Gaylor v. John Hancock Mut. Life Ins. Co., 96-6038

• Decision Date: 29 April 1997
• Docket Number: No. 96-6038,96-6038
• Citation: 112 F.3d 460
• Parties: 97 CJ C.A.R. 636 Nancy GAYLOR, Plaintiff-Appellant, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 460

112 F.3d 460

97 CJ C.A.R. 636

Nancy GAYLOR, Plaintiff-Appellant, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a corporation Defendant-Appellee.

No. 96-6038.

United States Court of Appeals Tenth Circuit.

April 29, 1997.

Glenn Mullins, Oklahoma City, Oklahoma, for Plaintiff-Appellant.

L.E. Stringer and Mark D. Spencer, Crowe & Dunlevy, Oklahoma City, Oklahoma, for Defendant-Appellee.

Before KELLY, Circuit Judge, McWILLIAMS, Senior Circuit Judge, and BRISCOE, Circuit Judge. ^*

PAUL KELLY, Jr., Circuit Judge.

Plaintiff Nancy Gaylor appeals from a district court decision affirming the denial of her claim for long-term disability benefits. Ms. Gaylor maintains first that her policy with Defendant John Hancock Mutual Life Insurance Company (Hancock) is not governed by the Employee Retirement Income Security Act of 1974 (ERISA), Pub.L. No. 93-406, 88 Stat. 832 (codified as amended at 29 U.S.C. §§ 1001-1461). Second, she argues that even if her claim is governed by ERISA, the bases relied upon by Hancock were insufficient to deny her claim. Our jurisdiction arises under 28 U.S.C. § 1291, and we reverse.

Facts

As part of an association of employers, the Morris General Agency (Morris) purchased two group insurance policies from Hancock, for the purpose of providing insurance benefits to its employees. Employees of Morris become eligible to receive benefits after six months of employment with Morris. Should employees choose to participate, life and accidental death and dismemberment (ADD) policies are mandatory; other coverage, including disability, is optional. Morris contributes the entire cost of the premiums for its employees' life and ADD insurance; for certain employees, Morris also contributes part of the premiums for its employees' disability insurance.

Morris hired Nancy Gaylor as a salaried employee on March 1, 1992. On June 13, 1992, Ms. Gaylor slipped on wet concrete and fell, injuring her lower back. Two days later, she saw a doctor, who prescribed pain medication and diagnosed her with "sciatic neuritis." She continued to visit general practitioners over the summer, and was finally referred to Dr. J. Patrick Livingston, who set up a magnetic resonance imaging (MRI) test and an electromyography (EMG) study. On the basis of the MRI and EMG, Dr. Livingston concluded that Ms. Gaylor was not in need of orthopedic surgery, and recommended that Ms. Gaylor see a neurosurgeon. She did so in late November 1992, and the neurologist again could find no cause for Ms. Gaylor's condition. In a letter dated November 23, 1992, Dr. Livingston indicated that Ms. Gaylor was still his patient and that he would see her in further follow-ups.

In the meantime, Ms. Gaylor's condition had hindered her work with Morris, and her work production suffered. She filed a disability claim form on October 13, 1992, claiming that although her accident occurred in June, she was unable to work as of October 13, 1992. Two days later, Morris terminated Ms. Gaylor's employment.

In January 1993, Hancock requested an independent medical examination of Ms. Gaylor's injury by Dr. Ronald R. Chadwell, who also could not verify the cause of Ms. Gaylor's disability through clinical or laboratory means. He did agree with Dr. Livingston and Ms. Gaylor's primary care physicians, however, that Ms. Gaylor suffered from a debilitating condition, and diagnosed a back strain secondary to her fall and also some early degenerative changes in the lumbo-sacral spine area.

On March 1, 1993, Hancock authorized payment of $1,345.73 on Ms. Gaylor's claim for the two-week period from November 14, 1992 to November 28, 1992. On March 2, 1993, Ms. Gaylor saw Dr. Livingston, who informed her that there was nothing more he could do for her and suggested that she return to her primary care physicians for long-term treatment. Dr. Livingston later explained in a letter to Hancock that he believed that Ms. Gaylor's chronic, non-surgical condition required follow-up and care and medications that are best handled by primary care physicians who would continue to see patients on a regular basis. Ms. Gaylor followed Dr. Livingston's advice, and, in June, attempted to make an appointment with a general practitioner. She was rejected, however, because she was financially unable to pay the doctor's bill. On August 10, 1993, Ms. Gaylor finally did see her primary care physician.

Finally, on October 4, 1993, Hancock denied Ms. Gaylor's claim for any additional benefits under her disability policy, claiming that (1) she was not under the regular care of a physician, and (2) her physical condition could not be verified by the use of clinical and laboratory diagnostic means. On November 9, 1993, Ms. Gaylor filed this lawsuit.

Discussion

I. ERISA Preemption

Ms. Gaylor argues that her policy with John Hancock is not part of an "employee welfare benefit plan" within the meaning of ERISA, 29 U.S.C. § 1002(3). She further argues that even if her policy is part of an ERISA plan, her claims under Oklahoma state law fall within the ERISA savings clause, 29 U.S.C. § 1144(b)(2)(A), and thus are not exempted by ERISA.

A. Whether Morris established or maintained an "employee

welfare benefit plan"

We must first determine whether ERISA covers the insurance benefits which Morris provides to its employees, a question which we review de novo. Peckham v. Gem State Mut. of Utah, 964 F.2d 1043, 1047 (10th Cir.1992).

Ms. Gaylor argues that the benefits provided by Morris are excluded from ERISA coverage under the "safe harbor" provision, 29 C.F.R. § 2510.3-1(j), which provides that the term "employee welfare benefit plan" shall not include programs in which (1) no contribution is made by the employer; (2) participation in the program is completely voluntary for the employees; (3) the sole functions of the employer are to permit the insurer to publicize the program to employees and to collect premiums through payroll deductions; and (4) the employer receives no consideration in connection with the program. Plans which meet each of these four factors are excluded from ERISA coverage. Hansen v. Continental Ins. Co., 940 F.2d 971, 977 (5th Cir.1991). The district court indicated that if the safe harbor provision does not apply, "the employer's involvement in the insurance program is deemed sufficiently significant to qualify the program as an 'employee welfare benefit plan' subject to ERISA." Aplt.App. at 389. We observed in Peckham, however, that "[t]he fact that [a] plan is not excluded from ERISA coverage by this regulation does not compel the conclusion that the plan is an ERISA plan." 964 F.2d at 1049 n. 10. "[A] program that fails to satisfy the [safe harbor provision] is not automatically deemed to have been 'established or maintained' by the employer, but, rather, is subject to further evaluation under the conventional tests." Johnson v. Watts Regulator Co., 63 F.3d 1129, 1133 (1st Cir.1995).

Ms. Gaylor argues that no contribution was made by Morris with respect to her disability insurance, and that the first factor is therefore satisfied. Morris did contribute, however, the entire cost of Ms. Gaylor's ADD insurance, which was mandatory once Ms. Gaylor chose to enroll for coverage. For purposes of satisfying the safe harbor provision, Ms. Gaylor attempts to sever her optional disability coverage from the rest of the benefits she received through her employer's plan. "This cannot be done because the [optional] coverage was a feature of the Plan, notwithstanding the fact that the cost of such coverage had to be contributed by the employee." Smith v. Jefferson Pilot Life Ins. Co., 14 F.3d 562, 567 (11th Cir.), cert. denied, 513 U.S. 808, 115 S.Ct. 57, 130 L.Ed.2d 15 (1994); see also Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341, 1345 (11th Cir.1994).

Having determined that the safe harbor provision does not apply, we now turn to the "conventional tests" for whether Morris's plan is governed by ERISA. Johnson, 63 F.3d at 1133. ERISA governs "employee benefit plans," 29 U.S.C. § 1003(a), one form of which is an "employee welfare benefit plan," 29 U.S.C. § 1002(3). ERISA defines "employee welfare benefit plan" as:

any plan, fund, or program ... established or maintained by an employer ... for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise ... medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment ...

29 U.S.C. § 1002(1).

The definition can be broken down into five elements: (1) a "plan, fund, or program" (2) established or maintained (3) by an employer (4) for the purpose of providing health care or disability benefits (5) to participants or their beneficiaries. See Peckham, 964 F.2d at 1047. It is clear that Ms. Gaylor, as an employee of Morris, was provided with life, ADD and disability benefits. We must now determine whether Morris established or maintained a plan within the meaning of § 1002(1).

A "plan, fund, or program" exists if "from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and the procedures for receiving benefits." Id. ( quoting Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir.1982)). Under this test, we are certain that a plan exists. The intended benefits are life, ADD, medical, accident and sickness, and disability benefits; the class of beneficiaries is Morris's employees, and if the employees so choose, their dependents; financing comes from both Morris and its employees; and the procedures for receiving benefits are detailed in the informational booklets provided to Morris employees.

Just because a plan exists, however, does not mean that it is an ERISA plan. Hansen, 940 F.2d at 977. We must determine whether Morris established or maintains the plan. As John Hancock points out in its brief, the "established or...