Salameh v. Provident Life & Acc. Ins. Co., Civil Action No. H-96-2874.

CourtUnited States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
Writing for the CourtCrone
Citation23 F.Supp.2d 704
Docket NumberCivil Action No. H-96-2874.
Decision Date24 September 1998
23 F.Supp.2d 704
Raja N. SALAMEH, M.D., Plaintiff,
Civil Action No. H-96-2874.
United States District Court, S.D. Texas.
September 24, 1998.

Page 705


Page 706


Page 707


Page 708

Paul E. Nunu, Attorney at Law, Houston, TX, for plaintiff.

Marilyn Tanner Hebinck, Royston Rayzor Vickery & Williams, Houston, TX, for defendant.


CRONE, United States Magistrate Judge.

Pending before the court is Defendant Provident Life & Accident Insurance Company's ("Provident") Motion to Dismiss Plaintiff's State Law Claims and to Strike Plaintiff's Jury Demand due to ERISA Preemption (# 18) and Plaintiff's Demand for Jury Trial (# 6). Having reviewed the motions, the submissions of the parties, the pleadings, and the applicable law, the court is of the opinion that the defendant's motion should be granted and the plaintiff's motion should be denied.

I. Background

Plaintiff Dr. Raja N. Salameh ("Salameh") is a board certified urologist practicing in Pasadena, Texas. Prior to 1990, Salameh and Dr. Raul Garcia ("Garcia") were partners operating under the name Urology Associates, P.A. ("Urology Associates"). On July 1, 1990, Dr. Gary Hurwitz ("Hurwitz") joined their practice and, on July 1, 1993, became a one-third owner of Urology Associates.

Effective April 8, 1990, Salameh obtained a disability income insurance policy from Provident. On October 1, 1990, however, Salameh's individual disability policy became part of Urology Associates' risk group policy covering all three physicians — Salameh, Garcia, and Hurwitz. The creation of a risk group

Page 709

was precipitated by Urology Associates' obtaining a Provident disability income policy for Hurwitz. The premium was reduced as a result, and the partnership began paying the premium for the entire group, rather than Salameh paying an individual premium.

On June 5, 1993, Salameh slipped and fell in the hallways of Southmore Medical Center Hospital. Salameh asserts that he "injured his neck, back, and body generally" in the fall, rendering him unable to perform the same "quantity and quality of surgeries" as he performed before the accident. He claims that, as a result of his injuries, he sustained a loss of earning capacity, which he contends will continue throughout the remainder of his life. Provident denied disability benefits to Salameh, maintaining that his fall did not result in an immediate loss of income and further disputing his claim for future loss of income. Salameh instituted this action in state court on August 1, 1996, asserting claims for disability benefits under the policy as well for damages arising from Provident's alleged violation of Articles 21.21 and 21.55 of the Texas Insurance Code. Provident timely removed the case to federal court on the basis of diversity of citizenship. Provident contends that Salameh's disability income policy is part of an ERISA Plan, preempting his state law claims and foreclosing the availability of a jury trial.

II. Analysis

A. Existence of an ERISA Plan

The Employee Retirement Security Act ("ERISA") applies to employee benefit plans "established by or maintained by an employer or employee organization" engaged in interstate commerce. See Meredith v. Time Ins. Co., 980 F.2d 352, 354 (5th Cir. 1993) (citing 29 U.S.C. § 1003(a)). "In enacting ERISA, Congress designed a comprehensive system of regulating employee benefit plans in order `to provide the maximum degree of protection to working men and women' whose employers provide benefits." Madonia v. Blue Cross & Blue Shield of Va., 11 F.3d 444, 448 (4th Cir.1993), cert. denied, 511 U.S. 1019, 114 S.Ct. 1401, 128 L.Ed.2d 74 (1994) (quoting S.Rep. No. 127, 93rd Cong., 2d Sess. (1974), reprinted in 1974 U.S.C.C.A.N. 4639, 4838, 4854). Two types of employee benefit plans are governed by ERISA: "employee welfare benefit plans" and "employee pension benefit plans." See Weaver v. Employers Underwriters, Inc., 13 F.3d 172, 175 (5th Cir.), cert. denied, 511 U.S. 1129, 114 S.Ct. 2137, 128 L.Ed.2d 866 (1994) (citing 29 U.S.C. § 1002(3)). An "employee welfare benefit plan" is defined as:

any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits ....

29 U.S.C. § 1002(1); see California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 117 S.Ct. 832, 836 n. 2, 136 L.Ed.2d 791 (1997); Peterson v. American Life & Health Ins. Co., 48 F.3d 404, 408 (9th Cir.), cert. denied, 516 U.S. 942, 116 S.Ct. 377, 133 L.Ed.2d 301 (1995); Madonia, 11 F.3d at 446; Meredith, 980 F.2d at 354.

The Fifth Circuit has "devised a comprehensive test for determining whether a particular plan qualifies as an `employee welfare benefit plan.'" Id. Under this test, a court must ascertain "whether a plan (1) exists; (2) falls within the safe-harbor provision established by the Department of Labor; and (3) satisfies the primary elements of an ERISA `employee benefit plan' — establishment or maintenance by an employer intending to benefit employees." Id. "If any part of the inquiry is answered in the negative, the submission is not an ERISA plan." Id. "At the outset, any court confronted with the question `whether a particular arrangement constitutes an employee welfare benefit plan under ERISA "must first satisfy itself that there is in fact a plan at all."'" Id. (citing MDPhysicians & Assocs., Inc. v. State Bd. of Ins., 957 F.2d 178, 183 (5th Cir.), cert. denied, 506 U.S. 861, 113 S.Ct. 179, 121 L.Ed.2d 125 (1992)); Madonia, 11 F.3d at 446-47. "`In determining whether a plan

Page 710

... [exists,] a court must determine whether from the surrounding circumstances a reasonable person could ascertain the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits.'" Meredith, 980 F.2d at 355 (quoting Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir.1982)); accord Madonia, 11 F.3d at 447.

In this case, upon analyzing the first prong, a reasonable person could ascertain that a plan exists. The evidence establishes that the provision of disability insurance to the physicians of Urology Associates was and is part of an overall design of employee benefits, which constitutes an ERISA plan. See Peterson, 48 F.3d at 407; Bellisario v. Lone Star Life Ins., 871 F.Supp. 374, 378-79 (C.D.Cal.1994). It is well recognized that a disability plan funded through the purchase of insurance may be categorized as an "employee benefit plan." See Gonzales v. Prudential Ins. Co. of Am., 901 F.2d 446, 452 (5th Cir.1990). The record reflects that, in addition to disability insurance, various benefits were provided by Urology Associates to its physicians and staff members. Rita Davis ("Davis"), the office manager of Urology Associates for more than six years, testified at deposition that it was her responsibility to write checks for payment of the physicians' disability insurance premiums. To her knowledge, no corresponding deduction was made from their compensation. Davis further testified that Urology Associates provided and paid the premiums on life insurance for its physicians and staff. She also acknowledged that group health insurance was provided for the physicians and that the premiums were paid by Urology Associates. In addition, the record reflects that the staff participated in a profit-sharing plan provided by the partnership, in which it annually contributed a percentage of their salaries to the plan. Finally, the federal income tax returns for Urology Associates from 1992 through 1996 indicate that it took annual deductions for "employee benefits" and "retirement benefits." Under these circumstances, it is apparent that a plan existed. See Peterson, 48 F.3d at 408; Madonia, 11 F.3d at 447.

Under the second prong of the analysis, if a plan meets all four criteria contained in 29 C.F.R. § 2510.3-1(j)(1)-(4), it falls within the safe-harbor provision promulgated by the Department of Labor and is exempt from ERISA's coverage. See Meredith, 980 F.2d at 355; Gahn v. Allstate Life Ins. Co., 926 F.2d 1449, 1452 (5th Cir.1991). A plan falls within the exemption and is not an ERISA plan if: (1) the employer does not contribute to the plan; (2) participation is voluntary; (3) the employer's role is limited to collecting premiums and remitting them to the insurer; and (4) the employer receives no profit from the plan. See 29 C.F.R. § 2510.3-1(j)(1)-(4) (1992); Meredith, 980 F.2d at 355. The plan must satisfy all four criteria to be exempt. Here, Urology Associates paid the premiums for life insurance covering its physicians and staff as well as its physicians' medical, health, and disability insurance. Thus, because Urology Associates contributed to the plan, the safe-harbor provision does not apply, and the plan is not exempted from ERISA.

Finally, in analyzing the third prong, the court "look[s] to the two `primary elements of an ERISA "employee welfare benefit plan" as defined by the statute: (1) whether an employer established or maintained the plan; and (2) whether the employer intended to provide benefits to its employees.'" Id. (citing MDPhysicians & Assocs., 957 F.2d at 183). The court, however, "cannot answer either question without first considering the bounds of the terms `employer' and `employee'". Id. at 355-56 (citations omitted). "An essential element of an ERISA employee welfare benefit plan is the `establishment or maintenance of a plan by...

To continue reading

Request your trial
9 cases
  • Waldmann v. Fulp, CIVIL ACTION NO. 7:13–CV–495
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • 12 Octubre 2016
    ...including health insurance, which supports a finding of an employment relationship. See Salameh v. Provident Life & Acc. Ins. Co ., 23 F.Supp.2d 704, 713 (S.D. Tex. 1998) ; cf. Cmty. for Creative Non–Violence, 490 U.S. at 753, 109 S.Ct. 2166. Hannes's affidavit states that, while RedMed and......
  • Lain v. Unum Life Ins. Co. of America, No. Civ.A. H-97-3560.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • 22 Octubre 1998
    ...Co., Inc. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 2219, 96 L.Ed.2d 1 (1987))); accord Salameh v. Provident Life & Accident Ins. Co., 23 F.Supp.2d 704, 716, Civil Action No. H-96-2874, 1998 WL 658657, at *10 (S.D.Tex. Sept.24, 1998) (Crone, M.J.). As in Engelhardt any long-term disability bene......
  • Burgos v. Group & Pension Administrators, Inc., No. CIV.A.H-03-0989.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • 13 Agosto 2003
    ...the plan satisfies the primary elements of an ERISA plan. See Meredith, 980 F.2d at 355; Salameh v. Provident Life & Accident Ins. Co., 23 F.Supp.2d 704, 710 (S.D.Tex.1998). Both requirements are met in this case. Because the SPD states that Tex-Trude, L.P. contributes to the plan, the safe......
  • McSperitt v. Hartford Life Ins. Co., No. Civ.A.3:04CV1533-G.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • 8 Abril 2005
    ...21.55 of the Texas Insurance Code under § 502(a)(1)(B) to find preemption. See Salameh v. Provident Life & Accident Insurance Company, 23 F.Supp.2d 704, 718 (S.D.Tex.1998) ("Because the essence of [the] suit seeks the recovery of benefits or otherwise relates to an employee benefit plan, [t......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT