Marshall v. Bankers Life & Casualty Co., No. S022055

• Court: United States State Supreme Court (California)
• Writing for the Court: PANELLI; LUCAS; MOSK
• Citation: 10 Cal.Rptr.2d 72,2 Cal.4th 1045,832 P.2d 573
• Parties: , 832 P.2d 573, 61 USLW 2080, 15 Employee Benefits Cas. 2018 Linda Brown MARSHALL, et al., Plaintiffs and Appellants, v. BANKERS LIFE AND CASUALTY COMPANY, et al., Defendants and Respondents.
• Docket Number: No. S022055
• Decision Date: 09 July 1992

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10 Cal.Rptr.2d 72 2 Cal.4th 1045, 832 P.2d 573, 61 USLW 2080, 15 Employee Benefits Cas. 2018 Linda Brown MARSHALL, et al., Plaintiffs and Appellants,
v.
BANKERS LIFE AND CASUALTY COMPANY, et al., Defendants and Respondents. No. S022055. Supreme Court of California,
In Bank. July 9, 1992.

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[2 Cal.4th 1048] [832 P.2d 574] Greene, Broillet, Taylor & Wheeler, Randy McMurray, Timothy J. Wheeler, Santa Monica, Mandell, Lewis & Goldberg, Janice E. Garlitz and Michael L. Goldberg, McLean, Va., for plaintiffs and appellants.

O'Neal & Wodin, Marc J. Wodin, Northridge, O'Melveny & Myers, Robert N. Eccles and Henry C. Thumann, Washington, D.C., for defendants and respondents.

Richard E. Barnsback, Phillip E. Stano, Woodrow E. Eno, Theresa L. Sorota, Washington, D.C., Seyfarth, Shaw, Fairweather & Geraldson, Jeffery Anne Tatum, San Francisco, Adams, [2 Cal.4th 1049] Duque & Hazeltine, David L. Bacon, Los Angeles, and Brad Wenger, Sacramento, as amici curiae on behalf of defendants and respondents.

PANELLI, Justice.

We granted review in this case to determine whether an employer that purchases a group health insurance policy to cover its employees and their dependents, but whose involvement in administration of benefits under the policy is minimal, thereby establishes an "employee benefit plan" within the meaning of the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq.), so that an action seeking damages under state law for the denial of a claim for policy benefits is

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[832 P.2d 575] preempted by federal law. ¹ We conclude that an employee benefit plan is established on these facts despite the employer's minimal involvement in plan administration and complete noninvolvement in claims processing. An action seeking remedies under state law for an improper denial of benefits is, therefore, preempted. (Pilot Life Ins. Co. v. Dedeaux (1987) 481 U.S. 41, 47-57, 107 S.Ct. 1549, 1552-58, 95 L.Ed.2d 39; Commercial Life Ins. Co. v. Superior Court (1988) 47 Cal.3d 473, 484-485, 253 Cal.Rptr. 682, 764 P.2d 1059.) BACKGROUND

In 1983 Donald Marshall was employed by Miller Import Datsun, Inc. (Miller Import). Miller Import's employee manual stated that all employees would be provided with group health insurance coverage. From March 1, 1983, to October 1, 1983, Miller Import provided its employees with health insurance coverage under a group health, life, and disability insurance policy issued by Bankers Life and Casualty Company (Bankers) and administered by Frank B. Hall & Company of California/MIA Administrators (Hall/MIA). All of Miller Import's employees were covered under the policy. Miller Import allowed its employees to enroll their dependents for coverage under the group policy, and Donald Marshall enrolled his wife, Linda. Miller Import paid the entire cost of premiums for its employees. It also paid the cost of premiums for covered dependents and then deducted those amounts from employees' paychecks. Hall/MIA billed Miller Import for premiums on a monthly basis.

Miller Import's role in administration of the policy was minor. It directed its employees to fill out enrollment cards and forms for changes of beneficiaries and dependent coverage; it then submitted the completed cards to [2 Cal.4th 1050] Hall/MIA. Miller Import received, and distributed to its employees, booklets entitled "Your Group Insurance Plan," containing information about the policy and procedures for filing claims. Additionally, Miller Import gave its employees copies of a three-page letter, prepared by Hall/MIA, explaining coverage under the policy. Miller Import provided its employees with claim forms, which they or their health care providers submitted directly to Hall/MIA. Miller Import neither reviewed nor evaluated claim forms; Hall/MIA made all determinations regarding eligibility for medical benefits. Miller Import employees were asked to contact Hall/MIA with any questions regarding the policy. However, when employees occasionally asked questions regarding enrollment, coverage changes, and claims, Miller Import personnel would try to respond before contacting Hall/MIA.

Miller Import did not intend to create an ERISA-governed benefit plan, and never filed any reports with the United States Department of Labor with respect to its group insurance policy.

The present suit arose out of the denial of Linda Marshall's claim for medical benefits. The operative pleading (the fourth amended complaint) alleged that Linda Marshall suffered aftereffects of an aneurysm and brain surgery, requiring hospitalization, during the term of the Bankers policy. Although Hall/MIA confirmed coverage under the policy at the time of her hospitalization, coverage was later revoked and her claims for benefits were denied on the basis that her claim related to a preexisting condition, sickle-cell anemia. The Marshalls sued Bankers and Hall/MIA, alleging breach of the duty of good faith and fair dealing, fraud, intentional infliction of emotional distress, negligence, and violation of Insurance Code section 790.03. Defendants denied liability. Both sides moved unsuccessfully for summary judgment on the issue of whether ERISA preempted the Marshalls' action. (29 U.S.C. § 1144(a).) That issue was bifurcated for trial on stipulated facts as set forth in the preceding three paragraphs.

The trial court ruled that Miller Import's insurance program constituted an "employee welfare benefit plan" within the meaning of ERISA, so that the Marshalls' claims

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[832 P.2d 576] were preempted. Accordingly, it entered judgment for defendants. The Court of Appeal reversed, holding that because there was no administrative activity potentially subject to employer abuse, ERISA was not implicated. For the reasons that follow, we conclude the Court of Appeal erred in focusing on the employer's involvement in administration of policy benefits. ANALYSIS

ERISA is a comprehensive federal law designed to promote the interests of employees and their beneficiaries in employee pension and benefit plans. [2 Cal.4th 1051] (Shaw v. Delta Air Lines, Inc. (1983) 463 U.S. 85, 90, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490.) 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) U.S.Code Cong. & Admin.News 1974, p. 4639.) 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. ----, ---- - ----, 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.)

ERISA's preemption clause is conspicuous for its breadth, establishing as an area of exclusive federal concern the subject of every State law that "relates to" an employee benefit plan governed by ERISA. (FMC Corp. v. Holliday (1990) 498 U.S. 52, ----, 111 S.Ct. 403, 407, [112 L.Ed.2d 356, 364].) ERISA preempts "any and all State laws insofar as they ... relate to any employee benefit plan," except laws "which regulate insurance...." (29 U.S.C. § 1144(a), (b)(2)(A).) An employee benefit plan is not deemed to be an insurance company or other insurer, or to be engaged in the business of insurance, for purposes of any state law purporting to regulate insurance companies or insurance contracts. (29 U.S.C. § 1144(b)(2)(B).)

In Pilot Life Ins. Co. v. Dedeaux, supra, 481 U.S. 41, 107 S.Ct. 1549, the high court held that ERISA preempts state common law tort and contract actions based on an insurer's improper processing of a claim for benefits under an insured employee benefit plan because such actions "relate to" an employee benefit plan, and because the state common law of tort and contract does not "regulate insurance" within the intent of ERISA. (Id. at pp. 47-57, 107 S.Ct. at pp. 1552-58.) In Commercial Life Ins. Co. v. Superior Court, supra, 47 Cal.3d 473, 253 Cal.Rptr. 682, 764 P.2d 1059, we held that ERISA preempts a surviving private cause of action brought under California Insurance Code section 790.03, subdivision (h), when the action asserts a claim arising from an employee benefit plan. (47 Cal.3d at p. 484, 253 Cal.Rptr. 682, 764 P.2d 1059; see Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 250 Cal.Rptr. 116, 758 P.2d 58 [prospectively eliminating private causes of action under Ins.Code, § 790.03, subd. (h) ].) Clearly, Pilot Life and Commercial Life require us to conclude that all of the Marshalls' causes of action are preempted if the group health plan under which Linda Marshall filed a claim for benefits is an employee benefit plan governed by ERISA. We turn accordingly to that question. ²

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[832 P.2d 577] ERISA governs any employee benefit plan established or maintained by an employer engaged in commerce or in an industry or activity affecting [2 Cal.4th 1052] commerce. (29 U.S.C. § 1003(a).) An "employee welfare benefit plan," within the meaning of ERISA, is "any plan, fund, or program ... established or maintained by an employer ... 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, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services...." (29 U.S.C. § 1002(1), emphasis added.)

The existence of an ERISA plan is a question of fact, to be answered in light of all of the surrounding circumstances as viewed by a reasonable person. (Kanne v. Connecticut General Life Ins. Co. (9th...