Crull v. GEM Ins. Co.

• Citation: 58 F.3d 1386
• Decision Date: 14 June 1995
• Docket Number: No. 94-15159,94-15159
• Parties: , 95 Daily Journal D.A.R. 8582, Pens. Plan Guide P 23912N Dale A. CRULL and Theresa M. Crull, husband and wife, Plaintiffs-Appellants, v. GEM INSURANCE COMPANY, a Utah corporation, Defendant-Appellee. . Submitted *
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1386

58 F.3d 1386

32 Fed.R.Serv.3d 1016, 95 Daily Journal D.A.R. 8582,

Pens. Plan Guide P 23912N

Dale A. CRULL and Theresa M. Crull, husband and wife, Plaintiffs-Appellants, v. GEM INSURANCE COMPANY, a Utah corporation, Defendant-Appellee.

No. 94-15159.

United States Court of Appeals,

Ninth Circuit.

Submitted ^* June 14, 1995.

Decided June 29, 1995.

Jan E. Cleator, Phoenix, AZ, for plaintiffs-appellants.

Leslie A. Kresin, Marscal, Weeks, McIntyre & Friedlander, Phoenix, AZ, for defendant-appellee.

Appeal from the United States District Court for the District of Arizona.

Before: GOODWIN, FARRIS, and KLEINFELD, Circuit Judges.

GOODWIN, Circuit Judge:

The plaintiffs' employer "established" an "employee welfare benefit plan" under ERISA. The plaintiffs sued the insurer to recover benefits allegedly owed them under the plan. They pled their claims under state law, but those claims were preempted by ERISA. The plaintiffs also requested that their state law claims be treated as claims for relief under ERISA's civil enforcement scheme. The District Court granted summary judgment to the defendant without considering the plaintiffs' alternate request. We remand to permit the District Court to consider whether the plaintiffs are entitled to relief under ERISA's civil enforcement scheme.

BACKGROUND

Dale Crull is an employee of Picture Perfect Electronic Contracting, Inc. ("Picture Perfect"). In 1990, Picture Perfect resolved to obtain health insurance for its employees. To that end, Picture Perfect entered into a "Trust Subscription Agreement and Application for Group Insurance" (the "Subscription Agreement") with Inter-Mountain Employer's Trust ("IMET"). IMET is a "multiple employer trust." A multiple employer trust is an entity established to procure group insurance coverage for otherwise unrelated employers. By aggregating their buying power, these unrelated employers can negotiate for better health insurance programs. In this case, IMET pooled the premiums from all its subscribers and purchased a group insurance policy from GEM Insurance Company ("GEM").

Pursuant to the Subscription Agreement, Picture Perfect paid Crull's insurance premiums directly to IMET. Crull contributed, through payroll deductions, seventy-five percent of the premium payments; Picture Perfect absorbed the cost of the other twenty-five percent. Picture Perfect expressly "agree[d] that it is the administrator of the [insurance plan] as that term is contemplated under ERISA." As administrator, Picture Perfect

agree[d] that its responsibilities include, but are not limited to, remitting contributions on the employee's behalf, notifying employees of eligibility requirements, effective dates of changes in coverage, termination of coverage, conversion privileges, and providing certificate booklets to employees promptly upon receipt.

GEM sent a package to Picture Perfect containing materials to be distributed to the employees. Picture Perfect was obliged to distribute to its employees Certificate Booklets explaining the benefits provided by the plan and the process for submitting claims, as well as various applications and forms for obtaining, extending, or continuing benefits. Picture Perfect was also required to provide its employees with instructions on the procedure for filling out and submitting the documents required for the administration of the plan.

In June, 1991, Dale Crull underwent surgery. He was hospitalized for a time, and required follow-up care until September, 1991. His medical expenses ran to nearly $100,000. GEM denied coverage and rescinded Crull's policy.

The Crulls proceeded to the Superior Court for Maricopa County, Arizona, and filed a complaint against GEM alleging, inter alia, that Dale Crull's medical expenses are covered by the terms of the policy. The Crulls pled their various claims under state law. GEM responded that the Crulls' claims are completely preempted by federal law under the Employee Retirement Income Security Act of 1974 ("ERISA"), 88 Stat. 829, as amended, 29 U.S.C. Sec. 1001 et seq. (1988 ed. and Supp. V), and removed the case to the United States District Court for the District of Arizona. Metropolitan Life Ins. Co. v The District Court ruled that the GEM policy is an ERISA "employee benefit plan," and that ERISA preempts the Crulls' state law claims. Although the Crulls contended that, should the district court find their state law claims preempted, their complaint should be regarded as raising a claim for relief under ERISA's civil enforcement scheme, the district court entered summary judgment for GEM without addressing that contention.

Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987).

DISCUSSION

ERISA preempts all state law claims that "relate to any employee benefit plan...." 29 U.S.C. Sec. 1144(a). Accordingly, we first must determine whether an "employee benefit plan" exists in this case.

I.

Under ERISA, an "employee benefit plan" is either an "employee welfare benefit plan" or an "employee pension benefit plan," or both. 29 U.S.C Sec. 1002(3). See Silvera v. Mutual Life Ins. Co. of New York, 884 F.2d 423, 425 (9th Cir.1989). The insurance plan offered by GEM in this case has nothing to do with pensions, so the likely statutory candidate is "employee welfare benefit plan." 29 U.S.C. Sec. 1002(1) defines "employee welfare benefit plan" as

any plan, fund, or program which ... is ... established or maintained by an employer ... 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, disability, death or unemployment....

See Silvera, 884 F.2d at 425; Kanne v. Connecticut Gen. Life Ins. Co., 867 F.2d 489, 492 (9th Cir.1988) (per curiam) (as amended). We agree with the District Court that Picture Perfect established a plan to help Dale Crull obtain health insurance, and that this plan constitutes an ERISA "employee welfare benefit plan."

The Crulls disagree. They point out that a plan is an ERISA "employee benefit plan" only if it is "established or maintained by an employer or by an employee organization, or both." With that we agree. The Crulls then argue that IMET is not a statutory "employer" or "employee organization." See 29 U.S.C. Secs. 1002(4), 1002(5). We have held that a multiple employer trust comprised of heterogenous, unrelated employers is not an ERISA employer. Credit Managers Ass'n v. Kennesaw Life & Acc. Ins., 809 F.2d 617, 625 (9th Cir.1987). We need not resolve IMET's status as an "employer" under ERISA, however.

IMET's status is not dispositive so long as Picture Perfect qualifies as an ERISA employer. ¹ This observation sets up the Crulls' second argument. They argue that Picture Perfect is not an employer for purposes of ERISA regulation because Picture Perfect merely arranged for a group-type insurance program for its employees. As authority, they cite Taggart Corp. v. Life & Health Benefits Admin., 617 F.2d 1208 (5th Cir.1980), which held that ERISA does not regulate "bare purchases of health insurance where ... the purchasing employer neither directly nor indirectly owns, controls, administers or assumes responsibility for the policy or its benefits." 617 F.2d at 1211.

We have held, however, that "[e]ven if an employer does no more than arrange for a 'group-type insurance program,' it can establish an ERISA plan, unless it is a mere advertiser who makes no contributions on behalf of its employees." Credit Managers Ass'n, 809 F.2d at 625 (applying Department of Labor ("DOL") regulations that establish the conditions under which an employer's purchase of group insurance on behalf of its employees does not establish an "employee welfare benefit plan" for purposes of ERISA, 29 C.F.R. Sec. 2510.3-1(j) (1987)). ²

In this case, Picture Perfect paid twenty-five percent of the premiums for each of its employees. An employer who pays a portion of an employee's premiums can be expected to recoup that cost by paying the employee an otherwise lower wage, and for this reason there is little economic difference (excepting tax consequences) between in-kind payments of health insurance and deductions from an employee's payroll. Nevertheless, the DOL's regulations and our precedents recognize an employer's payment of a portion of the insurance premium as a significant factor for determining the existence of an ERISA plan. Picture Perfect also expressly agreed to act as "the administrator of the plan as that term is contemplated under ERISA." This fact "evidenc[es] the intent of [Picture Perfect] to create an ERISA plan." Kanne, 867 F.2d at 493. Finally, Picture Perfect undertook numerous administrative tasks, including making payroll deductions, distributing plan information to its employees, instructing its employees on the procedure for filling out and submitting plan documents, and notifying its employees about any changes in the plan.

We agree with the District Court that, applying our precedents to the undisputed facts of the case, this issue was appropriate for resolution on summary judgment. Kanne, 867 F.2d at 493 (court decides the issue); Silvera, 884 F.2d 423 (same). Under the standard established by our precedents, Picture Perfect's actions are sufficient to show the establishment of an ERISA "employee welfare benefit plan." Credit Managers, 809 F.2d at 625.

II.

Having determined that an "employee welfare benefit plan" exists in this case, we next determine whether ERISA preempts the Crulls' state law claims. Section 514(a) provides that ERISA "shall supersede any and all State laws insofar as they ... relate to any employee benefit plan" covered by the statute. 29 U.S.C. Sec. 1144(a). Section 502(a) provides, in pertinent part, that

A civil action may be brought--

(1) by a participant or beneficiary--

. . . . .

(B) to recover benefits due to him under the terms of his plan, to...