Stanton v. Paul Revere Life Ins. Co., CIV. 98 CV 0764-B (JAH).
| Decision Date | 15 January 1999 |
| Docket Number | No. CIV. 98 CV 0764-B (JAH).,CIV. 98 CV 0764-B (JAH). |
| Citation | 37 F.Supp.2d 1159 |
| Parties | Mark P. STANTON, M.D., Plaintiff, v. PAUL REVERE LIFE INSURANCE COMPANY, a Massachusetts corporation, Doe 1 thorugh Doe 100, inclusive, Defendant. |
| Court | U.S. District Court — Southern District of California |
William W. Ravin, Law Officer of William W. Ravin, San Diego, CA, for plaintiff.
Robert Kevin Renner, Barger and Wolen, Irvine, CA, for defendant.
ORDER DENYING MOTION FOR SUMMARY JUDGMENT
This Motion for Summary Judgment rests on the assertion that the Plaintiffs state law claims are preempted by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq. Plaintiff's claims — request for declaratory relief, breach of contract, breach of implied covenant of good faith and fair dealing, intentional infliction of emotional distress, invasion of privacy, and fraud — arise out of Defendant's partial denial of benefits under a business income overhead expense (BOE) policy.
Plaintiff Mark P. Stanton is an ophthalmologist. Mark P. Stanton, M.D., Inc. is a California corporation. Dr. Stanton has an employment agreement with Mark P. Stanton, M.D., Inc. The Paul Revere Life Insurance Company is a foreign corporation licensed to do business in the State of California. Dr. Stanton purchased the policy in question through Randall G. Ames, an authorized agent of Paul Revere.
The validity of this policy and its terms are not in dispute. The parties do dispute whether Dr. Stanton is entitled to the full benefits available under the policy. Dr. Stanton asserts he suffered a disabling injury that no longer allows him to perform surgery. According to his understanding with Mr. Ames when he purchased the policy, this disability makes him "totally disabled" and entitles him to the policy's full benefits. Paul Revere maintains Dr. Stanton is not totally disabled. Paul Revere now brings this Motion for Summary Judgment on the grounds that its BOE policy with Dr. Stanton is part of an employee welfare benefit plan established by Dr. Stanton. As such, Paul Revere maintains that Dr. Stanton's common law claims are preempted by ERISA.
The question before this Court is thus (1) whether Dr. Stanton's corporation has established or maintained an employee welfare benefit plan as defined by ERISA and, if so, (2) whether the BOE policy at issue is part of that plan. If the answers to those questions are both in the affirmative, the question arises whether Dr. Stanton's common law claims are preempted under 29 U.S.C. § 1144(a).
Federal Rule of Civil Procedure 56(c) provides that summary judgment is appropriate 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 judgment as a matter of law."1 One of the principal purposes of the rule is to dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In considering a motion for summary judgment, the Court must examine all the evidence in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
Summary judgment must be granted if the party responding to the motion fails "to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The evidence offered need not be in a form admissible at trial to avoid summary judgment. Id. at 324, 106 S.Ct. 2548. When the moving party does not bear the burden of proof, summary judgment is warranted by demonstration of an absence of facts to support the non-moving party's case. Id. at 325, 106 S.Ct. 2548.
The Court must determine whether evidence has been presented that would enable a reasonable jury to find for the non-moving party. Anderson, 477 U.S. at 249-252, 106 S.Ct. 2505. If the Court finds that no reasonable fact-finder could, considering the evidence presented by the non-moving party and the inferences therefrom, find in favor of that party, summary judgment is warranted.
Defendant's motion for summary judgment turns wholly on whether or not Dr. Stanton's claims are preempted by ERISA. But that is a secondary question. ERISA will only preempt if two criteria are met: (1) there is a "plan" for the purposes of ERISA, see, e.g., Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987), and (2) that the causes of action "relate to" the "plan," if there is one. Thus, the critical question is whether or not the Paul Revere Business Income Overhead Expense (BOE) policy purchased by Dr. Stanton is part of an ERISA plan. The insurer carries the burden of establishing the existence of an ERISA plan. See Zavora v. Paul Revere Life Ins. Co., 145 F.3d 1118, 1120 n. 2 (9th Cir.1998).
Do the various benefits provided by the Stanton corporation constitute a "plan"? ERISA applies to "any employee benefit plan." 29 U.S.C. § 1003(a). In turn, an "employee benefit plan" is defined, for the purposes of this case, to be "an employee welfare benefit plan" (EWBP). Id. at § 1002(3). An ERISA employee welfare benefit plan is:
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, apprenticeship or other training programs .... 29 U.S.C. § 1002(1).
Case law has given flesh to this spare definition. In the influential case of Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir.1982), the Eleventh Circuit, sitting en banc, stated: "[A] welfare plan requires (1) a `plan, fund or program' (2) established or maintained (3) by an employer or by an employee organization, or by both, (4) for the purpose of providing medical, surgical, hospital care, sickness, accident, disability, death, unemployment or vacation benefits ... (5) to participants or their beneficiaries." See also Scott v. Gulf Oil Corp., 754 F.2d 1499 (9th Cir. 1985). The Donovan court stated that, while elements (3) through (5) were self-explanatory, the existence of a "plan, fund or program" turned on "the existence of intended benefits, intended beneficiaries, a source of financing, and a procedure to apply for and collect benefits." 688 F.2d at 1372.
Defendant makes both primary and secondary arguments. First, Defendant asserts that the BOE policy, in light of the other insurance policies of Mark P. Stanton, Inc., is part and parcel of an overall ERISA-qualifying plan. Secondarily, Defendant asserts that the BOE is by itself an ERISA-qualifying plan.2 The arguments are taken in reverse order.
"`The existence of an ERISA plan is a question of fact, to be answered in light of all the surrounding facts and circumstances from the point of view of a reasonable person.'" Harper v. American Chambers Life Ins. Co., 898 F.2d 1432, 1433 (9th Cir.1990) (quoting Kanne v. Connecticut Gen. Life Ins., 867 F.2d 489, 492 (9th Cir.1988)); see also Credit Managers Ass'n v. Kennesaw Life and Acc. Ins. Co., 809 F.2d 617, 625 (9th Cir.1987).
Plaintiff asserts that he purchased this BOE policy because his ability to conduct a profitable business turned on his physical ability to perform surgery. Should he suffer a disability grave enough to prevent him from performing surgery, Stanton knew certain expenses ____ leases, medical malpractice insurance, medical supplies, salaries, and office equipment — would be ongoing. Two undisputed facts support these assertions. First, Stanton has other personal disability insurance through another insurance company. Second, the BOE policy was only for a two-year period. Common experience adds credibility to these factual assertions. Such an insurance arrangement is not uncommon for a corporation to have for key employees. Finally, on its face, a "business income overhead policy" has very little to do with employee welfare.
The case cited by Defendant in support of its contention that the BOE is an ERISA plan standing by itself, Bellisario v. Lone Star Life Ins., 871 F.Supp. 374 (C.D.Cal.1994), is unavailing. In Bellisario, the company provided both a group medical insurance plan to its employees and the disability policy in question solely to the plaintiff. Bellisario held that the company's disability plan, even though provided to only one individual, was an ERISA plan. However, as will be discussed, no such "group medical" plan exists in the instant case. Thus, Bellisario's legal conclusion that the disability policy should be legally grouped together with the ERISA group medical plan to form one overall plan ____ a step critical to its holding ____ is inapposite. Second, the individual disability policy in Bellisario involved a "formal Wage Continuation plan." Id. at 375. As stated above, the BOE policy in the instant case was designed to cover the expenses of the business when the revenue generated by its principal earner decreased. Business expenses and wages are two quite separate matters. Likewise, as stated, Plaintiff in the instant case had other disability policies to cover lost wages. Thus, as the BOE was not specifically designed to benefit the employee, but instead to cover the owner should his only revenue-producing employee be injured, Bellisario is inapposite.3
Finally, the Court believes there is a genuine...
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