Hollingshead v. Matsen

• Decision Date: 25 April 1995
• Docket Number: A064631,Nos. A064628,s. A064628
• Citation: 40 Cal.Rptr.2d 603,34 Cal.App.4th 525
• Court: California Court of Appeals
• Parties: , 19 Employee Benefits Cas. 1333 Dianne HOLLINGSHEAD, Plaintiff and Appellant, v. Ralph MATSEN et al., Defendants and Respondents. Nyle G. HENDERSON et al., Plaintiffs and Appellants, v. Ralph MATSEN et al., Defendants and Respondents.

Page 603

40 Cal.Rptr.2d 603

34 Cal.App.4th 525, 19 Employee Benefits Cas. 1333

Dianne HOLLINGSHEAD, Plaintiff and Appellant, v. Ralph MATSEN et al., Defendants and Respondents.

Nyle G. HENDERSON et al., Plaintiffs and Appellants, v. Ralph MATSEN et al., Defendants and Respondents.

Nos. A064628, A064631.

Court of Appeal, First District, Division 2, California.

April 25, 1995.

Review Denied Aug. 17, 1995.

Roberts, Hill, Calligan, Bragg & Feeney and William R. Bragg, Eureka, for plaintiffs and appellants.

Moss & Enochian, Harry B. Moss and Mark D. Norcross, Redding, for defendants and respondents.

KLINE, Presiding Justice.

Introduction

In these consolidated cases ¹ plaintiffs Nyle G. Henderson and Diane Henderson and plaintiff Dianne Hollingshead, individually and as administrator of the estate of Raymond Styol Hollingshead, appeal following adverse summary judgments of the Humboldt County Superior Court finding plaintiffs' claims preempted by the Employee Retirement Income Security Act of 1974 (ERISA) and dismissing their claims against defendants Ralph Matsen, R.G. Matsen Insurance Agency, Inc., and Robert Burchitt, insurance brokers and agents. ² We shall affirm the judgment.

Statement of Facts/Procedural Background

Raymond Hollingshead, the deceased husband of plaintiff Hollingshead, was an employee of Customer Truck Service, Inc. In late 1989, plaintiff Nyle Henderson, president of Customer Truck Service Inc. (CTS), ³ was approached by defendant Robert Burchitt, a licensed insurance agent working for and on behalf of defendant R.G. Matsen Insurance Agency, Inc., and its owner defendant Ralph Matsen. Burchitt offered to review the group health insurance plan that was made available by CTS to its employees. CTS made available to its employees a group health insurance policy and paid the premiums for the employees who wished to participate. Dependent premiums were paid by the employee.

Defendants had handled the insurance needs of Henderson, CTS and its employees for several years. Neither Henderson nor CTS employees were knowledgeable in the field of health insurance and they relied upon defendants. Henderson considered Burchitt to be his personal insurance agent and the personal agent of CTS employees. Burchitt held himself out as available for providing specialized individual service to each CTS employee. Burchitt gave directions to have each employee contact him directly if they had any questions or needed help with regard to their insurance coverage. Many employees did so. Burchitt represented himself as having special expertise in group health insurance plans and indicated he felt he not only could find a plan with significantly lower premiums than CTS was then paying, but which also provided better individualized service to the employees and their families.

In December 1989, Burchitt advised Henderson that he had found a plan which was a solid, financially strong and reliable plan to offer to employees of CTS. Henderson accepted Burchitt's representations of special expertise in the area of employee group health insurance plans and relying upon his assurances of the strength and reliability of the recommended plan, Henderson canceled the existing group health policy being offered to CTS employees through Guardian Life Insurance Company and offered them coverage through American Pacific Employers Trust (APET). ⁴

Burchitt enrolled CTS and its employees in APET. APET is a "multiple employer membership arrangement" offering to "nonprofit corporations and/or businesses organized for profit" individual and group insurance policies issued by insurance carriers. Employees filled out individual applications provided by Burchitt. Coverage was effective January 1, 1990. APET was administered by Capitol Benefit Group, Inc., (CBG) and Anpac Administrators, Inc. (Anpac) CBG acted as the marketing/underwriting agent for the APET plan, and Anpac acted in a claims adjusting function.

CBG and Anpac, as administrators for the APET plan, acquired insurance for plaintiffs through Promed International, Ltd. (Promed), alleged by plaintiffs to be a British Virgin Islands corporation with its principal worldwide place of business outside the United States. Promed was a nonadmitted alien insurer and alleged to be a financially unsound, unsafe and irresponsible insurance carrier.

The insurance fund or program was established on February 26, 1990, pursuant to a trust agreement (The American-Pacific Employers' Trust) and a group life, accident, and health master policy was issued by Promed with coverage retroactive to January 1, 1990, for subscribing employers, their employees, and their employees' dependents. Promed's insurance coverage of the APET plan terminated on April 30, 1991, and another company took over coverage of the APET plan on May 1, 1991. At that time, there were a significant number of outstanding claims which had been approved by CBG and Anpac and submitted to Promed for funding. Promed failed to fund these approved claims.

In the booklet provided to Henderson and his employees, Promed was not mentioned as being the insurance company. The company mentioned was California Benefit Life of Newport Beach, California and Cal-Builders Insurance Trust. Defendant insurance brokers failed to advise plaintiffs of the existence, status, nature and makeup of Promed nor did they advise plaintiffs that the insurance policy issued by Promed became worthless and provided no or negligible coverage from approximately January 1, 1991, through May 1, 1991.

From January 1, 1991, Henderson and Hollingshead each suffered health care problems and incurred significant costs to health care providers for services provided. Thereafter, Henderson and Hollingshead were advised that Promed would not pay those claims and that they had no recourse with the California Department of Insurance because of Promed's status.

CBG and Anpac sued Promed in federal district court in Sacramento and in December 1992 obtained a default judgment against Promed and its principals on behalf of the APET plan for an amount in excess of $5,000,000. This judgment included all APET claims Promed failed to pay, including the claims of Henderson and Hollingshead. That judgment remains unsatisfied.

On November 24, 1992, plaintiff Hollingshead filed a second amended complaint against defendants Burchitt, Ralph Matsen, and R.G. Matsen Insurance Agency. On December 31, 1992, the Henderson plaintiffs filed their first amended complaint against defendants. Both complaints alleged causes of action for negligence, fraud and breach of fiduciary duties, breach of oral contract, intentional infliction of emotional distress, negligent infliction of emotional distress, fraud and deceit and intentional misrepresentation of fact.

Plaintiffs alleged they had been damaged in that they incurred obligations for medical costs and related services for the period of time from approximately January of 1991 through and including May of 1991; that they sustained existing and outstanding and unpaid medical bills beginning in January 1991 and continuing thereafter, which tarnished and diminished their reputations as financially responsible people; all of which caused plaintiffs emotional distress.

Defendants moved for summary judgment below on the grounds that all of the claims against it were preempted by virtue of ERISA (29 U.S.C. § 1001 et seq.) The trial court granted summary judgments for defendants finding there was no contested issue of material fact that "the insurance policies in question comprise 'employee welfare benefit plans' within the meaning of ERISA" and that "the claims against defendants here are 'related to,' or are connected with the essence of the health plan itself...." Consequently, the court found that ERISA preempted the causes of action against the insurance agents. Judgments were entered in favor of defendants in each action. These timely appeals followed.

Discussion

I.

The sole basis for defendants' motion for summary judgment was that plaintiffs' actions against defendant brokers were preempted by ERISA. "A defendant who moves for summary judgment must either prove an affirmative defense which would bar every cause of action pled in the complaint or disprove at least one essential element of each cause of action in the complaint. [Citation.] The moving party must show that under no possible hypothesis within the reasonable purview of the allegations of the complaint is there a material question of fact which requires examination by trial. [Citations.] If the defendant does not satisfy its burden as the moving party, the motion must be denied, and it is unnecessary for the court to consider the plaintiff's opposition, if any. [Citations.]" (Chevron U.S.A., Inc. v. Superior Court (1992) 4 Cal.App.4th 544, 548, 5 Cal.Rptr.2d 674.) ⁵

"ERISA is a comprehensive federal law designed to promote the interests of employees and their beneficiaries in employee pension and benefit plans. (Shaw v. Delta Air Lines, Inc. (1983) 463 U.S. 85, 90 [103 S.Ct. 2890, 2896, 77 L.Ed.2d 490, 496-497].) As a part of this integrated regulatory system, Congress enacted various safeguards to preclude abuse and to secure the rights and expectations that ERISA brought into being. (29 U.S.C. § 1001; see also Sen.Rep. No. 93-127, 1st Sess., p. 36 (1973).) Prominent among these safeguards is an expansive preemption provision, found at section 514 of ERISA (29 U.S.C. § 1144; Ingersoll-Rand v. McClendon (1990) 498 U.S. 133, 137-138 [111 S.Ct. 478, 482-483, 112 L.Ed.2d 474, 482-483]; Carpenters So. Cal. Admin. Corp. v. El Capitan Development Co. (1991) 53 Cal.3d 1041, 1047, 282 Cal.Rptr. 277, 811 P.2d 296.)" (Marshall v. Bankers Life & Casualty Co. (1992) 2 Cal.4th 1045, 1051, 10 Cal.Rptr.2d 72, 832 P.2d 573 [hereafter Marshall ].)

"ERISA's preemption clause is conspicuous for its breadth, establishing as an area of exclusive federal concern the subject of every State...