833 F.2d 85 (6th Cir. 1987), 86-1614, Northern Group Services, Inc. v. Auto Owners Ins. Co.

Docket Nº:86-1614, 86-1615, 86-1616.
Citation:833 F.2d 85
Party Name:NORTHERN GROUP SERVICES, INC., Masco Industries, Inc. Employees Benefit Plan for Hourly Employees of Forming Technology; Masco Industries, Inc. Employees Benefit Plan for Salaried Employees; Masco Industries, Inc. Self-Funded Employee Benefits Plans; and Highland Appliance Companies Medical Benefit Plan, Plaintiffs-Appellees, v. AUTO OWNERS INSURAN
Case Date:November 13, 1987
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 85

833 F.2d 85 (6th Cir. 1987)


Employees Benefit Plan for Hourly Employees of Forming

Technology; Masco Industries, Inc. Employees Benefit Plan

for Salaried Employees; Masco Industries, Inc. Self-Funded

Employee Benefits Plans; and Highland Appliance Companies

Medical Benefit Plan, Plaintiffs-Appellees,



of America; Michigan Mutual Insurance Company;

and Allstate Insurance Company (86- 1614),

State Farm Mutual Automobile Insurance Company (86-1615),

Auto Club Insurance Association (86-1616),


Nos. 86-1614, 86-1615, 86-1616.

United States Court of Appeals, Sixth Circuit

November 13, 1987

Argued June 9, 1987.

Rehearing and Rehearing En Banc Denied Dec. 30, 1987.

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Stephen E. Glazek (argued), Barris, Sott, Denn & Driker, James L. Borin, Garan, Lucow, Miller, Seward, Cooper & Becker, P.C., Detroit, Mich., for defendant-appellant in No. 86-1614.

Michael Shpiece, Honigman, Miller, Schwartz, and Cohn, Detroit, Mich., Stephen Wasinger (argued), for plaintiffs-appellees.

John A. Ashton (argued), Draugelis, Ashton, Scully, Haynes, MacLean & Pollard, Plymouth, Mich., for defendant-appellant in No. 86-1615.

David J. Lanctot (argued), Dickinson, Brandt, Hanlon, Becker & Lanctot, Detroit, Mich., for defendant-appellant in No. 86-1616.

Before MERRITT and MARTIN, Circuit Judges, and BROWN, Senior Circuit Judge.

MERRITT, Circuit Judge.

A group of automobile insurance companies challenge a ruling on summary judgment that the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001 et seq., preempted the Michigan No-Fault Automobile Insurance Act, Mich.Comp.Laws Sec. 500.3109a, to the extent that the Michigan law allows policy provisions which conflict with ERISA plans. ERISA's preemption provision, 29 U.S.C. Sec. 1144(a), provides in relevant part:

Except as provided in subsection (b) of this section, 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 Michigan statute requires that no-fault automobile insurers offer coordination of benefits provisions, and state court interpretation of that law makes the liability under such no-fault coverage secondary to other health and accident coverage. The plaintiff plans make no-fault liability primary and their own liability secondary and hence conflict with the Michigan insurance law. We reverse, holding that the Michigan

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law is saved from preemption by the ERISA "savings" clause, 29 U.S.C. Sec. 1144(b)(2)(A),

Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities,

and is not barred by the "deemer" clause, 29 U.S.C. Sec. 1144(b)(2)(B),

Neither an employee benefit plan ... nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer ... or to be engaged in the business of insurance ... for purposes of any law of any State purporting to regulate insurance companies [or] insurance contracts....

The questions of preemption analysis and interpretation under the first preemption clause, Sec. 1144(a), and the savings clause are straightforward and not particularly difficult. The questions under the "deemer" clause are more complex.

I. Proceedings Below

Several ERISA plans that provide employee health and medical benefits brought this declaratory action in the District Court seeking injunctive relief from medical expenses paid under no fault insurance policies by those companies to those covered by the ERISA plans. The ERISA plans contain coordination of benefits provisions that purport to make the liability of the plans secondary to state mandated no-fault automobile insurance. The Masco plan for salaried employees provides:

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. If you or a covered dependent incurs medical expenses as a result of a motor vehicle accident, those expenses should first be submitted to your motor vehicle insurance carrier. Any eligible expenses which are not paid by that carrier will then be considered for payment by the Masco Medical Plan. The Masco Medical Plan is considered secondary for no-fault motor vehicle expenses.

The automobile insurance companies defending the claims have issued no-fault automobile insurance contracts in accordance with Mich.Comp.Laws Sec. 500.3109a. The Michigan law "mandates that no-fault carriers offer coordination of benefits at reduced premiums when the insured has 'other health and accident coverage.' " Federal Kemper Insurance Co. v. Health Insurance Administration, Inc., 424 Mich. 537, 546, 383 N.W.2d 590, 594 (1986). In Federal Kemper the Supreme Court of Michigan determined that section 3109a imposed primary liability on a health insurer when the insured also had a no-fault policy with a coordination of benefits clause and the no-fault insurer charged lower premium rates. Relying on section 3109a and Federal Kemper, the automobile insurance companies have made claims against the employee benefit plans for reimbursement, asserting that they, not the plans, are secondarily liable.

In order to settle this confusion over the coordination of benefits between the plans and the statutorily required no-fault coverage, the plans and a plan administrator brought a declaratory action. After discovery, the parties made cross motions for summary judgment. The District Court held that ERISA preempted the Michigan law because the Michigan 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 the plans were excluded by the deemer clause, Sec. 1144(b)(2)(B). Because the plans were protected by ERISA, Michigan could not regulate the benefits they provided. The District Court concluded that "[t]he Michigan No-Fault Automobile Insurance Act is preempted to the extent that it has an impact on the ERISA plans." Id. at 538. The Court granted plaintiffs' motion for summary judgment and denied defendants' cross motion.

II. "Relate to"

As was inevitable with such broadly phrased statutory language, the extent of

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the preemption provision has been the subject of much litigation.

Shaw v. Delta Air Lines, 463 U.S. 85, 96-98, 103 S.Ct. 2890, 2899-2900, 77 L.Ed.2d 490 (1983), made clear that a law "relates to" an employee benefit plan if it has "a connection or reference to such a plan." The Court based this reading not only on a plain meaning approach but on the expressed legislative intent giving the words "relate to" a broad scope. Id. at 97-98, 103 S.Ct. at 2900. Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed. 2d 728 (1985), held that a state law requiring that health insurers provide mental-health-care benefits "clearly" relates to ERISA welfare benefit plans. Id. at 739, 105 S.Ct. at 2389.

In Fort Halifax Packing Co. v. Coyne, --- U.S. ----, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987), the Supreme Court further considered the meaning of the phrase "relate to any employee benefit plan." In Fort Halifax a Maine official sought to enforce the state statute requiring employers, in the event of a plant closing, to provide a one-time severance payment to employees not covered by express contract agreements providing for severance pay. The Court held that the Maine severance pay statute did not "relate to any employee benefit plan" under the ERISA preemption provision, 29 U.S.C. Sec. 1144(a), and thus was not preempted. Relying on the meaning and underlying purpose of section 1144(a), the Court rejected Fort Halifax's argument that any state law pertaining to a type of employee benefit listed in ERISA, such as severance pay, necessarily regulates a plan and is preempted.

Section 1144(a), the Court noted, expressly states that state laws are superseded to the extent they "relate to any employee benefit plan." The Court said that the preemption provision "does not refer to state laws relating to 'employee benefits,' but to state laws relating to 'employee benefit plans'." Id. at 107 S.Ct. at 2215 (emphasis original). The Court observed that ERISA uses the words "benefit" and "plan" separately throughout and nowhere treats the two as synonymous. "Given the basic difference between a 'benefit' and a 'plan,' Congress' choice of language is significant in its pre-emption of only the latter." Id. at 2216.

The Court identified the purpose of the preemption provision: to allow plans to adopt a uniform scheme for coordinating complex administrative activities, unaffected by divergent regulatory schemes in different states. Congress was aware of the administrative realities faced by employee benefit plans, and sought to "eliminat[e] the threat of conflicting or inconsistent State and local regulation." Id. (quoting 120 Cong.Rec. 29197 (1974) (remarks of Rep.Dent)). The Court explained that an employer who undertakes systematically to pay certain benefits assumes a number of obligations such as ascertaining eligibility, determining benefits, making payments, monitoring the availability of funds for benefit payments, and keeping records in compliance with reporting requirements:

The most efficient way to meet these responsibilities is to...

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