Matinchek v. John Alden Life Ins. Co.
| Decision Date | 19 August 1996 |
| Docket Number | No. 95-7654,95-7654 |
| Citation | 93 F.3d 96 |
| Parties | Pens. Plan Guide (CCH) P 23925U Frank E. MATINCHEK v. JOHN ALDEN LIFE INSURANCE COMPANY, Appellant. |
| Court | U.S. Court of Appeals — Third Circuit |
Jonathan H. Rudd (argued), McNees, Wallace & Nurick, Harrisburg, PA, for Appellant.
Barry A. Kronthal (argued), Stephen L. Banko, Jr., Foulkrod, Reynolds & Havas, Harrisburg, PA, for Appellee.
Before COWEN, NYGAARD and LEWIS, Circuit Judges.
The question we address in this appeal is whether ERISA governs an insurance coverage dispute between Appellee Frank E. Matinchek ("Matinchek") and the John Alden Life Insurance Company. We hold that ERISA does not govern this dispute because an insurance coverage plan covering only a sole business owner and his or her immediate family members cannot qualify as an "employee welfare benefit plan" under ERISA. We also hold, as a result of our conclusion that ERISA does not govern this dispute, that the district court incorrectly determined it had federal subject matter jurisdiction based on Matinchek's ERISA claims. Accordingly, we will vacate the district court's judgment and remand the case with instructions to dismiss the case for lack of subject matter jurisdiction. Because there were facts in the record that support diversity jurisdiction, however, we note that the district court's dismissal should not prejudice Matinchek's right to amend his complaint to include his state law claims.
On October 28, 1991, Matinchek completed an enrollment form for group health insurance coverage from the John Alden Life Insurance Company ("John Alden"). The enrollment form presented a series of questions regarding the applicant's health history. In response to a question regarding whether the applicant had been treated for prior diseases or disorders, including diabetes, Matinchek indicated "no." Matinchek also answered "no" to questions regarding whether he was currently taking any medication and whether he had consulted a doctor (other than his personal physician) over the past three years. App. 135a.
Prior to his application for health insurance coverage with John Alden, at least two doctors had performed blood sugar tests on Matinchek. Matinchek's blood sugar levels indicated that he had a problem with diabetes. The first doctor to make this diagnosis was Dr. Barnoski, Matinchek's family physician. Initially, sometime after July 1990, Dr. Barnoski put Matinchek on a 1500 to 1800 calorie diet. Dr. Barnoski thereafter performed four separate blood tests on Matinchek between February 6, 1991 and March 6, 1991. The blood sugar readings confirmed that Matinchek had a problem with diabetes. As a result of these readings, Dr. Barnoski prescribed and instructed Matinchek to take Glucotrol, which is an oral medication taken to lower the blood sugar in individuals suffering from non-insulin dependent diabetes. App. 82a.
Matinchek then visited Dr. Perna, a specialist in endocrinology and in the treatment of diabetes. During their initial consultation on March 27, 1991, Dr. Perna confirmed, based on a blood test and on Matinchek's medical history, that Matinchek was suffering from non-insulin dependent diabetes. Dr. Perna recommended that Matinchek follow a diabetic diet and "try to lose some weight." Dr. Perna also prescribed and instructed Matinchek to take 2.5 milligrams of Diabeta once a day. Diabeta is another oral medication that is used to lower the blood sugar in patients with non-insulin dependent diabetes. Dr. Perna continued to treat Matinchek for his diabetic condition throughout 1991 and performed additional blood sugar tests on April 16, 1991, May 7, 1991, and June 27, 1991. On March 30, 1992, Dr. Perna determined that "Matinchek's diabetes was sufficiently under control such that I discontinued the use of Diabeta to assist in lowering his blood sugar." App. 82a-90a. During the time period in which Dr. Perna was treating Matinchek, Matinchek was taking his own finger-stick blood tests on a routine basis to monitor his blood sugar level. App. 66a-70a.
Thus, the record evidence establishes that Matinchek made at least three misrepresentations on his enrollment form. First, he did not reveal that he was suffering from a diabetic condition as of October 28, 1991, the date of his enrollment. Second, he stated that he had not been to see a doctor who was not his personal physician over the past three years when, in fact, he had made numerous visits to Dr. Perna. Third, he represented that he was not taking any medication when Dr. Perna's records suggested that he was taking (or supposed to have been taking) Diabeta.
After receiving the enrollment form, John Alden issued a health insurance policy covering Matinchek and his wife. At the end of February, 1992, Matinchek entered the hospital because of an undisclosed medical problem. To cover the hospitalization expenses, Matinchek filed a claim for benefits with John Alden on March 10, 1992. The claim included a hospital diagnosis code for diabetes mellitus. Upon discovering the diagnosis code, a John Alden claims examiner initiated an investigation to determine whether Matinchek had, in his enrollment form, failed to disclose his diabetes as a pre-existing medical condition. The examiner ordered Matinchek's medical records from the hospital. The hospital did not send Matinchek's medical records to the examiner until April 10, 1992. The records, of course, revealed Matinchek's history of treatment for his diabetic condition.
After discovering the misrepresentation in the enrollment form, the examiner referred the file to John Alden's chief underwriter, Kathy Garvey ("Garvey"). By May 1, 1992, Garvey reviewed the file and determined that John Alden would not have issued Matinchek a policy if Matinchek had provided accurate information in his enrollment form. App. 95a. Thereafter, Tracy Boldman ("Boldman") a claims analyst, completed a rescission referral form and transmitted the file to the directors of the claims department to determine whether to rescind Matinchek's policy. It appears that sometime between May 1, 1992 and May 14, 1992, the directors decided to rescind Matinchek's policy.
On May 14, 1992, Boldman sent Matinchek a letter requesting Matinchek to review and correct any information that was incorrect on his enrollment form. This letter was apparently a form letter that John Alden sends out whenever an individual's policy is recommended to be rescinded. App. 99a. Matinchek received this letter on May 15, 1992. Also on May 15, 1992, a John Alden representative directed its premium services department to refund all premiums paid by the Matincheks. App. 190a. On the same day, Boldman sent a letter to Matinchek's insurance agent notifying the agent that Matinchek's coverage was being rescinded as a result of Matinchek's failure to disclose material information regarding his diabetes on the enrollment form. App. 100a.
Matinchek left home for a trip to Canada on May 18, 1992. On May 20, 1992, Matinchek was seriously injured in an auto accident in Canada when he fell asleep at the wheel and his car went over an embankment. His injuries required him to be hospitalized. Matinchek's wife reported the accident to John Alden on the day that it occurred. On May 21, 1992, the next day, John Alden sent Matinchek a letter stating that his policy had been rescinded.
After John Alden denied his claims for both the February hospitalization and for the May accident, Matinchek filed suit against John Alden, seeking to recover the benefits provided by the policy.
The district court rejected John Alden's motion for summary judgment on March 13, 1995. In its order denying summary judgment, the district court requested further briefing on the issues of waiver and estoppel. Thereafter, the district court granted summary judgment as to liability in favor of Matinchek, holding that, as a matter of law, John Alden had waived its right to rescind the insurance policy. The district court denied Matinchek's claim for attorney's fees, costs, and prejudgment interest. John Alden then brought this appeal. Matinchek does not appeal the district court's denial of its motion for attorney's fees, costs and prejudgment interest.
The district court, in its opinion denying John Alden's motion for summary judgment, stated that:
The instant action is governed by the Employee Retirement Income & Security Act ("ERISA"), under which a participant in an employee benefit plan may sue to "recover benefits due to him under the terms of his plan, to enforce his rights under the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). Because the insurance policy falls within the ambit of ERISA, it should be interpreted according to federal law.
Dist. Ct. Op. 3. In his second amended complaint, Matinchek stated that the policy at issue in this case "constitutes an employee benefit arising out of Mr. Matinchek's employment which qualifies as a 'Welfare Benefit Plan' within the meaning of 29 U.S.C. § 1002(1)." In its answer, John Alden did not dispute this claim. 1 Thus, from the outset of this litigation, both the parties and the district court assumed that this dispute was governed by ERISA and that ERISA was the source of the district court's federal question jurisdiction. For the reasons which follow, however, we conclude that ERISA cannot give rise to federal question jurisdiction in this case.
As set forth in its findings and its declarations of policy, Congress enacted ERISA to protect participants in employee benefit plans and their beneficiaries. 29 U.S.C. § 1001. ERISA includes what we have termed a "civil actions provision," 29 U.S.C. § 1132(a)(1), which authorizes a participant in "an employee welfare benefit plan" to recover benefits due to him [or her] under the terms of the plan. Heasley v. Belden & Blake Corp., 2...
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