Painter v. Golden Rule Ins. Co., s. 96-3114

Citation121 F.3d 436
Decision Date17 November 1997
Docket Number96-3454,Nos. 96-3114,s. 96-3114
Parties21 Employee Benefits Cas. 1561 Ana PAINTER, Plaintiff-Appellant, v. GOLDEN RULE INSURANCE COMPANY, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

Larry W. Glenn, S. Sheldon Weinhaus, St. Louis, MO, argued, for Plaintiff-Appellant.

Keith A. Rabenberg, St. Louis, MO, argued (Clark H. Cole, on the brief), for Defendant-Appellee.

Before LOKEN, JOHN R. GIBSON, and MAGILL, Circuit Judges.

LOKEN, Circuit Judge.

Ana Painter claimed health insurance benefits under a conversion policy issued by Golden Rule Insurance Company ("Golden Rule"). Golden Rule denied coverage on the ground that Painter's cancer treatments were experimental and not medically necessary. The resulting dispute has now spawned two appeals without resolving the coverage question. In No. 96-3114, Painter appeals the district court's 1 dismissal of her state law claims for malicious prosecution and breach of fiduciary duty as preempted by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq. In No. 96-3454, Painter appeals the amount of attorney's fees awarded after Golden Rule's declaratory judgment action was dismissed because the parties had not exhausted their contractual remedies. We affirm both decisions.

I. Background.

In 1991, Golden Rule paid Painter's claims for ovarian cancer medical treatments under a group policy purchased by her employer, M.D. Care, Inc. The group policy was part of an employee welfare benefit plan governed by ERISA. After Painter's cancer went into remission, she requested that the group policy cover high dose chemotherapy and peripheral stem cell infusion treatments. Golden Rule denied that request. Painter's employment with M.D. Care terminated in August 1992; her continuation coverage under the group policy terminated in February 1993, when M.D. Care canceled the group policy. At that point, Painter exercised her "health insurance conversion privilege" under the group policy and purchased an individual "Conversion Policy" from Golden Rule. 2

The First Lawsuit. Painter then proceeded with high dose chemotherapy cancer treatment and submitted a claim for those expenses under the Conversion Policy. Golden Rule denied coverage on the ground that this treatment was experimental and not medically necessary. When Painter threatened to assert a variety of legal claims, Golden Rule commenced a declaratory judgment action in federal court, seeking a declaration that it is not obligated under the Conversion Policy to pay Painter's claims for these additional cancer treatments. After Painter moved to dismiss on a variety of grounds, Golden Rule conceded that the parties had not exhausted the Conversion Policy's procedure for determining medical necessity. The district court then dismissed the declaratory judgment action without prejudice, ordering Golden Rule to pay Painter's "reasonable attorney's fees and costs incurred in defending this action." Painter applied for an award of $102,619.75 in attorney's fees and now appeals the district court's award of $37,493.35 (our case No. 96-3454).

The Second Lawsuit. In December 1995, without exhausting the Conversion Policy's medical necessity procedures, Painter commenced an action in state court, seeking compensatory and punitive damages under state law on the theory that Golden Rule's actions in denying coverage and commencing the declaratory judgment action constituted malicious prosecution and breach of fiduciary duty. After Golden Rule removed the action, the district court granted Golden Rule's motion to dismiss, concluding that "a conversion policy obtained by an employee pursuant to an ERISA plan is within the scope of ERISA, and state law claims relating to the conversion policy are subject to ERISA's preemption provision." Painter appeals (our case No. 96-3114). We review an ERISA preemption ruling de novo. See Arkansas Blue Cross & Blue Shield v. St. Mary's Hosp., Inc., 947 F.2d 1341, 1344 (8th Cir.1991), cert. denied, 504 U.S. 957, 112 S.Ct. 2305, 119 L.Ed.2d 227 (1992).

II. No. 96-3114--The ERISA Preemption Issue.

Painter argues that ERISA does not preempt her state law claims because the Conversion Policy is an individual contract that does not implicate administration of M.D. Care's group health plan. After M.D. Care terminated the group policy, Golden Rule had no relationship with M.D. Care or its ERISA plan. Therefore, Painter concludes, her state law claims do not "relate to" M.D. Care's plan within the meaning of ERISA's express preemption provision, 29 U.S.C. § 1144(a), and those claims should avoid ERISA preemption like the malicious prosecution claim in Nill v. Essex Group, Inc., 844 F.Supp. 1313, 1318-20 (N.D.Ind.1994).

The Supreme Court has decided sixteen ERISA preemption cases since the statute was enacted in 1974. See California Div. of Labor Stds. Enforcement v. Dillingham Constr., N.A., Inc., --- U.S. ----, ---- - ----, 117 S.Ct. 832, 842-43, 136 L.Ed.2d 791 (1997) (Scalia, J., concurring). Most involved the proper scope of "relate to" preemption under § 1144(a), and the Court has struggled, particularly in its more recent decisions, with the inherent vagueness of that key statutory phrase. Compare New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 652-661, 115 S.Ct. 1671, 1676-80, 131 L.Ed.2d 695 (1995), with Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2388, 85 L.Ed.2d 728 (1985). However, some ERISA cases involve the distinct question of conflict preemption--whether a state law is preempted because it conflicts with a specific portion of the complex ERISA statute. If there is a conflict, state law is preempted, whether or not "the statutory phrase 'relate to' provides further and additional support for the pre-emption claim." Boggs v. Boggs, --- U.S. ----, ----, 117 S.Ct. 1754, 1761, 138 L.Ed.2d 45 (1997). In our view, this is a case of conflict preemption.

To define the conflict between ERISA and Painter's state law claims, we must address an underlying legal issue--if Golden Rule denies Painter's claim for medical benefits after the Conversion Policy's contractual remedies have been exhausted, would a suit by Painter for wrongful denial of benefits be governed by ERISA's remedial provisions? In Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 43, 107 S.Ct. 1549, 1550, 95 L.Ed.2d 39 (1987), the Supreme Court held that ERISA remedies preempt "state common law tort and contract actions asserting improper processing of a claim for benefits under an insured employee benefit plan." The Court explained:

The deliberate care with which ERISA's civil enforcement remedies were drafted and the balancing of policies embodied in its choice of remedies argue strongly for the conclusion that ERISA's civil enforcement remedies were intended to be exclusive. This conclusion is fully confirmed by the legislative history of the civil enforcement provision.

Id. at 54, 107 S.Ct. at 1556. See also Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142-45, 111 S.Ct. 478, 484-86, 112 L.Ed.2d 474 (1990); Kuhl v. Lincoln Nat'l Health Plan of Kansas City, 999 F.2d 298, 302-04 (8th Cir.1993), cert. denied, 510 U.S. 1045, 114 S.Ct. 694, 126 L.Ed.2d 661 (1994). Thus, if ERISA provides Painter remedies for the wrongful denial of Conversion Policy benefits, then her state law claims for tortious mishandling of her benefit claim are conflict-preempted.

We conclude that Painter's claim for benefits under the Conversion Policy is governed by ERISA. The issue turns on three statutory provisions. First, the ERISA provision governing claims for plan benefits, 29 U.S.C. § 1132(a)(1)(B), provides that an ERISA "participant" may sue "to recover benefits due to him under the terms of his plan." Second, the definition of "participant" in 29 U.S.C. § 1002(7) includes "any employee or former employee of an employer ... who is or may become eligible to receive a benefit of any type from an employee benefit plan." (Emphasis added.) In other words, a former employee such as Painter may be an ERISA participant entitled to sue for benefits under § 1132(a)(1)(B).

That leaves the question whether Painter's Conversion Policy benefits are "due [her] under the terms of [her] plan" within the meaning of § 1132(a)(1)(B). ERISA defines an "employee welfare benefit plan," such as M.D. Care's group health plan, to mean "any plan, fund, or program ... established or maintained by an employer ... for the purpose of providing for its participants ... through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits." 29 U.S.C. § 1002(1). The group health policy M.D. Care purchased from Golden Rule either was itself an ERISA plan, or was part of a broader plan if M.D. Care's total plan or program included other components. A suit to recover benefits due Painter under that group policy, including continuation benefits due her as a former employee, would be governed by § 1132(a)(1)(B). Here, of course, the group policy has expired, and Painter is seeking medical benefits under Golden Rule's separate Conversion Policy. But the Conversion Policy came into being as a result of Painter exercising her right under the group policy to obtain this specific insurance policy. Thus, the right to a Conversion Policy was part of the plan or program "established" by M.D. Care to provide medical benefits for its current and former employees. As such, the Conversion Policy is a component of M.D. Care's ERISA plan. A suit to recover Conversion Policy benefits is governed by § 1132(a)(1)(B).

Because Painter's underlying claim for Conversion Policy benefits is governed by ERISA, her state law claims for Golden Rule's alleged mishandling of that claim are preempted under Pilot Life. This conclusion is...

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