Marshall v. Bankers Life and Cas. Co.
| Decision Date | 10 June 1991 |
| Docket Number | No. B050259,B050259 |
| Citation | 2 Cal.App.4th 1179,282 Cal.Rptr. 151 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Previously published at 231 Cal.App.3d 1503, 231 Cal.App.3d 18, 2 Cal.App.4th 1179 231 Cal.App.3d 1503, 231 Cal.App.3d 18, 2 Cal.App.4th 1179, 14 Employee Benefits Cas. 1315 Linda Brown MARSHALL, Donald Marshall, Plaintiffs and Appellants, v. BANKERS LIFE AND CASUALTY COMPANY, et al., Defendants and Respondents. Civ. |
Greene, Broillet, Taylor & Wheeler, Randy McMurray and Timothy J. Wheeler, Santa Monica, Mandell, Lewis & Goldberg and Michael L. Goldberg, Vienna, Va., for plaintiffs and appellants.
O'Neal & Wodin and Marc J. Wodin, Northridge, for defendants and respondents.
Plaintiffs and appellants Linda Brown Marshall and Donald Marshall appeal a judgment in favor of defendants and respondents Bankers Life and Casualty Company (Bankers) and Frank B. Hall and Company of California (FBH), (collectively, defendants).
The issue presented is whether the Marshalls' action arising out of an employment-based group health insurance program is preempted by ERISA. 1
The purpose of ERISA is to protect employees from potential abuses as a result of employer involvement in the administration of benefit plans. Employee insurance benefits which are not provided through such plans are outside the contemplation of ERISA and are governed by California common law and statutory law. Insurance companies which merely contract with employers for employee health benefits cannot hide behind nonexistent ERISA plans to avoid California bad faith actions.
Due to the focus of ERISA, preemption thereunder turns on the extent to which the employer is involved in the administration of a benefit program so as to implicate the concerns which gave rise to ERISA. Here, there was no administrative activity potentially subject to employer abuse so that ERISA's concern with regulating the administrative integrity of the program was not implicated. The judgment is therefore reversed.
After commencing the action on April 23, 1985, the Marshalls filed the operative pleading, a fourth amended complaint, on May 23, 1986, naming Bankers; FBH; and MIA Administrators, a subsidiary of FBH.
The plaintiffs alleged: Defendants had failed and refused to pay certain medical benefits allegedly due them under a group health insurance policy issued by Bankers to Donald Marshall's employer, Miller Import Datsun, Inc. (Miller), with respect to the hospitalization and treatment of Donald Marshall's wife, Linda Marshall, from May 5, 1983 to June 20, 1983. Defendants had denied the claim on the ground her hospitalization was for preexisting sickle-cell anemia, and under the policy, preexisting conditions were allowed a maximum benefit of $1,000. However, Linda Marshall was not being treated for sickle-cell anemia but for aftereffects of an aneurysm and brain surgery, and these facts were known to defendants.
The Marshalls pled six causes of action against Bankers, the insurer, as well as FBH, the administrator appointed by Bankers, as follows: (1) breach of the duty of good faith and fair dealing; (2) fraud (against Bankers); (3) fraud (against FBH); (4) breach of statutory duties (Ins.Code, § 790.03); (5) intentional infliction of emotional distress and willful and wanton misconduct; and (6) negligence.
The thirteenth affirmative defense of defendants' answer asserted that all causes of action were preempted by ERISA. Thereafter, both sides unsuccessfully sought summary judgment on the preemption issue, and the matter proceeded to trial before the court without a jury.
The trial court bifurcated the issue of ERISA preemption and tried the matter on stipulated facts.
The stipulation consisted of 24 defendants' facts and 25 plaintiffs' facts. It established the following:
Bankers approved Miller's application for a group health insurance policy, and coverage was in effect from March 1, 1983, to October 1, 1983. Miller received no compensation or consideration from Bankers for the subject insurance policy. Miller provided this coverage, which included health, life and disability insurance, to all its employees as part of an employee benefit package. Donald Marshall, as a Miller employee, was enrolled as an insured, while Linda Marshall was enrolled for dependent coverage.
While Miller's employee manual stated all employees would be provided with group health insurance coverage, Miller was not required to provide any health insurance to its employees pursuant to any written contract or collective bargaining agreement. Miller had the authority and the right at any time to cancel the subject group insurance policy and eventually it did so.
While the policy was in effect, Miller was billed by FBH and paid the premiums on a monthly basis out of Miller's own account. Miller did not set aside a separate fund for payment of the premiums. Miller paid the premiums for its employees in their entirety. Miller also paid the premiums for covered dependents, such as Linda Marshall, but deducted the amount of dependents' premiums from the employees' paychecks.
Miller was provided with enrollment cards and change forms, which it provided to its employees, and then sent the completed forms to FBH. Miller did nothing with completed enrollment cards or change forms, other than to forward them to FBH and to insert a copy in the employees' files.
Miller added or deleted names of employees who were hired or terminated and sent those changes to FBH. FBH or Bankers had all responsibility for determining whether an employee or dependents were eligible for coverage. FBH calculated and made all adjustments to Miller's premiums.
Miller also was provided with claim forms which it passed on to its employees. All completed claim forms were submitted directly by the employee or health care provider to FBH. FBH had been appointed by Bankers as its agent to administer the plan and FBH processed all claims. Miller did not review the completed claim forms and had no responsibility for evaluating claims which had been submitted. Nor was Miller responsible for monitoring how much money was available for paying claims. Miller could not deny any benefits under the policy. Benefits were paid directly to the employee or to the health care provider at the employee's request. Miller never handled the funds used to pay benefits and had no opportunity to misappropriate or improvidently invest those funds.
Miller also was provided with informational booklets, as well as a three-page explanatory letter, which it distributed to its employees. FBH sometimes sent information to Miller's employees via Miller. Occasionally, FBH requested Miller to have employees complete various forms, and Miller provided the employees with the forms.
Personnel at Miller would attempt to respond to employees' insurance questions which arose. If Miller could not resolve the problem, it would contact FBH or place the employee in contact with FBH. FBH directed Miller to have its employees contact FBH regarding benefits or claims. Donald Marshall spoke with FBH personnel regarding policy questions. He never spoke with anyone at Miller regarding the subject insurance.
Miller did not intend to create an ERISA plan. Donald Marshall was never informed his rights and obligations under the policy were governed by ERISA, and he was never told the insurance was to be an ERISA plan. Miller never filed any reports with the Department of Labor with respect to the subject insurance policy. Miller had no offices or employees outside California.
Following argument by counsel, the matter was taken under submission. Thereafter, the trial court held:
The employer's involvement in the program was "not extensive." There was no evidence Miller specifically intended to establish a program that would be covered by ERISA. But, the program which was established was for ongoing benefits of the type typically covered by ERISA. The employer paid employees' premiums, although the employees paid the cost of dependent coverage. The employer had the power to terminate the plan. The employer collected dependent premiums and transmitted those funds. The employer also performed various administrative duties such as disseminating insurance pamphlets to employees, handling enrollment forms and changes, answering questions and forwarding some questions to FBH and assisting in claims processing. 2 The employer did not handle money received by FBH, nor disburse benefits, nor make decisions regarding coverage or benefit payments on claims.
Despite the employer's limited involvement, the trial court felt bound by California authority to hold the Marshalls' action was barred. It concluded:
The Marshalls appealed.
The Marshalls contend there is insufficient evidence to support the finding the subject health insurance policy was an ERISA "plan." The employer's involvement in administering the program was limited and ministerial and therefore did not implicate the purpose of ERISA.
ERISA, which is found at 29 United States Code section 1001 et seq., in the chapter entitled Employee Retirement Income Security Program, "comprehensively regulates employee pension and welfare plans." (Metropolitan Life...
To continue reading
Request your trial
-
Marshall v. Bankers Life and Cas. Co.
...AND CASUALTY COMPANY et al., Respondents. No. S022055. Supreme Court of California, In Bank. Aug. 22, 1991. Prior report: Cal.App., 282 Cal.Rptr. 151. Respondents' petition for review LUCAS, C.J., and BROUSSARD, PANELLI, KENNARD, ARABIAN and BAXTER, JJ., concur. ...