Midwest Sec. Life Ins. Co. v. Stroup

• Decision Date: 17 February 1999
• Docket Number: No. 06A05-9804-CV-201,06A05-9804-CV-201
• Citation: 706 N.E.2d 201
• Parties: MIDWEST SECURITY LIFE INSURANCE COMPANY, Appellant-Defendant, v. Theresa A. STROUP and Patrick J. Stroup, Appellees-Plaintiffs.
• Court: Indiana Appellate Court

Page 201

706 N.E.2d 201

MIDWEST SECURITY LIFE INSURANCE COMPANY, Appellant-Defendant, v. Theresa A. STROUP and Patrick J. Stroup, Appellees-Plaintiffs.

No. 06A05-9804-CV-201.

Court of Appeals of Indiana.

Feb. 17, 1999.

Alan J. Irvin, Dale & Eke, Indianapolis, Indiana, Attorney for Appellant.

Mary J. Hoeller, Dutton & Overman, Indianapolis, Indiana, Attorney for Appellee.

OPINION

SULLIVAN, Judge.

Appellant, Midwest Security Life Insurance Company (Midwest), brings an interlocutory appeal of the trial court's denial of its motion for summary judgment as to the claim of Appellees, Theresa A. Stroup (Theresa) and Patrick J. Stroup (collectively the Stroups).

We reverse.

On appeal, Midwest presents the following issues:

(1) Whether the Stroups' common law claims against Midwest for breach of an insurance contract and the tort of bad faith are preempted by the Employee Retirement Income Security Act (ERISA); ¹ and

(2) Whether the Stroups are entitled to a trial by jury upon their claims.

Midwest issued a group health insurance policy (the Plan) to Patrick Stroup's employer, Ivy Homes, Inc. The Stroups were beneficiaries under the Plan, which was governed by ERISA. Midwest served as administrator of the Plan.

In January of 1993, Theresa sought and received preapproval of benefits from Midwest for surgery to correct mandibular laterognathia. Midwest informed Theresa, through the dental surgeon, that coverage for her surgery was subject to insurance in effect at the time of the procedure and that all benefits were subject to policy provisions which could change. Furthermore, Midwest advised that the Plan provided "no guarantee of benefits." Record at 56.

To prepare for surgery, Theresa wore orthodontic appliances for approximately one year following her preapproval. On January 17, 1994, Theresa's dental surgeon requested preapproval of benefits for surgery to correct a musculoskeletal deformity of the maxilla and mandible. The letter noted that surgery had already been approved as medically necessary but "recent surgical-orthodontic evaluation revealed the above mentioned maxillary deformities." Record at 57. Following requests for additional information, Midwest approved coverage for the proposed surgery. In so doing, Midwest advised that, "[a]ll benefits are subject to ... plan provisions at the time of the service." Record at 60.

Theresa underwent surgery on April 13, 1994. During the procedure, an artery in Theresa's right jaw was inadvertently severed. Because of the severed artery, she lost two units of blood, "a greater than average amount of blood loss," and thereafter suffered pain related to the flooding of blood into her right temporomandibular joint. Record at 310. On January 24, 1995, Theresa's dental surgeon requested preapproval from Midwest for surgery to correct "a significant internal derangement involving the left temporomandibular joint." Record at 61. Two days later, on January 26, 1995, Midwest responded that the maximum benefit available to Theresa for surgical treatment of Temporomandibular Joint Disorder (TMJ) was $1,000. On August 1, 1994, Midwest had amended the Plan to exclude coverage for charges for orthognathic surgery. Thus, Midwest refused to provide coverage for the entire surgical procedure. Theresa ultimately underwent emergency bone graft surgery in October of 1995 and further corrective surgery in January of 1996. The Stroups incurred total medical expenses in excess of $50,000, although they do not know what portion of those expenses Midwest has actually covered.

On June 26, 1995, the Stroups filed their Complaint for Injunctive Relief and Damages against Midwest. Midwest filed its Answer on May 31, 1996. With leave of court, on July 23, 1997, the Stroups filed an Amended Complaint for Damages. In their Amended Complaint, the Stroups charged Midwest with breach of the insurance contract and with the tort of bad faith. They also requested a jury trial. Midwest answered the Amended Complaint on August 18, 1997, asserting as an affirmative defense that the Stroups' claims were preempted by ERISA. Midwest filed for summary judgment on January 2, 1998, again alleging that the Stroups' claims were preempted by ERISA. Midwest also filed a Motion to Strike Plaintiff's Jury Demand.

Following a hearing, the trial court on March 4, 1998, made the following findings in its order denying Midwest's summary judgment motion.

"1. Pursuant to Trial Rule 56 the Court finds that there are genuine issues of material fact which would preclude the entry of Summary Judgment.

2. The Court specifically finds as a matter of law that the Plaintiffs' state law claims for breach of contract and bad faith are not preempted by the Employee Retirement Income Security Act (ERISA).

3. Logically, therefore, Plaintiffs' claims for punitive damages are also not preempted by ERISA.

4. The Court, having determined that this cause of action arises under state law, and is not preempted by ERISA, the Court, therefore, concluded that Defendant's Motion to Strike Plaintiffs' Request for Jury should as well be denied. The Court finds that this matter is triable to a jury." Record at 407-08.

Subsequently, on March 16, 1998, the trial court granted Midwest's Petition to Certify Order for Interlocutory Appeal and Request for Stay.

Upon review of the grant or denial of a summary judgment motion, we apply the same legal standard as the trial court: summary judgment is appropriate only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C); Primerica Life Ins. Co. v. Skinner (1997) Ind.App., 678 N.E.2d 1140, 1142; General Casualty of Wis. v. Diversified Painting Service, Inc. (1992) Ind.App., 603 N.E.2d 1389, 1390. The party appealing the trial court's grant or denial of summary judgment has the burden of persuading this court that the trial court's decision was erroneous. Primerica Life, supra at 1142.

The material facts in the instant case are not in dispute. The chief conflict concerns the proper application of the law to the facts. Enacted in 1974, ERISA "establishes a detailed federal framework for the regulation of pension and welfare benefit plans." Bennett v. Indiana Life and Health Ins. Guar. (1997) Ind.App., 688 N.E.2d 171, 179, trans. denied. The stated purpose of ERISA is to "protect ... the interests of participants in employee benefit plans and their beneficiaries ... by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts." ² 29 U.S.C. § 1001(b) (1999). A beneficiary or plan participant may enforce his rights under ERISA by bringing a civil action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." Id. at § 1132(a)(1)(B). State and federal district courts have concurrent jurisdiction over actions brought by a beneficiary or participant to recover benefits and to enforce or clarify rights under the plan. Id. at § 1132(e)(1); Associates Inv. Co. v. Claeys (1989) Ind.App., 533 N.E.2d 1248, 1251 ("ERISA specifically and unequivocally designates state courts as a proper forum for civil actions to recover benefits due under the terms of an employee benefit plan."), trans. denied.

ERISA was designed to create uniformity in the laws governing employee benefit plans. Bennett, supra, 688 N.E.2d at 179; Edwards v. Bethlehem Steel Corp. (1990) Ind.App., 554 N.E.2d 833, 835-36 ("ERISA was created to treat employee benefits uniformly; the main goal was to protect the employee from losing anticipated benefits."), trans. denied. Congress gave ERISA broad preemptive authority over state law. 29 U.S.C. § 1144(a) states, "[e]xcept as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." ³ However, the scope of ERISA's preemptive power is limited by 29 U.S.C. § 1144(b)(2)(A), the "savings clause," which provides, "nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities." See Westhoven v. Lincoln Foodservice Products, Inc. (1993) Ind.App., 616 N.E.2d 778, 781 ("ERISA permits certain independent, albeit potentially inconsistent or contradictory, state action in specified areas of local interest and concern."), reh'g denied.

Midwest contends that the Stroups would have no lawsuit but for the existence of the Plan, that the state law claims require proof of an insurance policy governed by ERISA, and that the claims for breach of contract and bad faith "relate to" the Plan. Therefore, argues Midwest, the Stroups' claims are preempted by ERISA. We agree that the Stroups' claims for breach of contract and bad faith are, in fact, preempted. In so concluding, we look to federal law for guidance. Decisions by the United States Supreme Court regarding ERISA preemption are binding upon state courts, while the decisions of lower federal courts serve merely as persuasive authority. Indiana Dep't of Public Welfare v. Payne (1993) Ind., 622 N.E.2d 461, 468.

The United States Supreme Court has noted that ERISA's preemption provisions are "deliberately expansive." Pilot Life Ins. Co. v. Dedeaux (1987) 481 U.S. 41, 46, 107 S.Ct. 1549, 1552, 95 L.Ed.2d 39. Under ERISA, state claims are preempted if they "relate to" an employee benefit plan. A law "relates to" a covered employee benefit plan if it has: (1) a connection with or (2) a reference to such plan. California Div. of Labor Standards Enforcement v. Dillingham Constr. (1997) 519 U.S. 316, 324, 117 S.Ct. 832, 837, 136 L.Ed.2d 791, (quoting ...