

Id. (footnotes omitted); 29 C.F.R. § 2510.3-3(b) (1998) ("[T]he term 'employee benefit plan' shall not include any plan, fund, or program ... under which no employees are participants covered under the plan.").

Thus, in order to establish an ERISA employee welfare benefit plan, the plan must provide benefits to at least one employee, not including an employee who is also the owner of the business in question. See Williams v. Wright, 927 F.2d 1540, 1545 (11th Cir.1991); 29 C.F.R. § 2510.3-3(c)(1) (1998) ("An individual and his or her spouse shall not be deemed to be employees with respect to a trade or business, whether incorporated or unincorporated, which is wholly owned by the individual or by the individual and his or her spouse."); see also Peterson v. American Life & Health Ins. Co., 48 F.3d 404, 407 (9th Cir.1995) ("Neither an owner of a business nor a partner in a partnership can constitute an 'employee' for purposes of determining the existence of an ERISA plan."); Meredith v. Time Ins. Co., 980 F.2d 352, 357 (5th Cir.1993) ("These regulations prevent Meredith from being simultaneously an employer and an employee.").

Slamen argues that the disability insurance policy he purchased from Paul Revere in 1985 was not an ERISA plan because he wholly owned the dental practice and was the only person covered under the disability insurance policy. Thus, by virtue of § 2510.3-3(c)(1), he argues that he could not be considered an employee for purposes of determining whether the disability insurance policy was an ERISA plan. We agree. Slamen's disability insurance policy covered only himself. No employees received any benefits under the plan and there is nothing in the record showing that the disability insurance policy bears any relationship to the health and life insurance benefits that Slamen provides to his employees. On the contrary, the two policies were purchased at different times, from different insurers, and for different purposes. The first policy covers Slamen's employees as well as himself, while the second policy only covers Slamen and was not designed to benefit Slamen's employees.

In light of these facts, we are not persuaded by Paul Revere's argument that ERISA nonetheless applies here because Slamen had in place other insurance for his employees. In Kemp v. IBM Corp., 109 F.3d 708 (11th Cir.1997), we held that "non-ERISA benefits do not fall within ERISA's reach merely because they are included in a multibenefit plan along with ERISA benefits." Id. at 713. Applying this principle, we held that an employer's retirement education assistance benefits were not benefits protected by ERISA and that their inclusion in a broader multibenefit plan did "not turn the non-ERISA benefit into an employee welfare benefit plan." Id. By analogy, Slamen's disability insurance policy--which is not, by its terms, an ERISA plan--is not converted into an ERISA plan merely because Slamen also provides ERISA benefits to his employees. See Zeiger v. Zeiger, 131 F.3d 150, 1997 WL 737659, at * 1 (9th Cir. Nov. 25, 1997) ("A non-ERISA plan is not converted into an ERISA plan merely because an employer also sponsors a separate benefits plan subject to ERISA.").

Indeed, in Robertson v. Alexander Grant & Co., 798 F.2d 868 (5th Cir.1986), the Fifth Circuit applied this very reasoning in holding that ERISA did not apply to a plan covering only partners. The court rejected the argument that ERISA applied because the plan also covered principals, a class of employees, finding that this claim

ignores the fact that the plans, however similar, are two separate plans. The plan...