Ruble v. UNUM Life Ins. Co. of America

• Decision Date: 06 September 1990
• Docket Number: No. 89-1751,89-1751
• Citation: 913 F.2d 295
• Parties: 12 Employee Benefits Ca 2434 Philip RUBLE, Plaintiff-Appellant, v. UNUM LIFE INSURANCE CO. OF AMERICA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 295

913 F.2d 295

12 Employee Benefits Ca 2434

Philip RUBLE, Plaintiff-Appellant, v. UNUM LIFE INSURANCE CO. OF AMERICA, Defendant-Appellee.

No. 89-1751.

United States Court of Appeals, Sixth Circuit.

Argued March 9, 1990.

Decided Sept. 6, 1990.

John H. MacFarlane, Holmes, Mumford, Schubel, Norlander & MacFarlane, Battle Creek, Mich., Jeanne M. Unger (argued), Traverse City, Mich., for plaintiff-appellant.

J. Michael Smith (argued), Miller, Johnson, Snell & Cumminskey, Grand Rapids, Mich., for defendant-appellee.

Before: NELSON and NORRIS, Circuit Judges, and EDWARDS, Senior Circuit Judge.

DAVID A. NELSON, Circuit Judge.

This is an action brought under Michigan law for breach of a group disability insurance contract. The insurance policy, which constitutes an "employee welfare benefit plan" under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001 et seq., contains a provision purporting to reduce benefits by the amount of any social security benefits received. The parties disagree as to whether the Michigan Insurance Code of 1956 made this provision ineffective.

The defendant insurance company moved for summary judgment on the grounds that whatever the effect of the Michigan Insurance Code, the plaintiff's exclusive remedy was an action brought under Sec. 502 of ERISA, 29 U.S.C. Sec. 1132. The district court granted the defendant's motion and dismissed the action.

The law is clear that only pursuant to ERISA can an employee sue for benefits allegedly due under an employee welfare benefit plan. The plaintiff in this case concedes that this is not an ERISA action. Accordingly, and because the plaintiff's claim appears deficient on the merits anyway, we shall affirm the district court's judgment.

I

UNUM Life Insurance Company of America, the defendant herein, is a corporation organized in the State of Maine, where its principal place of business is located. Effective December 1, 1978, UNUM issued a group disability insurance policy to a Michigan corporation known as Cello-Foil Products, Inc. The policy recites that it was delivered in Michigan and is subject to the laws of that jurisdiction.

The policy provides that qualified employees of Cello-Foil who become totally disabled as a result of sickness or injury are entitled to receive monthly benefits determined under a prescribed formula. There is a coordination of benefits provision stating that benefits otherwise payable are to be reduced by "other income benefits." As defined in the policy, the term "other income benefits" includes benefits for which the insured and his family are eligible under the United States Social Security Act.

Plaintiff Philip L. Ruble, a Michigan resident employed by Cello-Foil, lost his eyesight as a result of sickness and applied for long-term disability benefits under the policy. UNUM began paying such benefits in January of 1983, reducing the amount of the payments by the amount of the social security disability benefits that Mr. Ruble and his family were receiving.

In January of 1988 Mr. Ruble sued UNUM in the Circuit Court for Calhoun County, Michigan, alleging that the version of the Michigan Insurance Code that was in effect at the time his disability arose mandated the use of contract language under which policy benefits could not be reduced on account of social security benefits. (See Bill v. Northwestern Nat'l Life Ins. Co., 143 Mich.App. 766, 373 N.W.2d 214 (1985), lv. den., 425 Mich. 877, 389 N.W.2d 863 (1986), quoting portions of the Michigan Insurance Code as in effect prior to a 1987 amendment.) Mr. Ruble's complaint, which did not purport to assert any claim under ERISA, sought declaratory relief and a judgment for money damages.

The original complaint was soon followed by an amended version asserting claims for negligent misrepresentation, breach of contract, and breach of an implied covenant of good faith. Like its predecessor, the first amended complaint did not purport to rely on ERISA.

Asserting the existence of original federal jurisdiction under both 28 U.S.C. Sec. 1332 (diversity of citizenship) and 29 U.S.C. Sec. 1132 (ERISA), UNUM removed the case to the United States District Court for the Western District of Michigan. After a flurry of motions, the parties filed a stipulation providing for dismissal of both a motion for remand to the state court and a motion for dismissal on preemption grounds. The stipulation provided further that the plaintiff could file "a Second Amended Complaint stating alleged claims against defendant under the Employee Retirement Income Security Act (ERISA), 29 USC Secs. 1001-1461."

The second amended complaint, which asserted only a claim for damages resulting from breach of the insurance contract as allegedly modified by the Michigan Insurance Code, expressly averred that "[j]urisdiction of this court is conferred by 29 USC sec 1132(e) [ERISA Sec. 502(e) ] because the subject group disability insurance contract is an employee benefit subject to ERISA." (The statutory subsection cited in this jurisdictional allegation provides that federal and state courts shall have concurrent jurisdiction over actions brought pursuant to 29 U.S.C. Sec. 1132(a)(1)(B); the latter subsection provides that a civil action may be brought by a beneficiary to recover benefits due him under the terms of an ERISA plan.)

UNUM filed an answer in which the company asserted a number of defenses, including preemption by ERISA, but admitted the jurisdictional allegation quoted above. The parties then filed a joint status report in which, among other things, the plaintiff requested leave to file yet another amended complaint. After the plaintiff waived his demand for a jury trial, and pursuant to stipulation, a third amended complaint was duly filed.

The third amended complaint omitted all reference to ERISA. The earlier reference to 29 U.S.C. Sec. 1132(e) was dropped, and jurisdiction was predicated solely on diversity of citizenship, the amount in controversy, and 28 U.S.C. Sec. 1446, a statute dealing with the procedure for removal.

The gravamen of the claim asserted in the third amended complaint was essentially unchanged. As before, the complaint asserted that UNUM's deductions under the coordination of benefits provision constituted a breach of contract because Michigan's Insurance Code mandated the inclusion in the policy of a provision under which there could be no such deductions. While alleging that the defendant had concealed the fact that the policy's coordination of benefits provision conflicted with the provision required by statute, the pleading made no claim for additional damages in that regard; we presume that the allegation was included simply to meet waiver and estoppel defenses to which UNUM had referred in its earlier answer.

The parties filed cross-motions for summary judgment. The district court denied the plaintiff's motion and granted the defendant's. This appeal followed.

II

Subject to qualifications not relevant here, see 29 U.S.C. Sec. 1003, any plan established by an employer to provide employee disability benefits, whether through the purchase of insurance or otherwise, is an "employee welfare benefit plan" to which ERISA applies. 29 U.S.C. Secs. 1002(1) and 1003. ERISA regulates such plans "comprehensively." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44, 107 S.Ct. 1549, 1551, 95 L.Ed.2d 39 (1987). And ERISA creates a federal cause of action, enforceable either in federal district court or in any state court of competent jurisdiction, for a plan beneficiary who seeks "to recover benefits due to him under the terms of the 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." 29 U.S.C. Sec. 1132(a)(1)(B).

ERISA further provides, subject to a savings clause found in 29 U.S.C. Sec. 1144(b), that the provisions of the subchapter in which the federal cause of action is created "shall supersede any and all State laws" insofar as such state laws relate to employee welfare benefit plans covered by ERISA. Among the "State laws" superseded by reason of this preemption clause, we have held, is the common law right to sue for breach of contract. McMahan v. New England Mut. Life Ins. Co., 888 F.2d 426 (6th Cir.1989).

Were it not for ERISA's savings clause, all state laws regulating the content of benefit plans covered by ERISA would be superseded as well. The savings clause, however, carves out an exception for "any law of any State which regulates insurance...." 29 U.S.C. Sec. 1144(b)(2)(A). The Michigan Insurance Code clearly regulates insurance. If, as Mr. Ruble contends, the Insurance Code operated to write UNUM's coordination of benefits provision out of the group insurance policy, at least as to deductions on account of social security benefits, nothing in ERISA would prevent the insurance policy from being enforced in its statutorily modified form. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985) (Massachusetts insurance law mandating minimum health insurance benefits was not preempted by ERISA); Northern Group Servs., Inc. v. Auto Owners Ins. Co., 833 F.2d 85 (6th Cir.1987) (Michigan insurance law mandating coordination of automobile insurance benefits was not preempted by ERISA), cert. denied, 486 U.S. 1017, 108 S.Ct. 1754, 100 L.Ed.2d 216 (1988).

Regardless of how Michigan's insurance code might have modified the terms of the UNUM insurance policy, however, any action brought by a beneficiary to enforce the policy as so modified could only be brought under Sec. 502 of ERISA, 29 U.S.C. Sec. 1132. We should have supposed that plaintiff Ruble's counsel recognized this in drafting the second amended complaint. That version omitted the common law tort and implied contract claims asserted in the earlier amendment--claims similar to common law claims held preempted by ERISA in Pilot Life Insurance...