Miller v. Taylor Insulation Co.

• Decision Date: 04 November 1994
• Docket Number: No. 94-1256,94-1256
• Parties: , 18 Employee Benefits Cas. 2363, Pens. Plan Guide P 23905S Joseph C. MILLER and Karen M. Miller, Plaintiffs-Appellants, v. TAYLOR INSULATION COMPANY and Jon Nelson, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 755

39 F.3d 755

63 USLW 2352, 18 Employee Benefits Cas. 2363,

Pens. Plan Guide P 23905S

Joseph C. MILLER and Karen M. Miller, Plaintiffs-Appellants, v. TAYLOR INSULATION COMPANY and Jon Nelson, Defendants-Appellees.

No. 94-1256.

United States Court of Appeals Seventh Circuit.

Argued Sept. 13, 1994.

Decided Nov. 4, 1994.

B. Douglas Stephens (argued), Clark J. Stojan, Mark A. Tarnow, Wessels, Stojan & Stephens, Rock Island, IL, for plaintiffs-appellants.

Michael J. Motto (argued), James T. Carlin, Carlin, Hellstrom & Bittner, Davenport, IA, for defendants-appellees.

Before POSNER, Chief Judge, MANION, Circuit Judge, and ASPEN, District Judge. ^*

POSNER, Chief Judge.

This is a suit for benefits under an employee welfare plan, with an alternative claim for breach of contract. The district judge held that the alternative claim was preempted and that the plaintiffs had no rights under ERISA, and he therefore granted summary judgment for the defendants and dismissed the suit. 794 F.Supp. 289 (C.D.Ill.1992).

Joseph Miller became the president of the principal defendant, Taylor Insulation Company, in 1973, and later the chairman of the board, the position that he held when he retired in 1979, at which time the company's chief executive officer was Jon Nelson, the other defendant. Upon retiring, Miller entered into a ten-year "Consultation and Non-Competition Agreement" with the company. The agreement provided, among other things, that "Miller shall also be entitled to participate in the sick-pay plan, the medical reimbursement plan and the group life insurance plan, which is currently effective and which has been authorized and adopted by Taylor." All these were plans in which Miller had participated as an employee up to the date of his retirement. The medical reimbursement plan is the one in issue. It was an insured plan that provided benefits to full-time employees and their beneficiaries. The insurance company listed Miller and his family as being covered by the policy that it had issued to Taylor.

In 1980 Taylor switched insurance companies without altering benefits. The new insurance company continued to list Miller and his family as enrolled for coverage; and between 1979 and 1987 Taylor reimbursed Miller and his family for various medical expenses. But in the latter year, with two years of the Consultation and Non-Competition Agreement still to go, Taylor, in search of lower premiums, again switched insurance companies. The new company delisted Miller and his family, since the policy provided--as had its predecessors--that coverage was limited to full-time employees, which Miller had ceased to be when he retired. Nelson told Miller that he was no longer a participant in the medical reimbursement plan, and this suit ensued.

The medical reimbursement plan was an ERISA plan but Miller argues that if he is not a plan participant ERISA is inapplicable and he can sue Taylor for breach of contract, since Taylor promised him in the Consultation and Non-Competition Agreement that he could participate in the plan. The argument is unsound. ERISA preempts state law, including common law, that relates to an ERISA plan. 29 U.S.C. Sec. 1144(a). There is no doubt that the medical reimbursement plan maintained by Taylor is an ERISA plan, 29 U.S.C. Sec. 1002(1); Ed Miniat, Inc. v. Globe Life Ins. Group, Inc., 805 F.2d 732, 738-39 (7th Cir.1986); Wickman v. Northwestern Nat'l Ins. Co., 908 F.2d 1077, 1082-83 (1st Cir.1990); Scott v. Gulf Oil Corp., 754 F.2d 1499, 1502-03 (9th Cir.1985); Donovan v. Dillingham, 688 F.2d 1367, 1372-73 (11th Cir.1982) (en banc), or that Miller's claim relates to it. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 137-40, 111 S.Ct. 478, 482-83, 112 L.Ed.2d 474 (1990); District of Columbia v. Greater Washington Bd. of Trade, --- U.S. ----, ----, 113 S.Ct. 580, 583, 121 L.Ed.2d 513 (1992); Bartholet v. Reishauer A.G., 953 F.2d 1073, 1077 (7th Cir.1992). The naming of Nelson as an additional defendant does not alter this conclusion. Whether or not he can be sued under ERISA--a question to which the answer is, "It depends," see 29 U.S.C. Sec. 1002(21)(A); Williams v. Caterpillar, Inc., 944 F.2d 658, 665 (9th Cir.1991); Dardaganis v. Grace Capital Inc., 889 F.2d 1237, 1242-43 (2d Cir.1989); Yeseta v. Baima, 837 F.2d 380, 386 (9th Cir.1988); Thomas v. Telemecanique, Inc., 768 F.Supp. 503, 507 (D.Md.1991), though Nelson has not attempted to make an issue of the matter--a plaintiff cannot be permitted to thwart Congress's decision to preempt state laws relating to pension and welfare plans by naming additional defendants besides those suable under ERISA.

So Miller cannot rely on any claim of breach of contract that he might, were it not for ERISA's preemption provision, have against Taylor. His only possible claim is an ERISA claim. As to that, Taylor's (and Nelson's) defense is simply that the terms of the medical reimbursement plan were stated in the successive insurance policies, which are materially identical, and that under those terms Miller was not eligible to participate in the plan, because he was not a full-time employee. End of case.

Not so fast. First of all, Taylor may be estopped to deny that Miller is a participant. Nelson himself conceded that the only possible interpretation of the Consultation and Non-Competition Agreement is that in it Taylor promised Miller that he would be a participant in the medical reimbursement plan (presumably--this has not been made an issue either--until the agreement expired). This was not a promise of any particular level of benefits, or a promise to waive the limitations applicable to other participants, such as an exclusion of benefits for preexisting conditions. It was a promise to treat Miller like the other participants. The promise would be entirely hollow if Miller were excluded from all possibility of receiving benefits simply because he was not a full-time employee. He was retiring, ceasing to be a full-time employee, with no expectation of resuming full-time employment. And everyone knew this. The agreement promised him coverage regardless. So, if, as turned out to be the case, the insurance policy did not cover Miller, it became Taylor's duty either to obtain an amendment to the policy or to pay any benefits that might be due under the terms governing entitlement (other than the status of being a full-time employee) itself.

Promissory estoppel is, in the view of this circuit at any rate, a part of the common law that we have been told (for example in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110, 109 S.Ct. 948, 954, 103 L.Ed.2d 80 (1989)) to create in order to plug gaps in ERISA. Thomason v. Aetna Life Ins. Co., 9 F.3d 645, 647, 649-50 (7th Cir.1993); Black v. TIC Investment Corp., 900 F.2d 112, 114-15 (7th Cir.1990). We do not understand Taylor's argument that only plan participants can plead promissory estoppel--that the concept cannot be used to make a person a plan participant. No reason for this limitation has been offered, and we cannot think of any. It is not as if Miller were statutorily ineligible to be a plan participant. Those former employees who have a colorable claim to benefits are eligible. 29 U.S.C. Sec. 1002(7); Firestone Tire & Rubber Co. v. Bruch, supra, 489 U.S. at 117, 109 S.Ct. at 957-58; Alexander v. Anheuser-Busch Cos., 990 F.2d 536, 539 (10th Cir.1993); Shawley v. Bethlehem Steel Corp., 989 F.2d 652, 656 (3d Cir.1993). That's Miller. It would beg the question whether a person (provided that he is not outside the pale of the statute altogether) could become a plan participant by operation of promissory estoppel to conclude that he cannot invoke the doctrine unless he has a colorable claim to benefits that is based on the language of the plan itself.

Granted, promissory estoppel may not have as long a reach in an ERISA case as in an ordinary breach of contract case. Conceivably the policy against oral modifications of ERISA plans, on which see Schoonmaker v. Employee Savings Plan, 987 F.2d 410, 412 (7th Cir.1993); Pohl v. National Benefits Consultants, Inc., 956 F.2d 126, 128 (7th Cir.1992); Bartholet v. Reishauer A.G., supra, 953 F.2d at 1078; Musto v. American General Corp., 861 F.2d 897, 910 (6th Cir.1988); Nachwalter v. Christie, 805 F.2d 956, 960 (11th Cir.1986), may bar using the concept of estoppel to modify the terms of a written plan on the basis of an oral promise, although Kane v. Aetna Life Ins. Co., 893 F.2d 1283, 1286 (11th Cir.1990), is to the contrary, and the issue is unresolved in this circuit. Schoonmaker v. Employee Savings Plan, supra, 987 F.2d at 414 n. 4. There is a sense in which using promissory estoppel to allow into a written plan someone excluded by its terms amounts to an oral modification of the terms of a written plan. The main objection, however, to oral modifications is that they would enable the plan's integrity, and possibly its actuarial soundness, to be eroded by relatively low-level employees who in response to inquiries about the scope of coverage advise participants that a particular medical procedure is covered, even though the plan is explicit that it is not covered. Vershaw v. Northwestern National Life Ins. Co., 979 F.2d 557, 559 (7th Cir.1992); Pohl v. National Benefits Consultants, Inc., supra, 956 F.2d at 128; Cefalu v. B.F. Goodrich Co., 871 F.2d 1290, 1296 (5th Cir.1989). This concern is diminished when the doctrine is used to prevent an employer from denying that an employee (or as in this case a former employee) is a participant in the plan. Assurances that one is a participant, as distinct from assurances concerning the plan's coverage of a particular medical procedure, are unlikely to come from low-level employees, and did not in this case. Cf. Willett v. Blue Cross & Blue Shield of Alabama, 953 F.2d 1335, 1342 (11th Cir.1992). We need not pursue the issue further. The promise in this case was written. Enforcing it would not collide with a...