Derby Ass'n Trust, Inc. v. Department of Ins. and Finance, 90-01-026
| Decision Date | 22 July 1992 |
| Docket Number | No. 90-01-026,90-01-026 |
| Citation | 114 Or.App. 389,835 P.2d 149 |
| Parties | In the Matter of The Derby Association Trust, Inc., Independent Contractor's Association, Garald W. Derby and Mark G. Derby. The DERBY ASSOCIATION TRUST, INC., Independent Contractor's Association, Garald W. Derby and Mark G. Derby, Petitioners, v. DEPARTMENT OF INSURANCE AND FINANCE, Respondent. DIF; CA A68002. |
| Court | Oregon Court of Appeals |
Donald L. Dickerson, Eugene, argued the cause and filed the brief for petitioners.
Karen Majcher Art, Asst. Atty. Gen., Salem, argued the cause for respondent. With her on the brief were Dave Frohnmayer, Atty. Gen., and Virginia L. Linder, Sol. Gen., Salem.
Before BUTTLER, P.J., and ROSSMAN and DE MUNIZ, JJ.
DE MUNIZ, Judge.
Petitioners seek review of an order of the Department of Insurance and Finance (DIF) that concluded that petitioners violated ORS 731.354 1 by transacting insurance business without obtaining a certificate of authority. The issue is whether petitioners are providing a "welfare and benefits program" that is subject to regulation only under the federal Employee Retirement Income Security Act (ERISA) 2 or are engaged in insurance transactions that are subject to regulation under Oregon laws. We affirm.
We take the facts from DIF's findings. The Derby Association Trust, Inc. (DAT), was incorporated in March, 1989. In May, 1989, DAT began marketing the DAT Plan through petitioners Garald Derby and Mark Derby. The DAT Plan provided accidental disability, accidental death and accidental dismemberment "insurance." It was available to persons who were sole proprietors or partners in their own businesses. It was also available to employees who were designated as officers, directors and substantial shareholders in corporations. DAT issued policies to at least 128 people who were employed by 48 different, non-affiliated employers.
In February, 1990, Independent Contractor's Association, Inc. (ICA Inc.), was incorporated as a non-profit corporation. Employees and employers in the wood products industry are eligible for membership in the Independent Contractor's Association (ICA). DAT's assets were transferred to ICA Inc., and ICA Inc. assumed DAT's obligations. Neither DAT nor ICA Inc. ever obtained a certificate of authority to transact insurance business in Oregon. In March, 1990, ICA Inc. established the Independent Contractor's Association Welfare Benefit Trust for the purpose of sponsoring a "welfare benefit plan" for ICA members, which would be subject to ERISA regulation. ICA Inc. adopted the DAT Plan as the ICA Welfare Benefit Plan (ICA Plan). ICA membership is necessary to be eligible for the ICA Plan.
The parties accept DIF's findings. Our review is limited to determining whether DIF correctly concluded that the ICA Plan is subject to regulation under Oregon insurance laws. 3 ORS 183.482(8)(a). When Congress enacted ERISA, it intended to preempt state regulation of "employee benefit programs." 4 Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983). 5 DIF concluded that the ICA Plan "clearly exceeds the definitional limits of ERISA and is [therefore] subject to state regulation." 6 In reaching its conclusion, DIF relied on the fact that ICA members include independent contractors, employees and employers. In Bell v. Employee Sec. Ben. Ass'n, 437 F.Supp. 382, 385 (D.Kan.1977), the court held that an employee benefit plan must be "provided by an employer or homogenous employee organization, such as a union." The ICA Plan is provided by ICA Inc., which had assumed DAT's obligations, including the DAT Plan. The people who purchased the DAT Plan and the ICA Plan are not employed by ICA Inc., nor were they employed by DAT. Neither DAT nor ICA Inc. are employers.
The Bell court also concluded that an "homogenous employee organization" must be a group with a "commonality of interests among its employee members." 437 F.Supp. at 394. In Baucom v. Pilot Life Ins. Co., 674 F.Supp. 1175 (M.D.N.C.1987), the court elaborated on the "commonality of interest" requirement. In that case, the court considered whether the Carolinas Section Professional Golf Association was an "employee organization." The association included golf professionals, assistant golf professionals and approved tournament players. 7 The court observed that those members could be employers, employees or self-employed. 674 F.Supp. at 1177. It recognized that members of the association shared some common interests, 8 such as promoting golf. However, the association failed the "commonality of interest" test, because professionals who own golf shops, professionals who manage shops as employees and tournament players have inherently different, and potentially conflicting, economic interests. 674 F.Supp. at 1180.
Membership in ICA is open to employees, employers and independent contractors in the wood products industries. Like the golf association in Baucom v. Pilot Life Ins. Co., supra, ICA fails the commonality of interest test. The ICA Plan is subject to regulation under Oregon insurance laws. DIF correctly concluded that petitioners had violated ORS 731.354 by transacting insurance business without obtaining a certificate of authority.
Affirmed.
1 ORS 731.354 provides:
"No person shall act as an insurer and no insurer shall directly or indirectly transact insurance in this state except as authorized by a subsisting certificate of authority issued to the insurer by the [Director of the Department of Insurance and Finance]."
3 ORS 731.004 to ORS 752.055.
4 29 U.S.C. § 1144 provides, in part:
5 Although we are bound by the United States Supreme Court's interpretations of federal statutes, we are not bound by decisions of the lower federal courts, even those of the Ninth Circuit Court of Appeals. Gillar...
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