Cowart v. Metropolitan Life Ins. Co.
| Decision Date | 08 August 2006 |
| Docket Number | No. 5:04 CV 312 CAR.,5:04 CV 312 CAR. |
| Parties | Phillip W. COWART and Annemie Cowart, Plaintiffs v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant |
| Court | U.S. District Court — Middle District of Georgia |
Thomas R. Burnside, III and Mark B. Williamson of Burnside Wall LLP in Augusta, GA, for The plaintiffs.
H. Sanders Carter, Jr. and Lisa R. Richardson of Carter & Ansley LLP of Atlanta, GA, for The defendant.
ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
Before the Court is Defendant Metropolitan Life Insurance Company's Motion for Summary Judgment [Doc. 35]. Plaintiffs have filed a Response [Doc. 40] and Defendant has filed a Reply [Doc. 47]. For the reasons discussed below, Defendant's Motion for Summary Judgment is GRANTED. Furthermore, as discussed below, Plaintiffs' request to amend their complaint is also GRANTED. Plaintiffs shall have fifteen (15) days from the date of this Order to amend their Complaint.
This case involves a coverage dispute between Plaintiffs and their disability insurance provider, Metropolitan Life Insurance Company ("Defendant" or "Met-Life"). Plaintiff Phillip Cowart is the named insured under the policy, and Plaintiff Annemie Cowart, Phillip's wife, is the owner of the policy. Plaintiffs' complaint alleges claims for breach of contract and bad faith arising under Georgia law. Through the present motion for summary judgment, Defendant argues that these claims are preempted by the Employee Retirement Income Security Act ("ERISA"). At the center of this dispute is whether Plaintiffs' disability insurance policy is part of an "employee welfare benefit plan" as defined in Title I of ERISA, 29 U.S.C. § 1002(1) (1999).
Plaintiff Phillip Cowart ("Cowart") is the former President and sole shareholder of Phil Cowart Construction, Inc. ("PCC"). PCC operated as a subchapter-S corporation, meaning that the income or loss of the company passed through to Cowart. During its operation—from ap proximately 1976 until 1996—PCC performed residential home construction. In addition to Cowart, PCC employed two superintendents—Henry Jones and John Garrett, together with a bookkeeper and various laborers. (Cowart Depo. [Doc. 39] p. 40-41, 43-44).
In April 1986, Cowart, Jones, and Garrett purchased disability insurance policies from Defendant.1 On April 10, 1986, PCC submitted applications for the policies through the DeBorde-Howard Agency. (Verroi Aff. [Doc. 35, Exh. 1] ¶¶ 4(a), 4(f)). At least two of the applications identify PCC as the applicant and intended owner of the policies. (Jones Application [Doc. 35, Exh. 2]; Cowart Application [Doc. 35, Exh. 7]).2 On both applications, Cowart signed the name "Phil Cowart Construction, Phil Cowart, Pres." on the signature line for the "applicant, if other than the proposed insured." Id. In addition, Cowart's application indicates that the premiums were to "be paid with the employer's funds with no part of the premiums paid with funds taxable to Proposed Insured as income." (Cowart Application [Doc. 35, Exh. 7]). In addition, prepayment receipts signed by Cowart (in his capacity as President of PCC) and an agent of Defendant indicate that PCC paid the initial premiums for both policies. (Jones Application [Doc. 35, Exh. 4]; Cowart Application [Doc. 35, Exh. 9]).
The premiums for the three policies were billed to PCC. Because PCC received one bill for the three policies, the premiums were subject to a 10% "list bill" discount. (Verroi Aff. [Doc. 35, Exh. 1] ¶ 5; Jones Application [Doc. 35, Exh. 2]; Cowart Application [Doc. 35, Exh. 7]). While Plaintiffs admit that PCC paid the premiums for the three policies, they allege that Cowart, Jones, and Garrett ultimately were responsible for the premium payments because PCC took the payments into account when calculating their salaries. Plaintiffs have produced no documentary evidence of any such agreement, however. Plaintiffs further argue that Cowart was ultimately responsible for his own premium payment because, as the sole shareholder of PCC, his year-end profit allocation directly accounted for the premium payment. Cowart, however, did not report the premium payments as income on his W-2 forms, and therefore was not required to pay taxes on them. (Cowart W-2 [Doc. 35, Exhs. 14, 15]).
The three policies remained in effect even after Cowart, Jones, and Garrett left PCC's employ. Garrett left PCC in 1988 and kept his policy in place when he left the company. Jones left PCC in 1994 and also kept his policy in place. Upon Jones's departure from PCC, Cowart executed a Beneficiary Owner Designation on behalf of PCC transferring ownership of the policy from PCC to Milton Jones Homes, Inc., Jones's new employer. (Beneficiary Owner Designation [Doc. 47, Exh. 3]). Similarly, after PCC ceased operations in 1996, PCC assigned ownership of Cowart's policy to Annemie Cowart. Cowart executed the assignment on behalf of PCC. ( .
On March 14, 1997, Cowart submitted a claim for disability benefits based on a diagnosis of depression and generalized anxiety disorder. For nearly five years, Defendant paid disability benefits to Cowart; however, on January 14, 2002, Defendant notified Cowart by letter that his benefits were being terminated. Cowart then appealed the termination decision, and Defendant denied his appeal in a letter dated October 8, 2003.
Plaintiffs then filed the present lawsuit in the State Court of Houston County, alleging breach of contract and bad faith. Defendant removed the case to this Court on the grounds of diversity jurisdiction, or alternatively, federal question jurisdiction based on its assertion that Plaintiffs' claims were governed by ERISA. Following removal, Plaintiffs did not amend their complaint to assert a cause of action under ERISA. At the close of discovery, Defendant filed the present motion for summary judgment. Through its motion, Defendant argues that Plaintiffs' state-law claims should be dismissed because they are preempted by ERISA. In their Response, Plaintiffs argue that even if their state-law claims are preempted by ERISA, they should be granted leave to amend their complaint to state a claim under ERISA. This Order will address these two motions.
Summary judgment must be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Johnson v. Clifton, 74 F.3d 1087, 1090 (11th Cir.1996). Not all factual disputes render summary judgment inappropriate; only a genuine issue of material fact will defeat a properly supported motion for summary judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). This means that summary judgment may be granted if there is insufficient evidence for a reasonable jury to return a verdict for the nonmoving party or, in other words, if reasonable minds could not differ as to the verdict. See id. at 249-52, 106 S.Ct. 2505.
In reviewing a motion for summary judgment, the court must view the evidence and all justifiable inferences in the light most favorable to the nonmoving party, but the court may not make credibility determinations or weigh the evidence. See id. at 254-55, 106 S.Ct. 2505; see also Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000). The moving party "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact" and that entitle it to a judgment as a matter of law. Celotex, 477 U.S. at 323, 106 S.Ct. 2548 (internal quotation marks omitted).
If the moving party discharges this burden, the burden then shifts to the nonmoving party to go beyond the pleadings and present specific evidence showing that there is a genuine issue of material fact (i.e., evidence that would support a jury verdict) or that the moving party is not entitled to a judgment as a matter of law. See Fed.R.Civ.P. 56(e); see also Celotex, 477 U.S. at 324-26, 106 S.Ct. 2548. This evidence must consist of more than mere conclusory allegations or legal conclusions. See Avirgan v. Hull, 932 F.2d 1572, 1577 (11th Cir.1991).
Defendant argues it is entitled to summary judgment because Plaintiffs' claims, which arise under state law, are preempted by ERISA. The ERISA preemption provision states that ERISA supersedes "any and all state laws insofar as they ... relate to an employee [welfare] benefit plan." 29 U.S.C. § 1144(a) (1999). Therefore, under this provision, to determine whether a plaintiff's state law claims are preempted by ERISA, the Court must engage in a two-step analysis. In the first step, the Court must determine whether the policy at issue is part of an employee welfare benefit plan governed by ERISA. In the second step, the Court must determine whether the plaintiff's state law claims relate to the plan so as to be preempted by ERISA. In this case, there is no question that Plaintiffs' state-law claims "relate to" their policy. See Butero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1215 (11th Cir.1999) () (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48, 107 S.Ct. 1549,...
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