Stern v. Provident Life and Accident Ins. Co.

• Decision Date: 18 December 2003
• Docket Number: No. 6:03-cv-947-ORL-31 JGG.,6:03-cv-947-ORL-31 JGG.
• Citation: 295 F.Supp.2d 1321
• Parties: Martin H. STERN, M.D., Plaintiff, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Middle District of Florida

295 F.Supp.2d 1321

Martin H. STERN, M.D., Plaintiff, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, Defendant.

No. 6:03-cv-947-ORL-31 JGG.

United States District Court, M.D. Florida, Orlando Division.

December 18, 2003.

S. Sammy Cacciatore, Jr., Nance, Cacciatore & Hamilton, Melbourne, FL, for plaintiff.

John Edward Meagher, Jonathan M. Fordin, Shutts & Bowen, LLP, Miami, FL, Francis H. Sheppard, Michael R. Candes, Rumberger, Kirk & Caldwell, P.A., Orlando, FL, for defendant. ^*

AMENDED ORDER

PRESNELL, District Judge.

This cause comes for the Court's consideration on:

1) Plaintiff's Motion to Remand (Doc. 18);

2) Plaintiff's Memorandum in Support of the Motion to Remand (Doc. 19);

3) Defendant Provident Life and Accident Insurance Company's ("Provident") Response thereto (Doc. 26); and 4) Defendant's Amended Notice of Removal, or in the Alternative, Supplemental Response to Motion to Remand (Doc. 33).

I. Background

Plaintiff Martin H. Stern, M.D., is an employee of Radiology Associates of Brevard, P.A. ("RAB"). In 1988, Plaintiff voluntarily purchased two policies for long-term disability insurance¹ from Defendant Provident, policy numbers 854115 and 846993. (Doc. 2, Composite Exs. A and B; see also Danner Aff. at ¶ 12). Initially, RAB paid the premiums on behalf of the physicians per a "Premium Payment Agreement" between RAB and Defendant. (Doc. 2, Composite Ex. A at 17; and Doc. 2, Composite Ex. B at 15).²

On October 13, 1994, RAB's Board of Directors held a meeting at which they unanimously approved conversion of the long-term disability insurance from an employer-paid plan to an employee-paid plan. (Danner Aff., Ex. 1, at 2). After this conversion, RAB continued to remit the premiums to the insurer but the physicians actually paid the premiums with their after-tax earnings. (Danner Aff. at ¶ 16). RAB continued to remit the premiums to the insurer because the physicians enjoyed a discount if RAB paid the premiums via one bill. (Id. at ¶ 17).

On May 29, 2003, Plaintiff filed a three-count complaint against Defendant in state court. Plaintiff asserted, in Counts I and II, breach of contract claims against Defendant for nonpayment of disability benefits. Plaintiff also sued Francis J. Tragesser, the insurance agent, in Count III, for professional negligence. Plaintiff also filed, in this Court, a suit against Unum, Stern v. Unum Life Ins. Co., Case No. 6:03-cv-948-ORL-31KRS, for nonpayment of disability benefits under Unum policy number 377402.

On July 10, 2003, Defendant Provident removed the instant case to this Court (Doc. 1), asserting federal question jurisdiction under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001-1461. On August 8, 2003, Plaintiff filed a Motion to Remand (Doc. 18), contending that his claims are not subject to ERISA because the insurance policies were issued individually and not as part of a welfare plan provided by the employer.

On August 22, 2003, Judge John Antoon ordered reassignment of the Unum case, No. 6:03-cv-948, to this Court. (Doc. 22, Case No. 03-948).³ On September 17 and 19, 2003, the Court dismissed Plaintiff's claims against Tragesser in both Case Nos. 03-948 and 03-947, respectively, without prejudice, noting that, if appropriate, the claims could be reasserted in state court (see, e.g., Doc. 30, Case No. 03-947).

The Court now considers Plaintiff's Motion to Remand.

II. Analysis

Section 1441 of Title 28 governs removal of cases from state court, providing in pertinent part that "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a) (emphasis added). A removing defendant bears the burden of proving federal jurisdiction. Leonard v. Enterprise Rent A Car, 279 F.3d 967, 972 (11th Cir. 2002). Removal is proper when Congress "preempts an area of law so completely that any complaint raising claims in that area is necessarily federal in character." Whitt v. Sherman Int'l Corp., 147 F.3d 1325, 1329 (11th Cir.1998); see also Nix v. United Health Care of Ala., Inc., 179 F.Supp.2d 1363, 1366 (M.D.Ala.2001) (citing Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987), and Butero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1211-12 (11th Cir.1999)). "ERISA was intended to completely preempt state law claims involving rights to recover benefits under employee benefit plans." Id. (citation omitted). Thus, if the disability insurance policies at issue are covered by ERISA,⁴ then removal was proper.

Whether an ERISA plan exists is a fact question for the Court to determine. Letner v. Unum Life Ins. Co. of Am., 203 F.Supp.2d 1291, 1297 (N.D.Fla.2001) (citation omitted). The Eleventh Circuit uses a flexible approach when determining whether a plan is subject to ERISA. Whitt, 147 F.3d at 1330 (citing Williams v. Wright, 927 F.2d 1540, 1543 (11th Cir. 1991)). Although courts must liberally construe ERISA, removal must be "approached with great care." Letner, 203 F.Supp.2d at 1296 (citing Caterpillar, Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987)).

A policy constitutes an employee welfare benefit plan under 29 U.S.C. § 1002(1) if it is a:

(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, apprentice-ship or other training programs, day care centers, scholarship funds, prepaid legal services or severance benefits (5) to participants or their beneficiaries.

Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir.1982) (en banc). To determine if an ERISA "plan, fund or program" was instituted, a court must look at the surrounding circumstances to determine whether a "reasonable person could ascertain the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits." Id. at 1373.

Whether a plan is subject to ERISA also may be determined by looking to certain rules promulgated by the Department of Labor pursuant to 29 U.S.C. § 1135. Indeed, the Department of Labor issued safe harbor regulations that delineate certain circumstances in which an insurance program will not be deemed an ERISA plan. Randol v. Mid-West Nat'l Life Ins. Co. of Tenn., 987 F.2d 1547, 1550 (11th Cir.1993) (noting that a plan that meets the safe harbor regulations definitely does not qualify as an ERISA plan). Under 29 C.F.R. § 2510.3-1(j), an insurance program offered by an insurer to employees is not considered ERISA if:

1) No contributions are made by the employer;

2) Participation in the program is completely voluntary;

3) The sole function of the employer with respect to the program, without endorsing the program, is to permit the insurer to publicize the program to employees, to collect premiums through payroll deductions or dues checkoffs, and to remit them to the insurer; and

4) The employer receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.

In order to fall within the safe harbor regulations, the insurance program must satisfy all four statutory criteria. Edwards v. Prudential Ins. Co. of Am., 213 F.Supp.2d 1376, 1382-83 (S.D.Fla. 2002) (citing cases). In conducting its inquiry, the Court must focus on how an objectively reasonable employee would view the totality of the circumstances. Id. at 1383 (citations omitted).

In the instant case, the policies as they currently stand might qualify for safe harbor protection. Indeed, after October 1994, when the Board of Directors voted to switch to an employee-paid plan, RAB began to act merely as an administrative conduit between the employees and the insurance company. In such cases where an employer serves as a mere conduit, courts have found the safe harbor regulations to be satisfied. See, e.g., Taggart Corp. v. Life and Health Benefits Admin., Inc., 617 F.2d 1208, 1210-11 (5th Cir. 1980)⁵ (finding that the employer acted as a mere conduit by forwarding payments to a group insurer);⁶ Schwartz v. Provident Life and Accident Ins. Co., 280 F.Supp.2d 937, 942 (D.Ariz.2003) (collecting cases in which an employer that acts as a mere "conduit for payment of premiums does not make contributions for purposes of the safe harbor regulation"); Letner, 203 F.Supp.2d at 1302 (finding that the policy fell within safe harbor regulation because the employer's role was limited to the administrative task of implementing payroll deductions). This Court, however, cannot examine the policies only in their current form; it also must examine them from the point of their creation. At the policies' inception in 1988 until October 1994, RAB paid the premiums pursuant to a plan it established directly with the insurer. As a result, the insurance program at that time did not meet prong one of the safe harbor regulations, and would presumably have fallen under ERISA.⁷

Thus, the question becomes whether the change in payor status converted the policies from ERISA-covered to non-ERISA plans. To resolve this issue, the Court must look to the statutory language of § 1002(1) to determine whether the policies were "established or maintained" by an employer for the benefit of its employees. The Court finds that the policies at issue herein were "established" as ERISA plans. A plan is "established" when "`there has been some degree of implementation by the employer going beyond a mere intent to confer a benefit.'" Nix, 179 F.Supp.2d at 1367 (quoting Butero, 174 F.3d at...