Hemphill v. Unisys Corp.

• Decision Date: 10 June 1994
• Docket Number: Civ. No. 93-C-0163S.
• Citation: 855 F. Supp. 1225
• Parties: Raymond B. HEMPHILL, Plaintiff, v. UNISYS CORPORATION, Defendant.
• Court: U.S. District Court — District of Utah

855 F. Supp. 1225

Raymond B. HEMPHILL, Plaintiff, v. UNISYS CORPORATION, Defendant.

Civ. No. 93-C-0163S.

United States District Court, D. Utah, Central Division.

June 10, 1994.

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Mark R. McDougal, Don R. Schow, Mark R. McDougal & Associates, Salt Lake City, UT, for plaintiff.

Chris Wangsgard, David W. Zimmerman, Parsons, Behle & Latimer, Salt Lake City, UT, Aaron A. Nelson, Hanson, Nelson, Chipman & Quigley, Salt Lake City, UT, Thomas R. Lee, Kimball, Parr, Waddoups, Brown & Gee, Salt Lake City, UT, for defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO STRIKE THE AFFIDAVIT OF RAYMOND B. HEMPHILL

SAM, District Judge.

This matter came before the court on motions of the defendant Unisys Corporation ("Unisys") for summary judgment on all of the plaintiff's remaining claims and for an order striking portions of the plaintiff's affidavit which was submitted in opposition to the motion for summary judgment. For reasons discussed more fully below, both motions are granted in part and denied in part.

I. BACKGROUND

The plaintiff, Raymond B. Hemphill ("Hemphill"), was injured in an automobile accident on or about September 18, 1988. At the time, his vehicle was insured by Farmers Insurance Company ("Farmers"). He had a contract for health insurance with his employer, Unisys, and a health care provider, Alta Health Strategies, Inc. ("Alta"). Hemphill sought payment for medical expenses, long-term disability, and other benefits, but some of these benefits were denied. He then sued Farmers, Unisys, and Alta in state court, alleging breach of contract, breach of a duty of good faith, and related claims.

Unisys and Alta removed the action to federal court on grounds of ERISA preemption (¶ 2, Amended Notice of Removal). All of Hemphill's claims against Alta and his claim for punitive damages against Unisys were dismissed by stipulation of the parties; his claims against Farmers were remanded to state court.

The remaining claims against Unisys are not clearly identified in the complaint but are set forth as a single cause of action against all the defendants. Hemphill does allege, inter alia, that Unisys "breached the contract of insurance" (¶¶ 13-15) and breached a "duty to act in good faith" (¶¶ 16-17).

Unisys argues that it is entitled to summary judgment because these state law claims are preempted by ERISA. In addition, Unisys details the type of benefits which Hemphill sought and was denied, and explains why a claim under ERISA for each type of benefit must fail. Unisys argues that a claim to recover benefits for home care is barred by the applicable statute of limitations; that claims to recover benefits for home care, incontinence pads, and bladder control undergarments are governed by an "abuse of discretion" standard, and that the plan administrator did not abuse its discretion in denying these claims; that claims to recover benefits for reconstructive surgery and long-term disability are barred for failure to exhaust administrative remedies and because Hemphill is no longer a "participant" in the relevant plans; and that a claim to recover long-term disability benefits is not available because Hemphill has returned to work.

Hemphill responds that Unisys "has presented no evidence to establish the Unisys Medical Plan as an ERISA plan," but, in any event, his complaint does state an ERISA claim; that his claim for benefits for home care is not time-barred; and that there are genuine issues of material fact which preclude summary judgment on his claims to recover various kinds of benefits. (Memorandum of Points and Authorities in Opposition to Motion for Summary Judgment, at 4).

II. DISCUSSION

A. Motion for summary judgment

1. Whether ERISA governs Hemphill's claims

The question whether the "contract of insurance" referred to in Hemphill's complaint is governed by ERISA, is a threshold issue. See Peckham v. Gem State Mut. of Utah, 964 F.2d 1043, 1046 (10th Cir.1992). ERISA governs "employee benefit plans." 29 U.S.C. § 1003(a). One kind of employee benefit plan is an "employee welfare benefit plan," which is defined 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, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, or disability ...

29 U.S.C. § 1002(1) (1988). This definition has been broken into five elements: (1) a plan, fund, or program (2) established or maintained (3) by an employer (4) for the purpose of providing medical, surgical, or hospital care benefits (5) to participants or their beneficiaries. Peckham, 964 F.2d at 1047 (citing Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir.1982)).

The parties do not dispute that Hemphill had medical insurance under a policy provided by his employer, Unisys. Thus, elements (3), (4), and (5) are clearly satisfied. Whether this policy is a "plan, fund, or program established or maintained" by the employer, so that the first two elements are satisfied, is less obvious.

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 the procedures for receiving benefits." Peckham, 964 F.2d at 1047 (quoting Donovan, 688 F.2d at 1373). With respect to Hemphill's policy, a reasonable person could ascertain that the intended benefit is medical coverage, the intended beneficiaries are employees of Unisys and their dependents, financing is contributed by Unisys, and the procedures for receiving benefits are outlined in the Unisys Summary Plan Description Booklet ("SPD").¹ (See Ex. 1 to Affidavit of Mary Massman, at 83.)

A "plan" also requires an "ongoing administrative program." Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11, 107 S.Ct. 2211, 2217, 96 L.Ed.2d 1 (1987). The Unisys Medical Plan has been administered by Aetna Life Insurance Company ("Aetna") since January 1, 1990. (¶ 1, Supplemental Affidavit of Abigail Countryman.)

As to the second element, a plan is "established or maintained" by an employer when the plan is part of an employment relationship. Peckham, 964 F.2d at 1049. According to a Department of Labor regulation, an ERISA plan is not established or maintained by an employer when all four of the following conditions are met:

1. No contributions to premiums are made by the employer on behalf of the employees;

2. Participation in the program is completely voluntary;

3. The sole functions of the employer with respect to the program are to permit the insurer to publicize the program to its employees and to collect and remit employees' premiums;

4. The employer receives no compensation in connection with the program.

29 C.F.R. § 2510.3(j).

Applying these definitions, courts have held as a matter of law that a plan which has the following three components is governed by ERISA:

(1) a contractual arrangement between the employer and the insurance company for the provision of insurance to the employer's employees; (2) an eligibility requirement of being an employee ...; (3) the employer's contribution of some, but not all, of the insurance premiums on behalf of its employees.

Hollister v. Molander, 744 F.Supp. 846, 847 (N.D.Ill.1990). See also Brundage-Peterson v. Compcare Health Servs. Inc., 877 F.2d 509, 511 (7th Cir.1989).

The Unisys Medical Plan (the "Plan") has these three components. It is administered as part of a contractual arrangement between Unisys and Aetna. (¶ 1, Countryman Supp. Affidavit.) Only full-time employees are eligible to participate. (SPD at 12.) Unisys contributes to the cost of the Plan in the form of "credits" for all employees. (SPD at 15.)²

The court therefore concludes that the Plan is an employee benefit plan governed by ERISA.

2. Whether Hemphill's state law claims are preempted

ERISA 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). Thus, the scope of ERISA preemption is "very broad." Straub v. Western Union Tel. Co., 851 F.2d 1262, 1263 (10th Cir.1988). See also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46-47, 107 S.Ct. 1549, 1552-53, 95 L.Ed.2d 39 (1987); Settles v. Golden Rule Ins. Co., 927 F.2d 505, 508 (10th Cir.1991).

Congress intended not only to preempt state law applicable to individual employee benefit rights, but to displace it with ERISA's civil enforcement provisions. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65-67, 107 S.Ct. 1542, 1547-48, 95 L.Ed.2d 55 (1987). Accordingly, an action is removable to federal court if the complaint may reasonably be characterized as stating a claim that could have been filed under one or more of ERISA's enforcement provisions. Id. The traditional "well-pleaded complaint" rule that determines the removability of an action in most fields of law is not controlling in ERISA cases. Id.; M. Wald & D. Kenty, ERISA: A Comprehensive Guide, § 7.7 (1991 & Supp.1994).

If a state law claim is preempted by ERISA and within the scope of ERISA's civil enforcement provisions, the claim "will convert to a federal claim." Carland v. Metropolitan Life Ins. Co., 935 F.2d 1114, 1119 (10th Cir.), cert. denied, ___ U.S. ___, 112 S.Ct. 670, 116 L.Ed.2d 761 (1991). This conversion of a state law claim into a federal claim is sometimes called "super preemption." Brown v. Connecticut Gen. Life Ins. Co., 934 F.2d 1193, 1196 (11th Cir.1991). The effect of super preemption is not "to `absorb' state law claims, allowing them to proceed unaffected in substance by the conversion," but to "completely eliminate" them — leaving plaintiffs only the causes of action...