Knott v. Provident Life & Accident Ins. Co.

• Decision Date: 21 March 2002
• Docket Number: No. 11-00-00243-CV.,11-00-00243-CV.
• Citation: 70 S.W.3d 924
• Parties: Dr. James KNOTT, M.D., Appellant, v. THE PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY and Debra Lucille Townley, as Independent Executor of the Estate of Ellis Garland Gatlin, Deceased, Appellees.
• Court: Texas Court of Appeals

70 S.W.3d 924

Dr. James KNOTT, M.D., Appellant, v. THE PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY and Debra Lucille Townley, as Independent Executor of the Estate of Ellis Garland Gatlin, Deceased, Appellees.

No. 11-00-00243-CV.

Court of Appeals of Texas, Eastland.

March 21, 2002.

Rehearing Overruled April 18, 2002.

Ben C. Martin, T. King Fifer, Law Offices of Ben C. Martin, Dallas, for Appellant.

Andrew C. Whitaker, Mark T. Davenport, Figari, Davenport & Graves, Dallas, Thomas L. Fiedler, Mark Alexander, Patrick C. Frank, Fiedler, Akin, Frank & Carlton, P.C., Dallas, for Appellees.

Panel consists of ARNOT, C.J., and WRIGHT, J., and McCALL, J.

W.G. ARNOT, III, Chief Justice.

Opinion

This appeal concerns a claim for benefits under two disability insurance policies issued by The Provident Life and Accident Insurance Company (Provident). Dr. James Knott, M.D., an obstetrician/gynecologist, purchased the disability insurance policies in the 1970s from his insurance agent, Ellis Garland Gatlin, deceased. Dr. Knott received total disability benefits under the policies for 24 months from 1996 until 1998. He filed suit against Provident and the independent executor of Gatlin's estate after Provident stopped paying him benefits in 1998. The trial court granted summary judgment in favor of Provident and Gatlin's independent executor on all claims asserted by Dr. Knott. We affirm in part and reverse and remand in part.

Dr. Knott sustained a fracture to his spine as a result of a plane crash which occurred in June 1985. He was unable to work for approximately two months after the injury. Upon returning to his practice on a full-time basis in August 1985, there were various medical procedures which he could no longer perform as a result of his injury. Dr. Knott testified that he was never able to perform these procedures after the accident. He initially applied for total disability benefits under the policies in 1985. Provident denied this claim on the basis that each of the policies had a 90 day elimination period which Provident asserted that Dr. Knott had not met by his return to work in less than 90 days. Dr. Knott did not contest Provident's denial of total disability benefits at that time. Instead, he accepted Provident's offer to pay him residual disability benefits for partial disability. In order to receive residual disability benefits, Dr. Knott was required to show that he had sustained a loss of income as a result of his disability. Dr. Knott received residual disability benefits periodically from 1986 until 1989. Dr. Knott stopped receiving residual disability benefits in 1989 because his earnings met or exceeded the amount of his earnings prior to the accident.

Dr. Knott neither applied for nor received any type of disability benefits from Provident from 1989 through 1995. He remained covered under the policies during this period although he did not pay any premiums.¹ Dr. Knott's 65th birthday occurred in August 1995. He filed a second claim for total disability benefits under the policies in January 1996. This second claim coincided with Dr. Knott reducing his workload to a part-time basis. Provident began paying Dr. Knott total disability benefits based on the second claim in April 1996 after the 90-day elimination period had been satisfied. Provident terminated his benefits in March 1998 after 24 months of benefits had been paid. Provident based this action on a provision of the policies which provided for a maximum of 24 months of benefits for disabilities commencing after the insured's 65th birthday. Dr. Knott filed suit asserting that Provident's termination of benefits constituted a breach of the insurance contract and occurred in bad faith. He alleges that Gatlin misrepresented the terms of the policies to him at the time of purchase.

When reviewing a traditional motion for summary judgment, the following standards apply: (1) the movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true; and (3) every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor. TEX.R.CIV.P. 166a; Goswami v. Metropolitan Savings and Loan Association, 751 S.W.2d 487, 491 (Tex.1988); Nixon v. Mr. Property Management Company, Inc., 690 S.W.2d 546, 548-49 (Tex.1985); City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 676 (Tex.1979).

The order of the trial court did not specify the grounds for its summary judgment; therefore, summary judgment will be affirmed on appeal if any theories advanced are meritorious. State Farm Fire & Casualty Company v. S.S. & G.W., 858 S.W.2d 374, 380 (Tex.1993); Carr v. Brasher, 776 S.W.2d 567, 569 (Tex.1989). Provident's motion for summary judgment alleged nine grounds while the motion for summary judgment filed by Gatlin's independent executor alleged five grounds. Dr. Knott attacks each of these grounds on appeal.

Dr. Knott's Issue No. 8 asserts that the trial court erred in granting summary judgment on Provident's claim that the Employee Retirement Income Security Act of 1974, 29 U.S.C.A. § 1002 et seq. (West 1999), (ERISA) preempts all of his state law claims.² Provident contends that the arrangement for Dr. Knott's disability insurance policies constituted an "employee welfare benefit plan" under ERISA. ERISA defines an "employee welfare benefit plan" in Section 1002(1) as:

[A]ny plan, fund or program ... established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise ... medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment.

The arrangement presented in this case involves disability insurance.

In examining a particular arrangement to determine whether it qualifies as an employee welfare benefit plan under ERISA, a court should inquire whether a plan: (1) exists; (2) falls within the exceptions established by the Department of Labor; and (3) satisfies the primary elements of an ERISA employee welfare benefit plan. Meredith v. Time Insurance Company, 980 F.2d 352, 355 (5th Cir.1993). Thus, a court confronted with the question of whether a plan qualifies as an employee welfare benefit plan within the scope of ERISA must initially satisfy itself that there is in fact a plan at all. Meredith v. Time Insurance Company, supra at 355. To determine whether a plan, fund, or program exists, a court must determine from the surrounding circumstances whether a reasonable person could ascertain the intended: (1) benefits; (2) beneficiaries; (3) source of financing; and (4) procedures for receiving benefits. Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir.1982); see also Memorial Hospital System v. Northbrook Life Insurance Company, 904 F.2d 236, 240 (5th Cir.1990)(adopting Donovan for the Fifth Circuit).

There are two primary elements of an ERISA employee welfare benefit plan. A court must consider: (1) whether an employer established or maintained the plan and (2) whether the employer intended to provide certain benefits to its employees. MDPhysicians & Associates, Inc. v. State Board of Insurance, 957 F.2d 178, 183 (5th Cir.), cert. den'd, 506 U.S. 861, 113 S.Ct. 179, 121 L.Ed.2d 125 (1992); Hansen v. Continental Insurance Company, 940 F.2d 971, 978 (5th Cir.1991). Whether a particular set of insurance arrangements constitutes an employee welfare benefit plan is a question of fact. McNeil v. Time Insurance Company, 205 F.3d 179, 189 (5th Cir.2000); Zavora v. Paul Revere Life Insurance Company, 145 F.3d 1118, 1120 (9th Cir.1998). The burden of establishing the existence of an ERISA plan is on Provident. Zavora v. Paul Revere Life Insurance Company, supra at 1120.

The Fifth Circuit has held that a plan in which the only participants are the owners or partners does not constitute an ERISA benefit plan. McNeil v. Time Insurance Company, supra at 190; Meredith v. Time Insurance Company, supra at 357-58; see Parker v. Parker, 897 S.W.2d 918, 925 (Tex.App.-Fort Worth 1995, writ den'd). The summary judgment evidence indicates that a total of five disability insurance policies were issued by Provident to Dr. Knott and two other physicians with whom he was associated. The other physicians were Dr. Knott's partners in a professional association for most of the time in which the policies were in force. Consequently, there is summary judgment evidence that the only persons covered by the disability policies were owners of the medical practice. This evidence raises a fact question under the holdings in McNeil and Meredith that the only participants were owners or partners and, therefore, precludes the trial court's determination that an ERISA plan existed as a matter of law. Issue No. 8 is sustained. Issue No. 1, to the extent that it challenges the same ground as Issue No. 8, is also sustained. Because this portion of the summary judgment is being remanded for determination of a fact issue, we do not reach Issue No. 9 which alleges that Provident abused its discretion in handling Dr. Knott's claim. TEX.R.APP.P. 47.1.

In Issue No. 2, Dr. Knott addresses a summary judgment ground wherein Provident alleged that the termination of Dr. Knott's benefits in 1998 did not constitute a breach of the insurance policy because he was not totally disabled when the termination occurred. In order to analyze the summary judgment evidence regarding the level of Dr. Knott's disability at the time his benefits were terminated in 1998, a construction of the policies' definition of total disability is...