Curry v. Cincinnati Equitable Ins. Co.

• Citation: 834 S.W.2d 701
• Decision Date: 31 July 1992
• Docket Number: Nos. 91-CA-1114-M,91-CA-1245-MR,s. 91-CA-1114-M
• Parties: 15 Employee Benefits Cas. 2463 Joann CURRY, Appellant, v. CINCINNATI EQUITABLE INSURANCE COMPANY; Carl Curry; and St. Luke Hospital, Appellees. CINCINNATI EQUITABLE INSURANCE COMPANY, Cross-Appellant, v. Joann CURRY, Cross-Appellee.
• Court: Court of Appeals of Kentucky

Page 701

834 S.W.2d 701

15 Employee Benefits Cas. 2463

Joann CURRY, Appellant, v. CINCINNATI EQUITABLE INSURANCE COMPANY; Carl Curry; and St. Luke Hospital, Appellees.

CINCINNATI EQUITABLE INSURANCE COMPANY, Cross-Appellant, v. Joann CURRY, Cross-Appellee.

Nos. 91-CA-1114-MR, 91-CA-1245-MR.

Court of Appeals of Kentucky.

July 31, 1992.

Bernard J. Blau, Gregory W. McDowell, Carl Turner, Cold Spring, for Joann Curry.

William T. Robinson III, Troy W. Skeens, Jr., Roger N. Braden, Covington, for Cincinnati Equitable Ins. Co.

Carl Curry, pro se.

Stephen J. Elsbernd, Newport, for St. Luke Hosp.

BEFORE GUDGEL, HOWERTON, and WILHOIT, JJ.

GUDGEL, Judge:

This is an appeal and cross appeal from an order entered by the Campbell Circuit Court dismissing the state law claims of appellant Joann Curry in an action filed to recover benefits allegedly due under a group health insurance policy. Appellant's state law claims were dismissed on the ground that these claims are preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq. On direct appeal, Curry contends that the court erred (1) by failing to adjudge that the defense of ERISA preemption was waived because it was not asserted as an affirmative defense, (2) by adjudging that ERISA is applicable to the group insurance plan at issue, (3) by failing to adjudge that Curry's state law claims are exempt from preemption under the "saving clause" exception to ERISA and (4) by failing to adjudge that the motion to dismiss filed by appellee Cincinnati Equitable Insurance Company (CEIC) was filed in violation of Civil Rule 92(3), and hence, is untimely. On cross appeal, CEIC argues that the court erred by adjudging that the appropriate standard for reviewing its denial of benefits is a de novo review. We affirm on direct and cross appeal.

Appellee St. Luke Hospital sued Joann Curry and her husband Carl for unpaid medical bills. Thereafter, Curry filed a separate suit against CEIC seeking to recover benefits allegedly due under a group insurance plan. In the hospital's suit, Curry filed a third-party complaint against CEIC. These cases were consolidated by the court. CEIC denied Curry coverage under the insurance plan because she allegedly failed to disclose on her application a prior history of kidney stones.

Shortly before trial, CEIC filed a motion in limine seeking an order dismissing Curry's state law claims on the ground that they are preempted by ERISA. The court orally denied the motion. However, following a mistrial caused by time constraints, the court agreed to reconsider the motion. On March 4, 1991, the court entered an order adjudging that all of Curry's state law claims are preempted by ERISA. The court also adjudged that the denial of benefits challenged under ERISA would be reviewed under a de novo standard. In a subsequent order, the court made its order of March 4, 1991, a final and appealable order. This appeal followed.

I.

On direct appeal, Curry first contends that the issue of ERISA preemption is an affirmative defense which was waived when CEIC did not plead the defense in its answer as required by CR 8.03. We disagree. We note that the defense that a claim is preempted by federal law is not specifically listed in CR 8.03 as being an affirmative defense, nor is it listed in "other matters" which it would be proper to plead as set forth in 6 Bertlesman and Phillips, Kentucky Practice, CR 8.03 (4th ed. 1984). Nevertheless, we conclude that ERISA preemption is an affirmative defense because it has the effect of eliminating state law causes of action. However, for the following reasons, we are of the opinion that the defense was not waived.

Curry's initial claim was for breach of contract. Subsequently, she filed an amended complaint asserting a claim for bad faith, as well as claims under the Kentucky Consumer Protection Act and the Kentucky Unfair Settlement Practices Act. Once Curry filed her amended complaint, CEIC was entitled under CR 15.01 to plead in response to the amended complaint. Indeed, a defendant is specifically allowed to file an amended answer to an amended complaint. 6 Bertlesman and Philipps, supra, CR 15.01, Comment 1. Although CEIC responded to the amended complaint by filing a motion to dismiss rather than an amended answer, such a motion is usually treated by courts as an answer. See Wright & Miller, Federal Practice and Procedure: Civil § 1277 (1969). Thus, CEIC clearly pleaded ERISA preemption as a defense to the claims asserted in the amended complaint. Moreover, whenever a defense is asserted in an amended answer (here in a motion to dismiss) and arises out of the conduct, transaction or occurrence set forth in the plaintiff's original pleading, the defense relates back to the date of the original pleading. CR 15.03. It follows, therefore, and we conclude that the defense of ERISA preemption was not waived. See Burns v. Capitol Beverage Co., Ky., 472 S.W.2d 510 (1971) (defendant permitted to amend his answer to litigate his true defense where plaintiff had ample time to investigate this defense and to prepare for trial, and hence, there was no element of surprise); Teague v. Reid, Ky., 340 S.W.2d 235 (1960) (trial court abused its discretion by declining to allow defendants to amend their answers even though the motions to amend were not filed until the court was considering motions for summary judgment); Caldwell v. Bethlehem Mines Corp., Ky., 455 S.W.2d 67 (1970) (employer permitted to file special answer asserting defense of statute of limitations although not filed within time required by board's rules of procedure).

Although we agree with the trial court's determination that the issue as to ERISA preemption was not waived by CEIC, we note that we disagree with the trial court's conclusion, and CEIC's contention, that ERISA preemption is a subject matter jurisdiction question which can be raised at any time. On the contrary, ERISA preemption is an affirmative defense involving a choice of law issue which must be raised as a defense prior to trial. Associates Investment v. Claeys, 533 N.E.2d 1248 (Ind.App.1989).

II.

Next, Curry argues that the trial court erred by adjudging that the group plan at issue is an "employee benefit plan" as defined by ERISA. We disagree. With certain exceptions, ERISA's provisions "supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The following five elements must be present for there to be an "employee benefit plan," as defined by 29 U.S.C. § 1002(1):

(1) A plan, fund or program;

(2) Established or maintained;

(3) By an employer or by an employee organization, or by both;

(4) For the purpose of providing medical, surgical, hospital care, sickness, accident, disability, death, unemployment or vacation benefits, apprenticeships or other training programs, daycare centers, scholarship funds, prepaid legal services or severance benefits;

(5) To participants or their beneficiaries.

Curry argues that the group policy in question was not a plan as defined by ERISA and that even if it were, that ERISA does not govern the plan because it was not established or maintained by her employer, Southwestern College of Business (Southwestern). Curry maintains that Southwestern did not create the group policy, but only made it available to employees. Therefore, Curry urges that the plan was in effect an independent marketing scheme outside the policy of § 1002. We disagree. In the case cited by Curry, Blue Cross/Blue Shield of Florida, Inc. v. Weiner, 543 So.2d 794 (Fla. 4th Dist.Ct.App.1989), the Florida court held that ERISA did not apply to claims which arose out of a denial of coverage by Blue Cross and Blue Shield because the group health insurance plan was sold to individual gasoline service station retailers through an independent marketing company, ASFI, supposedly in cooperation with the national and state service station dealers associations. The court based its holding on the fact that the record did not reveal any plan or informal agreement established or maintained by an employer or an employee organization. Nor were there any fiduciary responsibilities created by the insurance marketing scheme, which simply made group insurance available to members of the organization. The instant action, however, is clearly distinguishable from Weiner. Here, there is a signed written agreement between Curry's employer, Southwestern, and CEIC. Moreover, the plan at issue here was provided to all qualified employees.

Curry also argues that ERISA does not apply because Southwestern had no administrative or managerial responsibilities regarding the plan, and therefore, did not show that it established or maintained the plan. Again, we disagree. According to the affidavit of Ken Uveges, who was involved with the underwriting of the plan, Southwestern was required to contribute at least 50 percent toward employee premiums. In addition, Southwestern negotiated for the kinds of coverage to be provided, as well as premiums, and was responsible for the plan design, including the deductible and co-insurance requirements. Moreover, Southwestern reserved the right to change certain matters regarding coverage and played a substantial role in the day-to-day administration of the plan. Clearly, Southwestern did far more than collect premiums from its employees, as appellant alleges. Indeed, because Southwestern made contributions to the plan and because Southwestern's function with respect to the plan was not limited to collecting premiums, the plan does not meet two of the four requirements under the current labor department regulation for showing that certain employee welfare plans are not governed by ERISA. 29 C.F.R. § 2510.3-1(j). We hold, therefore, that the trial court did not err by finding that the group policy upon which Curry's claims are based is an "employee benefit plan" as defined...