Schneider v. Unum Life Ins. Co. of America

• Decision Date: 17 May 2001
• Docket Number: No. 00-CV-1838.,00-CV-1838.
• Citation: 149 F.Supp.2d 169
• Parties: Julius SCHNEIDER, JR., and Eileen F. Schneider, Plaintiffs, v. UNUM LIFE INSURANCE COMPANY OF AMERICA, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

149 F.Supp.2d 169

Julius SCHNEIDER, JR., and Eileen F. Schneider, Plaintiffs, v. UNUM LIFE INSURANCE COMPANY OF AMERICA, Defendant.

No. 00-CV-1838.

United States District Court, E.D. Pennsylvania.

May 17, 2001.

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Wallace B. Eldridge, III, Allentown, PA, for Plaintiff.

E. Thomas Henefer, Stevens and Lee, Reading, PA, for Defendant.

OPINION AND ORDER

VAN ANTWERPEN, District Judge.

I. INTRODUCTION

The question before this Court is whether defendant UNUM Life Insurance Company of America ("UNUM") is entitled to summary judgment against plaintiffs Mr. and Mrs. Julius Schneider's ("Plaintiffs") claims for relief pursuant to a long-term care insurance agreement ("LTC policy" or "LTC plan") entered into by Plaintiffs with UNUM in February 1995. Plaintiffs present four Counts in their Complaint. Count I cites violations of three separate provisions of the Pennsylvania insurance code, 40 Pa.Stat. §§ 991.1105(b)(1), (c), 991.1107, and 991.1111(a), (d), and (e), as well as of two regulations promulgated by the Pennsylvania Insurance Commissioner, 31 Pa.Code §§ 89.94, 89.908(d). Counts II through IV present two common law contract claims and one claim under Pennsylvania's Consumer Protection Law, 73 Pa. Stat. § 201.1 et seq. UNUM argues that its LTC plan is governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461, and therefore that Plaintiffs' state law claims are precluded by ERISA's Preemption Clause, 29 U.S.C. § 1144(a). Plaintiffs offer no federal law issues for review. More specifically, they do not present any claims under ERISA's civil enforcement provisions, 29 U.S.C. §§ 1132(a)(1)(B)-(a)(3), against UNUM.

Plaintiffs filed their Complaint on April 7, 2000, in response to which UNUM filed Defendant's Answer and Affirmative Defenses on May 19 of that year. UNUM filed its Defendant's Motion for Summary Judgment on February 23, 2001, which was accompanied that same day by a Memorandum of Law in Support of Defendant's Motion for Summary Judgment. Plaintiffs responded with Plaintif's [sic] Answer Opposing Defendant's Motion for Summary Judgment on March 20, 2001. We have considered all of the above filings, as well as the extensive exhibits and appendices included therewith, and have applied the commonly accepted standard of review for summary judgment motions as explained by the Supreme Court of the United States. We find that UNUM's LTC plan does come under ERISA, and therefore that Plaintiffs' state law contract and consumer protection claims are preempted. As a result, UNUM is entitled to summary judgment on these claims. We also find, however, that Plaintiff's claims pursuant to Pennsylvania insurance law are excepted from preemption by ERISA's Savings Clause, 29 U.S.C. § 1144(b)(2)(A), and for this reason, among others, deny UNUM's motion for summary judgment with respect to those claims.

II. BACKGROUND

UNUM offered its long-term care insurance policy ("LTC policy") to members of the Pennsylvania State Education Association ("PSEA") on an open enrollment basis as of January 26, 1995. Open enrollment means that offerees may obtain coverage without providing their prospective insurer with any information regarding their medical history. Mr. Julius Schneider, Jr. was a member of PSEA and took advantage of UNUM's open enrollment offer. Mr. Schneider has multiple sclerosis ("MS"), and as a result allegedly telephoned a representative of UNUM on two separate occasions to confirm that his MS would not preclude him from coverage under the LTC policy. Mr. Schneider claims he was assured by UNUM that his condition would not preclude coverage. Mr. Schneider purchased UNUM's LTC policy and received a certificate of insurance effective February 1, 1995. Mr. Schneider made timely payments to UNUM for approximately three years until his MS rendered him completely disabled and in need of benefits in January 1998. UNUM denied Mr. Schneider's claim, however, on the grounds that his policy never took effect. UNUM argues that Mr. Schneider was never entitled to benefits under the LTC policy because, at the time of his enrollment, he was "totally disabled" in violation of one of the policy's exclusions.

III. DISCUSSION

We find that UNUM's Motion for Summary Judgment against Plaintiffs is properly before this court, that ERISA and Pennsylvania insurance law control the outcome of the case, and that UNUM is entitled to summary judgment on some, but not all, of Plaintiffs' claims. These findings and rulings are explained below.

A. Jurisdiction

This matter is properly before this court on diversity grounds. Plaintiffs reside at 1419 Grace Street, Allentown, Pennsylvania, 18103, and UNUM is a company having its principal place of business at 2211 Congress Street, Portland, Maine, 04122. (See Pls' Compl. at ¶¶ 1-3; Def.'s Answer and Affirmative Defenses at 1.) Plaintiffs' claims are in excess of seventy-five thousand ($75,000) dollars. Jurisdiction is therefore proper under 28 U.S.C. § 1332(a)(1) and (c)(1). Plaintiff makes no claims of federal question jurisdiction.

B. Summary Judgment Standard

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c). An issue is "genuine" only if there is a sufficient evidentiary basis on which a reasonable jury could find for the nonmoving party, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), and a factual dispute is "material" only if it might affect the outcome of the suit under existing law. Id. at 248, 106 S.Ct. 2505. Although all inferences must be drawn and all doubts resolved in favor of the nonmoving party, see United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); Wicker v. Consol. Rail Corp., 142 F.3d 690, 696 (3d Cir.1998), "[t]he moving party is `entitled to a judgment as a matter of law' [if] the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Anderson, 477 U.S. at 248-49, 106 S.Ct. 2505 (explaining that the nonmoving party bears the burden of demonstrating the existence of evidence that would support a jury finding in its favor).

UNUM contends that its LTC policy is governed by ERISA. Although they do not maintain that the policy falls outside ERISA's definition of a "welfare benefit plan," 29 U.S.C. § 1002(1), Plaintiffs respond by citing two grounds upon which their state law claims would not be subject to ERISA. They first claim that the LTC policy is not included in ERISA's definition of a "welfare benefit plan" because it is excepted from such consideration by means of the Department of Labor's Safe Harbor Provision, 29 C.F.R. § 2510.31(a)(1). Alternatively, Plaintiffs claim that ERISA's Savings Clause, 29 U.S.C. § 1144(b)(2)(A), excepts the LTC policy from ERISA standards because the policy "regulates insurance." We find that the Safe Harbor Provision does not apply to UNUM's LTC plan, but that the Savings Clause excepts Plaintiffs' claims under Pennsylvania insurance laws from ERISA.

C. ERISA's Application to Plaintiffs' Claims

Plaintiffs do not dispute UNUM's initial claim that the LTC policy purchased by Mr. Schneider fits under ERISA's definition of a "welfare benefit plan." "The existence of an ERISA plan is a question of fact, to be answered in the light of all the surrounding circumstances from the point of view of a reasonable person." Zimnoch v. ITT Hartford, 2000 WL 283845, at *3 (E.D.Pa. Mar.14, 2000) (citing Zavora v. Paul Revere Life Ins. Co., 145 F.3d 1118, 1120 (9th Cir.1998)). According to ERISA, a welfare benefit plan is

Any plan, fund or program which was ... 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....

29 U.S.C. § 1002(1) (emphasis added). A plan exists when, "from the surrounding circumstances, a reasonable person could ascertain the intended benefits, a class of beneficiaries, the source of financing and procedures for receiving benefits." Smith v. Hartford Ins. Group, 6 F.3d 131 (3d Cir.1993). UNUM cites evidence acceptable under Fed.R.Civ.P. 56 for consideration in summary judgment cases as well as applicable case law in support of PSEA's status as an "employee organization" under ERISA. (See Def.'s Mot. Summ. J. at 7-8.) More specifically, UNUM correctly argues that PSEA is an employee organization by virtue of its status as a labor union. See 29 U.S.C. § 1002(4). UNUM also establishes, again through evidence appropriate for consideration in conjunction with a summary judgment motion, that the LTC policy satisfies each of the Smith standards for determining if a plan is a "welfare benefit plan" under ERISA. (See Def.'s Mot. Summ. J. at 8.) Moreover, in light of Plaintiffs' failure to contest any of UNUM's assertions regarding the meaning or literal applicability of § 1002(1), we find that no genuine issue of material fact exists with respect to whether the Plaintiff's LTC policy is a "plan" under that section. The remaining question, then, is whether the program is one "established or maintained by the employer." In order to answer this question, we must determine whether the plan comes within the Department of Labor's Safe Harbor Provision, 29 C.F.R. §...