First Nat. Life Ins. Co. v. Sunshine-Jr. Food Stores, Inc.

• Citation: 960 F.2d 1546
• Decision Date: 13 May 1992
• Docket Number: 90-7668,Nos. 90-7535,SUNSHINE-JR,s. 90-7535
• Parties: , 15 Employee Benefits Cas. 1904 FIRST NATIONAL LIFE INSURANCE COMPANY, an Alabama Corporation, Plaintiff-Appellant, v.FOOD STORES, INC., a Florida Corporation, Defendant-Appellee, FIRST NATIONAL LIFE INSURANCE COMPANY, an Alabama Corporation, Plaintiff-Appellee, v.FOOD STORES, INC., a Florida Corporation, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1546

960 F.2d 1546

61 USLW 2048, 15 Employee Benefits Cas. 1904

FIRST NATIONAL LIFE INSURANCE COMPANY, an Alabama

Corporation, Plaintiff-Appellant, v. SUNSHINE-JR. FOOD STORES, INC., a Florida Corporation,

Defendant-Appellee,

FIRST NATIONAL LIFE INSURANCE COMPANY, an Alabama

Corporation, Plaintiff-Appellee, v. SUNSHINE-JR. FOOD STORES, INC., a Florida Corporation,

Defendant-Appellant.

Nos. 90-7535, 90-7668.

United States Court of Appeals,

Eleventh Circuit.

May 13, 1992.

Alvin T. Prestwood, Capouano, Wampold, Prestwood & Sansone, P.A., Montgomery, Ala., for First Nat. Life Ins. Co.

Charles A. Stewart, III, Robert W. Bradford, Jr., Hill, Hill, Carter, Cole & Black, P.C., Montgomery, Ala., for Sunshine-Jr. Stores, Inc.

Appeals from the United States District Court for the Middle District of Alabama.

Before ANDERSON, Circuit Judge, CLARK ^*, Senior Circuit Judge, and BROWN ^**, Senior District Judge.

WESLEY E. BROWN, Senior District Judge:

This suit concerns a group life and health insurance policy issued by First National Life Insurance Company ("FNL"). The policy was used to fund an employee welfare benefit plan established by Sunshine-Jr. Food Stores, Inc. ("Sunshine") to provide health benefits to its employees. The policy was in effect from August 1, 1983, until August 1, 1986. On this latter date, Sunshine terminated its policy with FNL and obtained coverage from another insurer. FNL subsequently filed this action asserting various state claims against Sunshine, including breach of contract and misrepresentation, as well as a claim for relief under the Employee Retirement Income Security Act, ("ERISA") 29 U.S.C. § 1001, et seq. The district court held that all of the state law claims asserted by FNL were preempted by ERISA. The ERISA claims were tried to the court. After hearing the evidence, the district court determined that FNL was not entitled to relief and entered judgment in favor of Sunshine. FNL appeals, raising several grounds for error.

Facts

Sunshine operates a chain of convenience stores. During the time period at issue here, Sunshine had about 2,000 employees. The company provided group health benefits to its employees through a fully insured plan. Eligible employees who wished to participate in the plan paid one-half of the premium for insurance benefits and Sunshine paid the other half. Prior to August of 1983, Sunshine provided benefits through a group policy with Aetna Insurance Company. In 1983, Sunshine began looking for another insurance carrier because of Aetna's rising premiums. The company contacted Frank Ayers, an insurance broker in Tallahassee, Florida. With Ayers' aid, Sunshine eventually chose FNL as insurer for its plan. The new group policy between these parties took effect on August 1, 1983.

Under the policy, FNL provided health, medical, and disability coverage to all employees of Sunshine who worked a minimum of 30 hours a week or a minimum of 1,000 hours each year. Sunshine bore the responsibility of enrolling all employees who were eligible to participate and wished to do so. The policy provided that Sunshine would enroll at least seventy-five percent of its eligible employees in the plan.

The policy did not expressly set forth the details of how the plan was to be administered. Nevertheless, the parties followed a relatively well-defined allocation of administrative responsibilities. For every billing period, Sunshine prepared a computer printout of its currently enrolled employees, calculated and collected the appropriate premiums, and forwarded a premium check along with the printout to Frank Ayers. Ayers and his employees in turn copied the printout and forwarded the materials to FNL. FNL deposited the premium check into its general assets accounts.

As to the claims process, employees or their health care providers typically submitted claims to Sunshine. The company would verify the employment status of the claimants and forward the claims to Ayers. Ayers would then check the accuracy of the claim and determine the appropriate rate under the policy. During the first year the policy was in effect, Ayers would send the claim to FNL, which would then issue a benefit check. In the later two years of the policy, FNL authorized Ayers to write benefit checks on its bank account. Ayers received a six percent commission from FNL on the Sunshine policy.

Sunshine ended its relationship with FNL in August of 1986, on the third anniversary of the policy. Again with Ayers' assistance, the company found a new insurer for its employee benefit plan. FNL later filed this suit. In addition to the claims asserted under state law, appellant sought monetary relief under ERISA based upon alleged breaches of the policy by Sunshine. The alleged breaches included the improper payment of benefits and the failure to maintain seventy-five percent employee participation in the plan.

Issues on Appeal

a. Preemption

The first issue raised by appellant FNL is whether the district court erred in finding that all of FNL's state law claims were preempted by ERISA. In its amended complaint, FNL alleged claims against Sunshine for breach of contract, breach of the duties of due care and good faith, willful and wanton conduct, misrepresentation, and an action under the Alabama Code for failure to disclose material facts. FNL apparently contends that these state claims should not be preempted because they do not "relate to" an employee benefit plan and are therefore outside the scope of ERISA's preemption clause. Appellant also suggests that the state law claims do not create a conflict with the purpose of the preemption provision. Finally, appellant argues that preemption is inappropriate because FNL has no adequate remedy under ERISA for the wrongs allegedly committed by the appellee.

We note initially that appellant does not challenge the district court's finding that the policy was part of an employee welfare benefit plan covered by ERISA. See 29 U.S.C. § 1002. See also Donovan v. Dillingham, 688 F.2d 1367 (11th Cir.1982) (en banc ). The district court found that the ERISA plan incorporated the terms of the group policy. R3-78-7. And, although Sunshine apparently had no formal written plan, the district court determined what the terms of the plan were at least in part from the course of dealing between FNL and Sunshine.

"In deciding whether a federal law pre-empts a state statute, our task is to ascertain Congress' intent in enacting the federal statute at issue." Shaw v. Delta Airlines, Inc., 463 U.S. 85, 95, 103 S.Ct. 2890, 2898, 77 L.Ed.2d 490 (1983). Under ERISA, Congress' intent is set forth expressly in the statutory language, which generally preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA. 29 U.S.C. § 1144(a). The preemption provision is "deliberately expansive and designed to 'establish pension plan regulation as exclusively a federal concern.' " Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 107 S.Ct. 1549, 1552, 95 L.Ed.2d 39 (1987). The Supreme Court has consistently recognized the expansive sweep of the preemption clause. Id.

In Amos v. Blue Cross-Blue Shield of Alabama, 868 F.2d 430 (11th Cir.), cert. denied, 493 U.S. 855, 110 S.Ct. 158, 107 L.Ed.2d 116 (1989), this court addressed the question of whether certain state law claims arising out of an alleged wrongful denial of benefits under an employee welfare plan were preempted by § 1144(a). The plaintiff in Amos asserted common law causes of action for bad faith refusal to pay benefits, fraud, and breach of contract. We concluded that the claims were preempted, stating "there can be no dispute that the common law causes of action asserted by the plaintiffs ... 'relate to' an employee benefit plan and therefore fall within ERISA's express preemption clause." Id. at 431. See also Phillips v. Amoco Oil Co., 799 F.2d 1464, 1469-70 (11th Cir.1986).

In the instant case, FNL seeks damages based on Sunshine's alleged mishandling of benefit payments and its alleged failure to adhere to terms of the group policy which were incorporated into the welfare benefit plan. We must reject the argument that these claims do not "relate to" the employee benefit plan. Congress used the words "relates to" in their broad sense and did not mean to preempt only state laws specifically designed to affect employee benefit plans. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983). A state law relates to an employee benefit plan if it "has a connection with or reference to such a plan." Id. The claims asserted by FNL have an obvious connection with the plan in this case. They are founded upon Sunshine's alleged failure to adhere to its obligations under the group policy which funded Sunshine's welfare benefit plan. Cf. Amos, 868 F.2d at 430. The district court found that the plan incorporated the terms of the policy. These claims "relate to" the welfare benefit plan.

Appellant maintains that preemption is not appropriate because its state claims are consistent with the purposes behind ERISA and the preemption provision. FNL argues that preemption of state laws was designed to preserve consistency and to prevent the imposition of conflicting requirements in benefit plans. According to FNL, the maintenance of its claims against Sunshine does not conflict with any of the objectives of ERISA. But the preemption provision displaces all state laws that fall within its sphere, even including state laws that are consistent with ERISA's substantive requirements. Mackey v. Lanier Collection Agency, 486 U.S. 825, 829, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988). Moreover, state contract and tort laws that impose varying standards upon the administrator of a welfare benefit plan create a significant potential for conflict with ERISA and thus are logically preempted. As we noted earlier, Congress deliberately wrote § 1144(a) in a broad manner...