Glass v. United of Omaha Life Ins. Co., 93-8775

• Decision Date: 04 October 1994
• Docket Number: No. 93-8775,93-8775
• Citation: 33 F.3d 1341
• Parties: 18 Employee Benefits Cas. 2002 Richard C. GLASS, Executor of the Estate of execr Maxwell C. Hostetter, Jr., Plaintiff, Margaret Hostetter, Plaintiff-Appellant, v. UNITED OF OMAHA LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1341

33 F.3d 1341

18 Employee Benefits Cas. 2002

Richard C. GLASS, Executor of the Estate of execr Maxwell C Hostetter, Jr., Plaintiff Margaret Hostetter, Plaintiff-Appellant, v. UNITED OF OMAHA LIFE INSURANCE COMPANY, Defendant-Appellee.

No. 93-8775.

United States Court of Appeals, Eleventh Circuit.

Oct. 4, 1994.

Norman Lee Smith, F. Clay Bush, Goodman & Bush, Atlanta, GA, for appellant.

Elizabeth J. Bondurant, Ben Kingree, Carter & Ansley, Atlanta, GA, for appellee.

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

Before ANDERSON and BIRCH, Circuit Judges, and ATKINS ^*, Senior District Judge.

ANDERSON, Circuit Judge:

Plaintiff Hostetter appeals an order granting summary judgment to defendant, United of Omaha Life Insurance Company ("United"), on state and federal claims arising from the denial of life insurance benefits for which she was the sole beneficiary. The district court held that the Employee Retirement and Income Security Act ("ERISA"), 29 U.S.C. Sec. 1001 et seq., preempted all claims on both policies, and ruled that no remediable violation of ERISA occurred. For the following reasons, we affirm.

I. FACTS AND PROCEEDINGS BELOW

Maxwell C. Hostetter was an employee with Silk Greenhouse, Inc. from July 13, 1987, until June 22, 1990. In 1988, Hostetter discovered that he was infected with Human Immunodeficiency Virus; he became ill as a result in January 1990. Unable to work, he went on leave of absence that month. Silk Greenhouse continued to pay him his full salary until they terminated him in June of that year. Hostetter died of Acquired Immune Deficiency Syndrome on February 2, 1991.

Silk Greenhouse offered its employees group life and health insurance. Through April 1, 1990, Silk Greenhouse offered an insurance program with Guardian Insurance Company. In December 1989 or January 1990, Silk Greenhouse began negotiating with United to replace Guardian as its insurance carrier. At some point, United offered a proposed program to Silk Greenhouse, and after negotiations the parties contracted to create a group insurance program.

Under this program the standard insurance policy for employees provided "Basic" coverage--life insurance equal to the employee's annual salary, health, dental, and accidental death and dismemberment insurance. This insurance program's premiums were paid jointly by the employee and Silk Greenhouse, with Silk Greenhouse contributing 55%. The insurance program through United offered an "Elect" life insurance policy for up to $100,000, with the premiums to be paid for solely by the employee. Only employees who participated in the Basic program were eligible for Elect life insurance. The Elect life policy contained a "portability" feature that allowed the policy to be converted into an individual policy when the employee left Silk Greenhouse.

Hostetter enrolled in the Basic life program on March 28, 1990, and the Elect Life program on March 31, 1990, naming his mother as the beneficiary of both policies. Both policies went into effect on April 1, 1990. This appeal concerns only the life coverage. After Mr. Hostetter was terminated in June 1990, he elected to convert the Elect life policy to an individual policy pursuant to the portability feature.

United enrolled Hostetter in the insurance program, initially accepted premiums, and converted his Elect life policy upon his request. However, the record clearly shows that Mr. Hostetter was ineligible for either coverage from the inception of the program until his death. The original group insurance proposal that United submitted to Silk Greenhouse stated a proposed eligibility requirement for Basic life insurance: those eligible for coverage would have to be working 20 hours per week for Silk Greenhouse at the time the plan went into effect. At Silk Greenhouse's request, the hourly requirement was raised to 30 hours per week, and was reflected in the booklet that was eventually given to those that enrolled in the plan. Hostetter never received this booklet, but it is clear that he was ineligible for the United plan because he went on leave of absence in January 1990, well before the plan went into effect, and never returned to work.

Silk Greenhouse was responsible for providing United with a list of employees eligible for the group program. Silk Greenhouse considered the employees on leave of absence to be full time employees eligible for the United program. Consequently, Silk Greenhouse submitted Mr. Hostetter's name as an eligible employee. United later discovered that employees who were on leave at the inception of the plan had been enrolled. The record shows that United almost immediately began contesting the eligibility of the employees enrolled in the plan who had been on leave of absence from its inception. As early as November 1990, United had called the eligibility of Hostetter and others in his situation into question.

Mr. Hostetter submitted approximately $118,000 in claims under the health insurance coverage provided by the plan. The record shows that all of these claims were paid by either Silk Greenhouse or United. Under the plan, Silk Greenhouse made the payments for health claims up to $100,000. A stop-loss insurance policy that Silk Greenhouse purchased from United made United responsible for payments over $100,000. The record reflects that United had raised the issue of Hostetter's eligibility as early as November 1990, and had informed Silk Greenhouse by January of 1991 that it considered Hostetter ineligible for the plan. After Mr. Hostetter's death, United denied claims made on both the life portion of his Basic coverage and the Elect life insurance policy.

As the sole beneficiary of Mr. Hostetter's insurance policies, Mrs. Hostetter brought suit in the Northern District of Georgia, based on diversity. ¹ She filed claims for breach of contract and bad faith. Later, she filed an amended complaint claiming ERISA violations. Under ERISA, plaintiff claimed that United breached its fiduciary duty to Hostetter, failed to provide accurate and timely plan information in the summary plan description, and wrongfully denied benefits. Furthermore, the plaintiff argued that waiver and/or equitable estoppel prohibited the defendant from denying benefits. The parties filed cross motions for summary judgment, with the defendant claiming that ERISA preempted all claims and that no compensable violation had occurred. The plaintiff admitted that ERISA governed the Basic life policy, but argued that ERISA did not govern the Elect life policy. The district court held that ERISA preempted all state law claims and entered summary judgment in favor of the defendant on all ERISA claims. The district court held that any summary plan description errors were the responsibility of Silk Greenhouse, which was the plan administrator. The district court also found that no breach of fiduciary duty had occurred and that the life insurance proceeds were not wrongfully denied, because Hostetter was never eligible for the plan. Finally, the district court found that no equitable estoppel claim existed. For the following reasons, we affirm.

II. STANDARD OF REVIEW

We have plenary review of summary judgments, and we apply the same legal standards that controlled the district court. Miranda v. B & B Cash Grocery Store, 975 F.2d 1518, 1532 (11th Cir.1992). We review the facts in the light most favorable to the non-movant and resolve all factual disputes in favor of the non-movant.

III. DISCUSSION

Several of appellant's claims warrant little discussion. First, it is clear that Hostetter was not working 30 hours per week at any time after the plan became effective and thus was not eligible for the plan. Thus, there was no wrongful denial of eligibility under ERISA. Furthermore, any violations of ERISA regarding the information provided in the summary plan description ("SPD") or the timeliness of the SPD's distribution afford Hostetter no relief, because Hostetter has not shown evidence that any deficiencies misled him regarding coverage, or caused any damages. Finally, Hostetter's equitable estoppel argument fails because Hostetter adduced no evidence that he detrimentally relied on any misrepresentations regarding his eligibility. Only two claims merit extended discussion. First, we consider Hostetter's argument that ERISA does not govern the Elect life policy, and second we entertain her waiver argument.

A. ERISA governs the Elect Life Policy

In order to have an ERISA plan there must be (1) a plan fund or program (2) established or maintained (3) by an employer or by an employee organization (4) for the purpose of providing, among other things, medical or death benefits (5) to participants and their beneficiaries. Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir.1982). Although Hostetter concedes that the Basic life policy is governed by ERISA, she argues that the Elect life coverage is not governed by ERISA. ² She maintains that this supplemental coverage is not part of an ERISA plan because Hostetter paid the entire premium and the policy was convertible into an individual policy. Hostetter cites Department of Labor Regulation 29 C.F.R. Sec. 2510.3-1(j) to support her argument.

Regulation 29 C.F.R. Sec. 2510.3-1(j) is a "safe harbor" provision that excludes some programs for group insurance from the "employee welfare benefit plans" governed by ERISA. ³ In relying upon this regulation, Hostetter invites us to sever the Elect life policy from the rest of the benefits package the Silk Greenhouse employees received from the Plan. We have recently held that a dependant coverage feature could not be severed from a plan and excluded from ERISA under Regulation 2510.3-1(j). Smith v. Jefferson Pilot Life Ins. Co., 14 F.3d 562, 568 (11th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct. 57, --- L.Ed.2d ---- (1994). Similarly, the Elect life policy in the instant case may not be severed from...