Grainger v. Western Cas. Life Ins. Co., 01-93-00407-CV

• Citation: 930 S.W.2d 609
• Decision Date: 18 January 1996
• Docket Number: No. 01-93-00407-CV,01-93-00407-CV
• Parties: Robert GRAINGER, as the Legal Representative of the Estate of Bruce Grainger and Arlene Grainger, Appellants, v. WESTERN CASUALTY LIFE INSURANCE CO., Richard P. Dale, and Leland R. Kohutek, Appellees. (1st Dist.)
• Court: Court of Appeals of Texas

Page 609

930 S.W.2d 609

Robert GRAINGER, as the Legal Representative of the Estate of Bruce Grainger and Arlene Grainger, Appellants, v. WESTERN CASUALTY LIFE INSURANCE CO., Richard P. Dale, and Leland R. Kohutek, Appellees.

No. 01-93-00407-CV.

Court of Appeals of Texas Houston (1st Dist.).

Jan. 18, 1996.

Rehearing Overruled Sept. 12, 1996.

Joe K. Longley, Tim Labadie, Austin, for Appellants.

Richard G. Caldwell, Thomas M. Farrell, David P. Griffith, Houston, for Appellees.

Before O'CONNOR, WILSON and PRICE ^*, JJ.

OPINION

WILSON, Justice.

Robert Grainger, representing the estate of his brother, Bruce Grainger, and Arlene Grainger (the Graingers), appeal from the trial court's order granting summary judgment for Western Casualty Life Insurance Co. (Western). The trial court found the insurance policy in this case was part of an "employee welfare benefit plan" governed by the Employee Retirement Income Security Act (ERISA). The court further found all causes of action asserted by the Graingers were therefore preempted as a matter of law.

The primary issues in this case are: (1) whether the Graingers waived error, if any, regarding Western's notice of intent to use unfiled discovery products; and (2) whether the summary judgment evidence established as a matter of law that the medical insurance policy purchased is governed by ERISA, thus preempting the Graingers' state law claims. We affirm.

Background to Lawsuit

Bruce Grainger was employed by Grainger, Inc. (the company), a small family-run business. In 1986, the company bought medical insurance policies from Western for each of its three full-time employees: Bruce, his brother Robert, and their father. The company paid all of the premiums on these policies through automatic bank drafts. The amount of available benefits under each policy was $100,000.

Beginning in December 1986 and continuing through July 1987, Bruce was hospitalized on numerous occasions, incurring bills in excess of $100,000. Bruce submitted these medical bills to Western for payment. Western refused payment, explaining the information it obtained from Bruce's physician showed he was suffering from a pre-existing condition as defined by the policy. Under the terms of the policy, Western was under no duty to pay for medical care resulting from such a pre-existing condition. Bruce's physician later informed Western, in August 1987, that his medical records were incorrect and Bruce's chest pains had begun just two or three weeks before his hospitalization. After receiving this information, Western paid the policy limit of $100,000, on November 10, 1987.

Bruce filed suit against Western on May 13, 1988, alleging violations of articles 3.62 and 21.21 of the Texas Insurance Code, section 17.50(a)(3) of the Deceptive Trade Practices-Consumer Protection Act (DTPA), ordinary and gross negligence, and breach of the duty of good faith and fair dealing. A derivative wrongful death claim brought by Arlene Grainger was added after Bruce died on August 26, 1992, while this action was still pending.

Background to the Summary Judgment

Western moved for summary judgment claiming the state causes of action asserted by the Graingers were preempted by ERISA. In its motion, Western argued the insurance arrangement constituted an ERISA plan because Bruce Granger's employer, the company, established and maintained the plan for the purpose of providing specific benefits to its employees.

With its motion for summary judgment, Western filed a notice of intent to rely upon answers to unfiled interrogatories and portions of unfiled deposition testimony. Without any discussion of the contents of the discovery, Western identified depositions (by deponent, volume, and page number) and plaintiffs' (Graingers') answers to interrogatories (by set and number of the interrogatory). The actual answers to the interrogatories and the excerpts of the deposition testimony were not included as part of the notice. At the end of the list of unfiled discovery, Western included the statement: "Any other discovery products not on file with the Clerk [are] specifically referred to in Memorandum In Support of Defendants' Motion for Partial Summary Judgment."

In the notice of intent, Western only listed the evidence on which it relied. In the memorandum in support of the motion, Western included a six-page summary of the evidence to the trial court with specific references to the page numbers of certain depositions. The Graingers did not challenge any of the statements in Western's narrative.

The Graingers filed two responses in opposition to Western's motion for summary judgment, as well as their own motion for summary judgment. In none of the documents filed by the Graingers did they object to Western's notice to rely on the unfiled discovery.

In their response and motion, the Graingers claim the policy was not part of an employee welfare benefit plan subject to ERISA regulations. They provided affidavits from Bruce and Robert Grainger, excerpts from depositions of Western employees and interrogatories answered by Western. According to the Graingers' evidence, Western issued individual health and life policies to each of the company's three employees to replace a group policy previously issued by Prudential. Bruce and Robert claimed the company neither owned nor controlled or administered the replacement policies, and there was no intent for the company to establish a welfare benefit plan governed by ERISA. Admitting that all premiums for the three policies were paid by check written on the company's bank account, Bruce and Robert stated in their affidavits that all such premiums had to be repaid to the company from earned commissions. Because the company fell on hard times, Bruce was unable to repay the company. Three years after suit was filed and after the ERISA claim became known, Bruce executed a promissory note to the company for the past unpaid premiums. The note bore no interest rate and contained no terms for payment.

Unfiled Discovery Products

In a supplemental brief filed after oral argument, the Graingers contend for the first time that Western did not properly submit its summary judgment evidence. On appeal, the Graingers now argue that the deposition testimony relied on by the trial court was not properly submitted because copies of the excerpts were not filed with the court. ¹ The Graingers contend the trial court had no evidence before it to consider in support of the defendant's motion for summary judgment.

The Graingers did not object in the trial court to the method or procedures by which the Western submitted its summary judgment evidence. Furthermore, none of the Graingers' responses to the motion for summary judgment filed in the court below brought this issue to the trial court's attention. Finally, no one argues, even now, that the judge did not base his ruling on the body of evidence the Graingers belatedly challenge as not filed. We find the Graingers' complaint has been waived because of the lack of any objection in the trial court. TEX.R.APP.P. 52(a).

We overrule the Graingers' supplemental point of error.

ERISA

In points of error one and two, the Graingers contend the trial court erred in granting Western's motion for summary judgment, and erred in denying their motion for summary judgment. Western argued in its motion for summary judgment that the company established a medical insurance plan governed by ERISA, therefore preempting the Graingers' state law claims. The Graingers argued in their motion for summary judgment that the medical insurance arrangement covering Bruce Grainger was not part of an ERISA plan as a matter of law.

To sustain a summary judgment, the movant must establish that no genuine issue of material fact exists, and he is entitled to judgment as a matter of law. McFadden v. American United Life Ins. Co., 658 S.W.2d 147, 148 (Tex.1983). We accept all evidence favorable to the non-movant as true, indulge the non-movant with every favorable reasonable inference, and resolve any doubt in the non-movant's favor. Nixon v. Mr. Property Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex.1985). When two parties file motions for summary judgment and one is denied and the other granted, we may review the denial and render judgment if the appealing party complains of both the granting of the opponent's motion and the denial of its own. Jones v. Strauss, 745 S.W.2d 898, 900 (Tex.1988); Phillips Natural Gas Co. v. Cardiff, 823 S.W.2d 314, 317 (Tex.App.--Houston [1st Dist.] 1992, writ denied).

The issue we address is whether the summary judgment evidence presented to the trial court demonstrated as a matter of law that the company, in purchasing medical insurance policies from Western for its employees, including Bruce Grainger, established an "employee welfare benefit plan" governed by ERISA. If it did, ERISA preempts the Graingers' state law claims and the trial court acted properly in granting summary judgment for Western and denying summary judgment for the Graingers.

The Employment Retirement Income Security Act of 1974 subjects employee benefit plans to federal regulation. ERISA regulates both pension plans and welfare plans that provide benefits in the event of illness, accident, disability, death or unemployment. 29 U.S.C.S. § 1002(1) (1988); Cathey v. Metropolitan Life Ins. Co., 805 S.W.2d 387, 388 (Tex.), cert. denied, 501 U.S. 1232, 111 S.Ct. 2855, 115 L.Ed.2d 1023 (1991). Congress enacted ERISA to protect working men and women from abuses in the administration and investment of private retirement plans and employee welfare plans. Donovan v. Dillingham, 688 F.2d 1367, 1370 (11th Cir.1982) (en banc); see also Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 240 (5th Cir.1990) (adopting Donovan for the Fifth Circuit). Toward that goal, ERISA applies to any "employee benefit plan" that is established or maintained by an employer or employee organization. 29...