Northern Group Services v. STATE FARM MUT. AUTO.

Decision Date11 June 1986
Docket NumberCiv. No. 85 75383.
Citation644 F. Supp. 535
PartiesNORTHERN GROUP SERVICES, INC., Masco Industries, Inc. Employees' Benefit Plan for Hourly Employees of Forming Technology: Masco Industries' Inc. Employee's Benefit Plan for Salaried Employees; Masco Industries, Inc. Self-Funded Employee Benefits Plans, and Highland Appliance Companies Medical Benefit Plan, Plaintiffs, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Auto Owners Insurance Company, Auto Club Insurance Association, Farmers Insurance Exchange, Citizens Insurance Company of America, Michigan Mutual Insurance Company, Jointly and Severally, Defendants.
CourtU.S. District Court — Western District of Michigan

Stephen Wassinger, Honigman, Miller, Schwartz and Cohn, Detroit, Mich., for plaintiffs.

John A. Ashton, Plymouth, Mich., for defendant State Farm.

Stephen E. Glazek, Detroit, Mich., for defendants Auto Owners, Citizens and Michigan Mut.

David J. Lanctot, Detroit, Mich., for defendant Auto Club Ins.

James L. Borin, Detroit, Mich., for defendant Allstate Ins.

Thomas F. Kauza, Detroit, Mich., for defendant Farmer Ins.

MEMORANDUM OPINION AND ORDER

ANNA DIGGS TAYLOR, District Judge.

This is an action for declaratory and injunctive relief. Plaintiff Northern Group Services, Inc. (NGS) is the Plan Supervisor for the plaintiff employee benefit plans; which include the Masco Industries, Inc. Employee Benefit Plan for Hourly Employees of Farming Technology; the Masco Industries, Inc. Employees' Benefit Plan for Salaried Employees; the Masco Industries, Inc. Self-funded Benefit Plans (the Masco Plans) and the Highland Appliance Companies Medical Benefit Plan (Highland Plan). These employee health and welfare benefit plans are subject to regulations contained in the Employee Retirement Income Security Act, 29 U.S.C. § 1132(e). This court also has jurisdiction pursuant to 28 U.S.C. §§ 1331, 2201-2202.

The Plans provide health and medical benefits to the Plan participants and their beneficiaries. Their benefits include payment of medical, surgical, hospital, nursing and rehabilitative costs which result from injuries the participant or beneficiary may suffer from an automobile accident. Each Plan contains a coordination of benefits provision which states that the Plan will be secondarily liable, after statutorily required no fault vehicle insurance coverage, for payment of benefits to such injured beneficiaries. The typical clause is found in the Masco Plan:

If your state has a no-fault motor vehicle law, the coverage required by the state is considered primary for motor vehicle related medical expenses ... Any eligible expenses which are not paid by that carrier will then be considered for payment by Masco Medical Plan. The Masco Medical Plan is considered secondary for no-fault motor vehicle expenses.

The defendants are seven insurance companies which provide medical insurance coverage for injuries related to automobile accidents: State Farm Mutual Automobile Insurance Company, Auto Owners Insurance Company, Auto Club Insurance Association, Farmers Insurance Exchange, Citizens Insurance Company of America, Michigan Mutual Insurance Company, and All-state Insurance Company. These insurance companies do business in the State of Michigan. They have issued no-fault automobile insurance policies to Michigan residents pursuant to the provision of the Michigan No-Fault Automobile Insurance Act, M.C.L.A. § 500.3109a, which states that, when an insured is protected by other health and accident insurance coverage, a coordination of benefits policy must be offered to that insured: "an insurer providing personal protection insurance benefits shall offer, at appropriately reduced premium rates deductibles and exclusions reasonably related to other health and accident coverage on the insured."

Plaintiffs seek the adjudication of this court that M.C.L.A. § 500.3109a is preempted by ERISA; or alternatively, they seek an order restraining defendants from claiming reimbursement from plaintiffs for the medical expenses which defendants have paid to beneficiaries of plaintiff ERISA plans pursuant to no-fault insurance policies. The parties have filed cross motions for summary judgment.

As a preliminary matter, defendant State Farm argues that plaintiffs lack standing to bring this claim. 29 U.S.C. § 1132(a)(3) provides that plan participants, beneficiaries and fiduciaries may bring an ERISA claim.

State Farm contends that plaintiff NGS, as Plan Administrator, lacks the discretionary control over the assets of these plans which is characteristic of true fiduciaries. ERISA defines a fiduciary as one who "exercises any discretionary authority or discretionary control respecting management of such plans or ... disposition of its assets, he renders investment advice for a fee or other compensation ... with respect to any moneys or other property, or he has discretionary authority or responsibility in the administration of the plan." 29 U.S.C. § 1002(2). Although William Alcott, III, the President of NGS, testified at his deposition that Masco Inc. retains substantial decisionmaking power over its plans, NGS as supervisor of the Plans, provides administrative services, such as the determination of claims, on the Plan's behalf. Moreover, under 29 U.S.C. § 1132(d)(1) this circuit has held that Plans may sue and be sued as an entity. Saramar Aluminum Co. v. Pension Plan for Employees of the Aluminum Industry, 782 F.2d 577, 581 (6th Cir.1986). "The Plan, as the party before the court, necessarily includes those who must act for the Plan such as NGS to administer it and to effectuate its policies." Id. This court accordingly finds that plaintiffs do have standing to bring this action. Moreover, defendants themselves have sued NGS as administrator, so NGS does have a substantial stake in the outcome of this case.

NGS and the Plans argue here that M.C.L.A. § 500.3109a is a state law which "relates to" an employee benefit plan within the meaning of 29 U.S.C. § 1144(a) which provides that "the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan ..." The term "relates to" has been interpreted by the United States Supreme Court to refer to any state law which has "a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983).

The No-Fault Act will accordingly be preempted unless, as defendants allege, it falls within the savings clause of ERISA. Section 1144(b)(2)(A) of ERISA provides that nothing in section 1144(a) shall be construed to exempt a state law which regulates insurance, banking or securities. However, section 1144(b)(2)(B) states that ERISA plans "shall not be deemed to be an insurance company or other insurer ... or to be engaged in the business of insurance ... for the purpose of any law of any state purporting to regulate insurance companies." The Masco and Highland Plans do not provide insurance coverage for participants and they are not insurers within the meaning of ERISA or any other definition of that term, they merely pay benefits from a fund. There was argument here that plaintiff Highland Plan was an insured plan, as it has purchased some insurance. The United States Supreme Court has indeed defined an insured plan as one which purchases insurance for its participants. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 2385, 85 L.Ed.2d 728 (1985). The evidence clearly shows, however, that the insurance acquired by the Highland Plan is obtained to insure the Plan against the employer's failure or inability to make contributions to the Trust Fund.

The Michigan No-Fault Automobile Insurance Act is preempted to the extent that it has impact on the ERISA Plans. The applicable ERISA statute provides that all state laws which relate to employee benefit plans are superceded by ERISA. 29 U.S.C. § 1144(a). Therefore, plaintiffs claim, section 500.3109a is preempted by ERISA because the State of Michigan would otherwise by its insurance laws be regulating federal ERISA plans and dictating when and to whom benefits should be paid by federally authorized fiduciaries. It appears to the court that the conclusion of preemption is mandatory in this instance because to allow the State of Michigan to control payment of federal benefits would be contrary to Congress' intent to "occupy that field." Ogden...

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5 cases
  • Northern Group Services, Inc. v. Auto Owners Ins. Co.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • December 30, 1987
    ...law "relate[d] to" an employee benefit plan within the meaning of 29 U.S.C. Sec. 1144(a). Northern Group Services v. State Farm Mutual Automobile Insurance Co., 644 F.Supp. 535 (E.D.Mich.1986). Further, the Michigan law was not protected by the savings clause, Sec. 1144(b)(2)(A), because th......
  • Auto Club Ins. Ass'n v. Frederick & Herrud, Inc., Docket No. 96693
    • United States
    • Court of Appeal of Michigan (US)
    • April 28, 1989
    ...154 Mich.App. 330, 397 N.W.2d 299 (1986). One of the cases cited in C.A. Muer Corp. was Northern Group Services, Inc. v. State Farm Mutual Automobile Ins. Co., 644 F.Supp. 535 (E.D.Mich.1986). Subsequent to issuance of the panel's decision in C.A. Muer Corp., the Sixth Circuit Court of Appe......
  • Physicians Health Plan v. Citizens Ins. Co.
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    • November 10, 1987
    ...Insurance Association v. Pipeline Industry Benefit Fund, 654 F.Supp. 188 (E.D.Mich.1985); Northern Group Services v. State Farm Mutual Automobile Insurance Co., 644 F.Supp. 535 (E.D.Mich.1986). State laws which relate to self-funded employee benefit plans are not exempt from preemption beca......
  • State Farm Mut. Auto. Ins. v. AMER. COMMUNITY MUT. INS. CO.
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    ...of the plan are ultimately responsible for claims. They rely on the reported decision of Judge Anna Diggs Taylor in Northern Group Services v. State Farm, 644 F.Supp. 535. (E.D.Mi.S.D.1986) where the court concluded that the purchase of step-loss insurance did not render an employee benefit......
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