Hollis v. Provident Life & Accident Ins. Co.

• Decision Date: 08 August 2001
• Docket Number: No. 99-60877,99-60877
• Citation: 259 F.3d 410
• Parties: (5th Cir. 2001) J.L. HOLLIS, Plaintiff-Appellant-Cross-Appellee, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, Defendant-Appellee-Cross-Appellant, and PAUL REVERE INSURANCE GROUP, Defendant-Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

Page 410

259 F.3d 410 (5th Cir. 2001)

J.L. HOLLIS, Plaintiff-Appellant-Cross-Appellee, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, Defendant-Appellee-Cross-Appellant and PAUL REVERE INSURANCE GROUP, Defendant-Appellee.

No. 99-60877

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

August 8, 2001

Charles M. Merkel (argued), Jack Robinson Dodson, Jr., Merkel & Cocke, Clarksdale, MS, for Hollis.

Clifford K. Bailer, III (argued), Richard D. Gamblin, Wise Carter, Child & Caraway, Jackson, MS, for Provident Life & Acc. Ins. Co, and Paul Revere Ins. Group.

Appeals from the United States District Court for the Southern District of Mississippi

Before REYNALDO G. GARZA, DAVIS and JONES, Circuit Judges.

REYNALDO G. GARZA, Circuit Judge:

This case involves claims for denial of benefits under two disability insurance policies. Appellant-cross-appellee Larry Hollis ("Hollis") began work with R.M. Hendrick Graduate Supply House, Inc. ("Graduate Supply") as a salesman in 1970. Graduate Supply sells class rings, diplomas, regalia, graduation invitations, yearbooks, and other similar items to high schools and colleges.

As a Graduate Supply sales representative, Hollis was assigned a territory and was responsible for servicing the schools within that territory. Hollis would load his car with Graduate Supply products, deliver them to the schools, make a sales presentation to the students, and then reload his car. In addition, Hollis serviced some of Graduate Supply's commercial accounts.

Prior to August 1, 1981, Graduate Supply treated Hollis as an employee, but, on August 1, 1981, Hollis and Graduate Supply signed an agreement that made Hollis an independent contractor. Under the agreement, Hollis was required to pay his own travel expenses, provide his own vehicle, and pay his own employment and income taxes. Hollis determined when he would visit his assigned schools, and he was solely responsible for maintaining Graduate Supply's contracts with those schools. In return, Graduate Supply paid Hollis a commission on the items he sold. However, Graduate Supply was Hollis's primary source of income, he had the same duties as employee-sales representatives, and he shared in year-end bonuses like Graduate Supply's employees.

Additionally, Graduate Supply had a program to provide life, medical, and disability insurance for its employees in which Hollis participated. Pursuant to this program, Hollis procured a disability insurance policy from Provident Life and Accident Insurance Company ("Provident"). Graduate Supply's employee-sales representatives obtained disability policies from a company called Lincoln Life. On his own, Hollis obtained a second disability policy from Paul Revere Insurance Company ("Paul Revere").

Graduate Supply paid $600.00 per year, or $50.00 per month, of the premium of each salesman's policy procured pursuant to its benefit program. If a salesman purchased a policy that cost more than $600.00 per year, Graduate Supply would pay the excess as it became due and then deduct it from the salesperson's monthly compensation. The premiums on Hollis's Provident policy were paid in this fashion.

The Provident policy would pay a monthly benefit of $4,100.00 in case of disability at a cost of $2,020.00 per year. The Paul Revere policy would pay a monthly benefit of $2,100.00 in case of disability. Both policies provide benefits in case of "total disability," but each policy defines that term in a slightly different way. Under the Provident policy, "total disability" means that "due to injury or sickness" the insured is "not able to perform the substantial and material duties of [his] occupation." Under the Paul Revere policy, "total disability" means that "because of injury or sickness," the insured is "unable to perform the important duties of [his] occupation."

Beginning in 1980, Hollis experienced occasional lower back pain and muscle spasms. Between 1980 and 1995, Hollis visited physicians several times for diagnosis and treatment of his back pain. The physicians told him that he did not have a ruptured disk or any other surgical problems. They advised Hollis to stay off his feet for a few days and take pain medication. In May of 1995, Hollis experienced severe back pain and spasms while unloading boxes of merchandise from his vehicle. He again visited a physician, Dr. Lynn Stringer, who performed an MRI on him and diagnosed him with advanced degenerative disc disease. His physician told him that excessive driving, bending, lifting and stooping was the reason for his back pain. Hollis attempted to continue working, but on August 17, 1995 he resigned from Graduate Supply due to his back problems.

On August 23, 1995, Hollis submitted his claim forms to Provident and Paul Revere. Dr. Stringer completed the Attending Physician Statement portion of the form. She reported the diagnosis as advanced degenerative disc disease and explained that the condition was permanent. She advised Hollis to either change his work habits or stop working. Within six months of the filing of the claim, both Provident and Paul Revere began paying benefits to Hollis.

In early 1997, Provident acquired Paul Revere and transferred Hollis's file to a different claim representative, Sally Moore. Moore contacted Hollis and told him that the typed attending physician's statements he had been submitting must be handwritten. In a telephone conversation, Hollis informed her, "very aggressively" according to Provident and Paul Revere, that he would continue to submit typed forms to save his physician time. Approximately one and half hours after this telephone conversation, Moore reopened the investigation into Hollis's claim and ordered additional physician statements and surveillance of Hollis's daily activities. Both Provident and Paul Revere terminated his benefits in early 1998 on the ground that he did not have a "total disability" as that term is defined under the policies.

In April of 1998, Hollis filed suit against Provident and Paul Revere in Mississippi state court for breach of contract and bad faith denial of disability insurance benefits. The case was removed to federal district court on May 5, 1998. In the federal district court, Provident moved for summary judgment on Hollis's state law claims on the ground that they were preempted by the federal Employee Retirement Income Security Act ("ERISA"). The district court denied its motion. The case was tried to a jury on May 28, 1998. As to Provident, the jury found that Hollis was totally disabled as defined by the Provident policy and that Provident acted in bad faith in denying Hollis's claim. As to Paul Revere, the jury found that Hollis was not totally disabled under its policy.

In addition to policy benefits, the jury awarded $100,000 in damages for mental anguish and emotional distress to Hollis for Provident's bad faith denial of disability benefits. Hollis moved the district court to award attorney's fees and costs, but the district court denied the award.

On appeal, Hollis raises two points of error. First, he claims that the district court erred by failing to award attorney's fees and costs. Second, he claims that the jury's answer that he was not totally disabled under the Paul Revere policy must be set aside because: it cannot be reconciled with the jury's answer that he was totally disabled under the Provident policy, the jury arrived at this answer by impermissibly considering evidence regarding Hollis's preexisting condition, and it is against the great weight of the evidence. Provident raises three points of error by way of cross appeal. First, Provident contends that Hollis's state law claims are preempted by ERISA. Alternatively, Provident argues: 1) there was insufficient evidence to support an award of damages for emotional distress and 2) Hollis's expert witness was not qualified to testify as to whether Provident denied his benefits in bad faith.

I.

The first issue we must decide is whether ERISA preempts Hollis's state law claims against Provident. Provident moved for summary judgment on the ground that ERISA preempts Hollis's state law claims, but the district court denied the motion. We reverse the decision of the district court.

ERISA "shall 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) (1994). More specifically, Section 1144(a) bars state law causes of action when two elements are present: 1) the state law claims address areas of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan; and 2) the claims directly affect the relationship between the traditional ERISA entities-the employer, the plan and its fiduciaries, and the participants and beneficiaries. See Weaver v. Employers Underwriters, Inc., 13 F.3d 172, 176 (5th Cir. 1994); Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 245 (5th Cir. 1990). Hollis's state law claims concern the right to receive benefits under an ERISA plan, and his claims directly affect the relationship between traditional ERISA entities. Therefore, ERISA preempts his state law claims against Provident.

A. ERISA Plan

The first element of preemption-whether the state law claims address areas of exclusive federal concern, such as the right to receive benefits under an ERISA plan-is met. Clearly, Hollis claims a right to receive benefits under the disability insurance policy Provident issued. However, this fact alone is insufficient to meet the first element of preemption. He must claim a right to receive benefits under an ERISA plan for preemption to occur. See Weaver, 13 F.3d at 176. Hollis concedes that Graduate Supply established and maintained an ERISA plan¹. The issue, therefore, is whether Hollis's disability insurance policy with Provident constitutes part of Graduate Supply's ERISA plan.

As mentioned above, under the terms of the Graduate Supply plan, a...