Davis v. Time Ins. Co.

• Decision Date: 20 October 1988
• Docket Number: Civ. A. No. H88-0148(R).
• Parties: Linda DAVIS, Plaintiff, v. TIME INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Mississippi

698 F. Supp. 1317

Linda DAVIS, Plaintiff, v. TIME INSURANCE COMPANY, Defendant.

Civ. A. No. H88-0148(R).

United States District Court, S.D. Mississippi, Hattiesburg Division.

October 20, 1988.

Leonard B. Melvin, Jr., Len Melvin, Melvin & Melvin, Laurel, Miss., for plaintiff.

William S. Mullins, III, Kenneth E. Bullock, Gibbes, Graves, Mullins, Bullock, & Ferris, Laurel, Miss., for defendant.

MEMORANDUM OPINION

DAN M. RUSSELL, Jr., District Judge.

This cause is before this Court on Motion to Remand filed by the plaintiff Linda Davis and the Court having considered said motion, together with briefs and exhibits in support and response thereto, finds as follows, to-wit:

The present suit is based on an alleged "bad faith" refusal by the defendant Time Insurance Company (Time) to pay benefits to the plaintiff which she alleges are due and owing under the subject policy. The defendant argues that in light of Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987), and Perkins v. Time Insurance Co., No. H87-0101(W), ___ F.Supp. ___ (S.D.Miss. July 29, 1988) (order denying plaintiff's motion to remand), this action is preempted by federal law, more specifically, the Employer Retirement Income Security Act of 1974 (ERISA) 29 U.S.C. § 1001, et seq., and therefore was properly removed. The plaintiff responds by arguing inter alia that the action was improperly removed because: (1) the facts do not support a finding a preemption under ERISA; and (2) the circumstances surrounding this action indicate that more than the statutory period of time for removal under 28 U.S.C. §§ 1441 and 1446 elapsed and therefore said removal was performed improvidently and without jurisdiction.

I. FACTS

On or about October 29, 1983, T.E. Cook Construction Company (Cook Construction) decided to establish a plan or program for the purpose of providing certain benefits to its five full-time employees. Cook Construction applied for benefits which provided for payment to be made to its employees in the event of their death or dismemberment or in the event said employees should incur medical expenses as the result of sickness or accident. It is also apparent that the benefits were intended to extend to certain dependents of full-time employees covered by the plan at said employee's option and expense. Cook Construction chose to provide the said benefits to its employees and their dependents by and through a group insurance policy secured by Time.

Time contends that in providing group insurance benefits to employers having less than ten employees, it does so through a vehicle known as the Time Insurance Multiple Employer Trust (Time MET), which is a legal entity, obstensibly designed for the sole purpose of serving as the policyholder for many small employers. This, Time alleges, is done primarily to provide group insurance at "affordable" rates.

On or about October 29, 1983, Cook Construction, by and through its owner, Mr. T.E. Cook, signed and delivered to Time an Employer Participation Agreement and Application which requested life, major medical and accidental death and dismemberment coverage for its employees under the Time MET trust policy.

On or about October 29, 1983, William R. Davis, a full-time employee of Cook Construction, applied to Time for the purpose of becoming a participant in the plan. He signed and delivered an Employee Enrollment Form requesting coverage under the Time MET group policy for himself and his wife, the plaintiff, Linda Davis. Subsequently, the Employer's Participation Agreement and Application, along with the Employee Enrollment Forms, as executed by all five full-time employees, including William Davis, were duly approved by Time and all of said employees and their qualified dependents became covered under the group policy issued on November 1, 1983. Thereafter, a certificate of insurance coverage was issued to each of the employees, including William Davis.

The plaintiff Linda Davis subsequently submitted a claim for medical benefits contending that coverage was required under the subject group insurance plan. Time denied said claim and on or about February 12, 1985, the plaintiff filed her complaint in the Circuit Court of the Second Judicial District of Jones County, Mississippi. On or about August 29, 1988, Time removed the action to this Court.

II. IS THE GROUP POLICY AT ISSUE COVERED BY ERISA?

To determine if the group policy at issue is an employee welfare benefit plan and thus governed by the Act an examination of the coverage and definitions provisions must be consulted. 29 U.S.C.A. § 1003, which is the coverage provision of ERISA, directs that:

(a) Except as provided in subsection (b) of this section and in sections 1051, 1081, and 1101 of this title, this subchapter shall apply to any employee benefit plan if it is established or maintained —

(1) by any employer engaged in commerce or in any industry or activity affecting commerce; or

(2) by any employee organization or organizations representing employees engaged in commerce or in any industry or activity affecting commerce; or

(3) by both.

For the purposes of ERISA an employee benefit plan is defined in 29 U.S.C.A. § 1002, which advises that:

For the purposes of this subchapter:

(1) The terms "employee welfare benefit plan" and "welfare plan" mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any benefit described in section 186(c) of this title (other than pensions on retirement or death, and insurance to provide such pensions).¹

Generally speaking, five statutory requirements have evolved which lend insight into whether a particular plan is covered under ERISA, they require: "(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, unemployment or vacation benefits...., (5) to participants or their beneficiaries." Ed Miniat, Inc. v. Globe Life Insurance Group, Inc., 805 F.2d 732, 738 (7th Cir.1986); Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir.1982) (en banc). The statutory language of ERISA does not specifically define the first two elements; however, case law indicates that in satisfying the requirements "a `plan, fund or program' under ERISA is established if from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits." Donovan v. Dillingham, 688 F.2d at 1373; Ed Miniat, Inc. v. Globe Life Insurance Group, Inc., 805 F.2d at 739; See also Harris v. Arkansas Book Company, 794 F.2d 358, 360 (8th Cir.1986); Scott v. Gulf Oil Corporation, 754 F.2d 1499, 1504 (9th Cir.1985); and Local Union 2134, United Mine Workers of America v. Powhatan Fuel, Inc., 640 F.Supp. 731, 734 (N.D.Ala.1986). In an effort to set forth facts which it believes establish a "plan, fund or program", the defendant Time has submitted affidavits and exhibits which set forth:

(1) that intended benefits were, among others, life accidental death and dismemberment and major medical benefits;

(2) that plaintiff, Linda Davis, was not only aware of the benefits, she applied for them;

(3) that defendant Time provided each covered employee with a Certificate of Insurance which explained the available benefits;

(4) that the class of beneficiaries was readily ascertainable as full-time employees (defined in the employer participation agreement as those working at least 30 hours per week) and their qualified dependents;

(5) that obviously plaintiff was a member of this class, since she filed a claim for benefits as well as this eventual law-suit;

(6) that the employer, Cook Construction, agreed and did pay the entire premium required for employee coverage under the plan (although there is evidence that the individual employees paid to the employer the percentage of the total premium owed for their individual coverage) (7) that Cook Construction contracted and agreed to be ultimately responsible for the insurance plan of its employees; and

(8) that defendant Time provided the employer with materials that demonstrated the claims procedure for its employees and their qualified dependents to follow.²

Although at this point the Court is confident that the plan entered into by Cook Construction on behalf of its employees satisfies all the statutory and precedential requirements for compliance under ERISA, the facts in this case must be analyzed in accordance with those in Taggart Corporation v. Life & Health Benefits Administration, 617 F.2d 1208 (5th Cir.1980) before a final determination can be made. The sole issue for consideration in Taggart was whether an entity known as the Security Multiple Employer's Trust (SMET) was itself an ERISA plan. Since the SMET in Taggart, arguably unlike the present case³, was a proprietary enterprise, established by independent businessmen for their own personal profit, the Fifth Circuit held that the SMET itself was not governed by ERISA. In Taggart it was determined that the SMET was set up by entrepreneurs as kind of an "insurance mutual fund" for their own personal profit, and that ERISA was designed to govern welfare plans which are established by employers for the benefit of their employees. Id. at 1210. It was determined that the Taggart...