Hoeflicker v. CENT. STATES, ETC., HEALTH & WELFARE

• Decision Date: 16 September 1986
• Docket Number: No. 86-0396-CV-W-5.,86-0396-CV-W-5.
• Citation: 644 F. Supp. 195
• Parties: Shiela J. HOEFLICKER, Plaintiff, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS HEALTH AND WELFARE FUND, Defendant.
• Court: U.S. District Court — Western District of Missouri

644 F. Supp. 195

Shiela J. HOEFLICKER, Plaintiff, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS HEALTH AND WELFARE FUND, Defendant.

No. 86-0396-CV-W-5.

United States District Court, W.D. Missouri, W.D.

September 16, 1986.

R.W. Shackleford, Bradley, Langdon & Bradley, Lexington, Mo., for plaintiff.

Steven A. Fehr, Herman A. Shaffer, Jolley, Walsh, Eager & Gordon, Kansas City, Mo., for defendant.

ORDER

SCOTT O. WRIGHT, Chief Judge.

Defendant has moved for summary judgment, pursuant to Rule 56, Fed.R.Civ.Pro., alleging that plaintiff's claim for vexatious refusal to pay accidental death benefits is pre-empted by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., and that any recovery under ERISA is precluded since defendant Fund Trustee's determination that plaintiff is not entitled to these benefits is supported by substantial evidence. For the following reasons, this Court concludes that summary judgment in favor of defendant is proper in this case.

A. Factual Background

Plaintiff's deceased husband was an employee of Associated Wholesale Grocers which paid contributions to defendant Fund for plaintiff's husband pursuant to a collective bargaining agreement. Defendant is an employee welfare benefit plan¹ which provides health benefits, life insurance benefits and accidental death benefits. Defendant Fund is self-insured as to accidental death benefits, and it is these benefits that are at issue in this case.

Plaintiff's husband died on February 18, 1985, and plaintiff filed a claim for life insurance and accidental death benefits as beneficiary. Defendant paid plaintiff life insurance benefits of $20,000, but denied plaintiff's claim and subsequent appeals for accidental death benefits, relying on the Plan's exclusion "for a loss resulting from suicide, or any attempt at suicide, whether the Participant is sane or insane."

In concluding that plaintiff's husband committed suicide, defendant relied on a number of items which included: (1) a police report from a police officer reporting to the plaintiff's residence, where her husband's death occurred, which classified the death as suicide; (2) a police property report which listed items seized at the scene which included four empty prescription drug bottles and other prescription drug bottles containing pills or capsules; and (3) a death certificate which indicated that plaintiff's husband committed suicide by taking medication, in excess, with alcohol.

Review of the denial was had by the Appeals Board and Board of Trustees of defendant Fund, which also denied plaintiff the accidental death benefits.

On February 19, 1986, plaintiff sued defendant in the Circuit Court of Jackson County, Missouri, based on a state law claim of vexatious refusal to pay pursuant to Mo.Rev.Stat. §§ 375.296 and 375.420,² seeking recovery of the $20,000 accidental death benefits, attorney's fees, the penalty provided by the Missouri statutes for vexatious delay, and costs. Defendant removed the case to this Court on March 26, 1986, using ERISA as the jurisdictional basis for removal. Pursuant to the provisions of Local Rule No. 30 of this Court, this case was designated for Compulsory Non-Binding Arbitration, but the arbitration hearing was postponed pending a ruling by this Court on defendant's motion for summary judgment.

B. Pre-emption

Defendant alleges that plaintiff's claim under Mo.Rev.Stat. § 375.296 and § 375.420 for vexatious refusal to pay is preempted by ERISA, 29 U.S.C. § 1001 et seq., relying principally on 29 U.S.C. § 1144, which was interpreted by the Supreme Court in Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985). This case becomes even more complicated by the fact that Missouri has an additional statute which provides that:

"In all suits upon policies of insurance on life hereafter issued by any company doing business in this state, to a citizen of this state, it shall be no defense that the insured committed suicide, unless it shall be shown to the satisfaction of the court or jury trying the case, that the insured contemplated suicide at the time he made his application for the policy, and any stipulation in the policy to the contrary shall be void."

Mo.Rev.Stat. § 376.620 (emphasis added). Thus, defendant argues that this section is also pre-empted under 29 U.S.C. § 1144.

It should first be noted that ERISA was enacted to protect the interest of employees who are covered under an employee benefit or pension plan. It imposes participation, funding, and vesting requirements on pension plans, 29 U.S.C. §§ 1051-1086, and it sets various uniform standards which include rules on reporting, disclosure, and fiduciary responsibility for both pension and welfare benefit plans. 29 U.S.C. §§ 1021-1031, 1101-1114. See also Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983). ERISA also requires the fair and proper handling and disposition of benefit claims, and sets forth remedies for breach of fiduciary duty for unfair or improper disposition. Russell v. Massachusetts Mutual Life Insurance Co., 722 F.2d 482, 488 (9th Cir.1983), rev'd on other grounds, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985).

The pre-emption provision of ERISA in 29 U.S.C. § 1144(a) states that:

"Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supercede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan ..." (emphasis added)

This pre-emption provision is modified by a "savings clause" in § 1144(b)(2)(A) which provides that:

"Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any state which regulates insurance, banking, or securities."

The "savings clause" is further modified by a "deemer" provision which reads:

"Neither an employee benefit plan ... nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for the purposes of any law of any state purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies." (emphasis added)

29 U.S.C. § 1144(b)(2)(B).

In Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985), the Supreme Court held that mandated-benefit laws,³ which regulate the substantive terms of insurance contracts, are saved from pre-emption by ERISA by the operation of the insurance "saving clause." 471 U.S. at ___, 105 S.Ct. at 2391, 85 L.Ed.2d at 743. In analyzing these pre-emption provisions, the Court interpreted this subsection as requiring a three-step analysis to determine whether a state law claim is pre-empted under ERISA. First, does the state law "relate to" an employee benefit plan? Second, does the state law regulate insurance, banking or securities so that the savings clause precludes pre-emption by ERISA? Third, does the "deemer clause" prevent the Plan or Trust Fund from being deemed an insurance company so as to make the "saving clause" inapplicable?

Here it is clear that both Mo.Rev.Stat. § 375.296 and § 375.420, which provide an insured with a cause of action for vexatious refusal to pay, and § 376.620, which eliminates suicide as a defense in most instances, "relate to" an employee benefit plan. In Metropolitan Life, the Court noted that, "the phrase `relate to' is given its broad common-sense meaning, such that a state law `relates to' a benefit plan in the normal sense of the phrase, if it has a connection with or reference to such a plan." 471 U.S. at ___, 105 S.Ct. at 2389.

While neither §§ 375.296 and 375.420 nor § 376.620 are denominated as benefit plan laws, all of them have an indirect and substantial effect on these benefit plans since the first two provide a remedy and penalty for any bad faith refusal to pay out of the plan, and the other affects the substance of the plan's insurance contract, namely, the validity of the suicide exclusion clause. Therefore, this Court agrees with defendant that §§ 375.296, 375.420 and 376.620, as applied, "relate to" ERISA plans and, thus, are covered by ERISA's broad pre-emption provision set forth in § 1144(a). Hence, the major issue here is whether §§ 375.296, 375.420 and 376.620 are "saved" by the § 1144(b)(2)(A) "saving clause" or excluded from this clause by the "deemer clause" in § 1144(b)(2)(B).

The insurance "saving clause" preserves any state law "which regulates insurance, banking, or securities." Section 376.620 regulates the terms of certain insurance contracts by making many suicide exclusions null and void, and §§ 375.296 and 375.420 regulate insurance in the sense that they provide additional remedies and penalties for bad faith failure to under insurance contracts. As noted in Metropolitan Life, "nearly every court that has addressed the question has concluded that laws regulating the substantive content of insurance contracts are laws that regulate insurance and, thus, are within the scope of the insurance saving clause." 471 U.S. at ___, n. 18, 105 S.Ct. at 2380, n. 18. Thus, it is clear that §§ 375.296 and 375.420, and § 376.620 "regulate insurance" and therefore, would fall within the § 1144(b)(2)(A) "saving clause." However, the "deemer clause" in § 1144(b)(2)(B), which the Court in Metropolitan Life concluded was inapplicable, would appear to apply in this case so as to make the § 1144(b)(2)(A) "saving clause" inapplicable and, thus, mandate that §§ 375.296, 375.420, and § 376.620 be pre-empted under § 1144(a)'s broad preemption provision.

It should be noted that the Court in Metropolitan Life read the "savings clause" very broadly and the "deemer clause" very narrowly by noting that "the presumption is...