Leonard v. Educators Mut. Life Ins. Co.
| Decision Date | 23 October 2007 |
| Docket Number | Civil Action No. 04-5310. |
| Citation | 620 F.Supp.2d 654 |
| Parties | Harold L. LEONARD, d/b/a The Leonard Clinic of Chiropractic, Plaintiff, v. EDUCATORS MUTUAL LIFE INSURANCE CO., Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
James H. Thomas, Blakinger, Byler & Thomas, P.C., Lancaster, PA, for Plaintiff.
George C. Werner, Barley Snyder, Lancaster, PA, for Defendant.
Plaintiff Harold L. Leonard ("Dr. Leonard"), doing business as The Leonard Clinic of Chiropractic ("the Clinic"),1 brought suit against defendant Educators Mutual Life Insurance Co. ("Educators") under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA") to recover unpaid medical benefits owed under a group insurance policy. Educators brought a motion for summary judgment on plaintiff's complaint pursuant to Federal Rule of Civil Procedure 56(c). Upon consideration of the motion for summary judgment, the court raised the issue of federal subject matter jurisdiction sua sponte, as it appeared to be lacking, and requested supplemental briefs from the parties on that issue.2 For the reasons that follow, I hold that the plan at issue is governed by ERISA, but I will grant Educators's motion for summary judgment as to plaintiff's claim for benefits.
Educators is a mutual life insurance company located in Pennsylvania, which now operates by the name of Eastern Life & Health Insurance Co. (Pl.Ex. 38 ("Agreed Facts") ¶ 2; Def. Summ. J. Mem. 1 n. 1.) In 1983, Dr. Leonard opened the Clinic at 1285 Manheim Pike, Lancaster, Pennsylvania, 17603. (Agreed Facts ¶ 4.) In July of 1990, the Clinic applied for group medical and life insurance coverage for its employees through Educators. (Agreed Facts ¶ 5; Def. Ex. 3.) At that time, Dr. Leonard's insurance agent was John C. Snyder (Agreed Facts ¶ 15); however, because the Clinic was considered a very small client, Snyder's assistant was primarily responsible for dealing with the Clinic (Def. Ex. 29 ("Synder Dep.") 7). In the application, the address of the clinic was reported as 1285 Manheim Pike, and three employees were to be covered by the policy. (Def.Ex. 3.) Educators did not offer or issue individual medical insurance plans. (Synder Dep. 32.)
Educators issued a group medical insurance policy and group life insurance coverage for Dr. Leonard and the Clinic's employees, including Dr. Leonard's wife, Diane Leonard. (Agreed Facts ¶ 5.) Educators assigned the Clinic group insurance policy number 8098. (Agreed Facts ¶ 6.) In order to qualify for group coverage, Educators required the Clinic to have at least three employees, (Def. Ex. 8; Def. Ex 30 ("Rankin4 Dep.") 11), working at least thirty hours per week and compensated for their services, (Def. Summ. J. Mem 2). After 1996, the Clinic was only required to have two employees. (Rankin Dep. 11.) In the Clinic's application dated December 2, 1997, there were reported to be a total of two eligible employees. (Pl. Ex. 8.) Educators reviewed the policies on an annual basis and notified customers of new prices for coverage. (Snyder Dep. 28.) Dr. Leonard paid the monthly invoices for health and life insurance to Educators. (Agreed Facts ¶ 14.)
In the fall of 1993, Dr. Leonard decided to resume his education and seek a degree in physical therapy from the University of Delaware. (Agreed Facts ¶ 11.) Dr. Leonard sold the Clinic to another chiropractor, Dr. Charles Czop, who took over the Clinic on January 1, 1994. Dr. Leonard was not an employee of Dr. Czop, but he continued to perform some services at the Clinic, including consultation with Dr. Czop and various insurance companies. Dr. Leonard also maintained a lock box for mail at the Clinic through March of 1999. (Dr. Leonard Aff. ¶ 2.) Dr. Leonard did not inform Educators of the fact that he had sold his Clinic or that the clinic at the site was being operated by Dr. Czop. (Def.Summ. J. Mem.3.) During Dr. Leonard's time at the University of Delaware, through February of 1999, the Leonards maintained a residence at 1364 Country Club Drive, Lancaster, Pennsylvania. (Agreed Facts ¶ 13.)
On May 25, 1995, pursuant to Dr. Leonard's request, Dr. Leonard's Pennsylvania chiropractic license was placed on inactive status. (Pl.Ex. 9.) According to Educators, it was not aware that Dr. Leonard was not licensed to practice in Pennsylvania at that time (Def.Summ. J. Mem.4) and Dr. Leonard has not disputed that fact. In September of 1995, Dr. Leonard opened a chiropractic clinic in Ellicott City, Maryland, and the Leonards maintained a second residence in a condominium in Ellicott City, Maryland. (Agreed Facts ¶¶ 10, 13.) Dr. Leonard, Diane Leonard, and several other employees operated the Ellicott City clinic, but it was affiliated with a large chiropractic organization under the name Yalich Clinic of Ellicott City. (Agreed Facts ¶ 10.) In late summer of 1997, Dr. Leonard ceased his affiliation with the Yalich Clinic and began operating as the Back & Neck Pain Treatment Center of Ellicott City; this clinic was a sole proprietorship. (Agreed Facts ¶ 11.) Diane Leonard provided services to Dr. Leonard as an office manager for the Back & Neck Pain Treatment Center of Ellicott City, although she was not compensated for those services. (Diane Leonard Dep. 16-18.) After the Leonards separated in June 1997, Diane Leonard ceased providing any services to Dr. Leonard's clinic in Maryland. (Diane Leonard Dep. 8.)
According to Educators, Dr. Leonard did not notify it that he was practicing in Ellicott City, Maryland (Def.Summ. J. Mem.4); however, while Dr. Leonard practiced in Maryland, he made payments to Educators from his Maryland checking account, which checks stated his Maryland address (Leonard Aff. ¶ 2). Educators also issued several Explanations of Benefits ("EOBs") to Dr. Leonard at his Ellicott City address and corresponded with Dr. Leonard at that address. (Pl.Ex. 39.)
The Clinic submitted an application for life insurance and comprehensive major medical insurance dated October 30, 1997, with a desired effectiveness date of October 1, 1997. (Def.Ex. 11.) The reason for the application was to change the Clinic's medical insurance plan from an indemnity plan to a preferred provider organization ("PPO") plan because, according to Snyder's recollection, Educators came out with a new policy series that was likely advantageous for the Clinic's employees. (Synder Dep. 14.) Snyder prepared and signed the application (Snyder Dep. 14-15; Def. Ex. 11), and Dr. Leonard signed the application (Leonard Dep. 122; Def. Ex. 11). The Clinic's application stated the name of the business as "Leonard Chiropractic Clinic" and the address of the business as "1285 Manheim Pike, Lancaster, PA, 17601." (Def.Ex. 11.) Employee application forms were submitted on behalf of Dr. and Diane Leonard. (Def.Exs. 12, 13.) Dr. Leonard's application stated that he worked thirty hours per week as a "Chiropractor / Consultant." (Def.Ex. 12.) The application stated, among other things, above the signature line, "I represent that I am actively and regularly working at least 30 hours a week for the employer named above ..." (Id.) Diane Leonard's application stated that she worked thirty-five hours per week and that her job duties included office management and marketing. (Def.Ex. 13.) Diane Leonard denies preparing or signing this form. (Diane Leonard Dep. 106-08). Dr. Leonard admits preparing a portion of this form, but stated that he did not sign it on Diane Leonard's behalf. (Dr. Leonard Dep. 140-41.) It is undisputed that by this time Diane Leonard was no longer working for Dr. Leonard at any location and that they were, in fact, separated. Snyder prepared a follow-up application for insurance, dated December 2, 1997, with a desired effectiveness date of December 1, 1997, which was submitted to Educators. (Def.Ex. 14.)
Educators issued a new group PPO policy to Dr. Leonard and the Clinic with an effective date of July 1, 1998. (Agreed Facts ¶ 19.) A booklet entitled "Your Group Medical Insurance Benefits," which included a Master Certificate effective July 1, 1998, was also issued. (Def. Ex. 2; Pl.Ex. 13.) In a section entitled "Eligible Employee," this group policy stated:
You must be a U.S. citizen and performing all of the duties of your job with a covered employer on a full-time basis. This may be at either:
• the covered employer's normal place of employment; or
• at some other place to which the regular business operations of the covered employer require you to travel.
To be "full-time" you must:
• regularly work for the covered employer at least 30 hours per week; and
• be on the regular payroll of the covered employer for that work.
(Pl.Ex. 13 at 32; Def. Ex. 2 at 32 (emphasis in original).) In another section, entitled "Termination of your medical coverage," the policy stated as follows:
Your medical coverage will terminate at 11:59 p.m. on the earlier of the following:
• the date the plan terminates; or
• the date your employer ceases to be a covered employer; or
• the day concurrent with or following: (a) the date you are no longer a member of an eligible class; or (b) the date you are no longer an active employee, except as provided under the Continuation of Coverage Provision, below; or (c) the date you retire.
(Pl.Ex. 13 at 6; Def. Ex. 2 at 6 (emphasis in original).) The July 1, 1998 group policy also included the following General Provision:
Statements made by you.
All statements made by you, in the absence of fraud, are representations and not warranties. A statement made by you may be used to contest your entitlement to coverage only if: (a) it is part of a written application; and (b) a copy of the application has been given to...
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