Taylor v. Blue Cross/Blue Shield of New York

• Decision Date: 23 March 1988
• Docket Number: Civ. A. No. 87-5809.
• Citation: 684 F. Supp. 1352
• Parties: James TAYLOR, et al. v. BLUE CROSS/BLUE SHIELD OF NEW YORK.
• Court: U.S. District Court — Eastern District of Louisiana

684 F. Supp. 1352

James TAYLOR, et al. v. BLUE CROSS/BLUE SHIELD OF NEW YORK.

Civ. A. No. 87-5809.

United States District Court, E.D. Louisiana.

March 23, 1988.

James B. Guest, Michael A. Broussard, Guest & Hand, Kenner, La., for plaintiffs.

Matthew J. Ungarino, Hulse, Nelson & Wanek, New Orleans, La., for defendant.

ORDER AND REASONS

CHARLES SCHWARTZ, Jr., District Judge.

This matter is before the Court on defendant's motion to dismiss plaintiffs' complaint for failure to state a claim upon which relief can be granted or alternatively for summary judgment. For the following reasons, the Court grants the motion.

This matter concerns ERISA,¹ Louisiana's mandatory-provider insurance statute for chiropractors, and insurance policies that exclude coverage for chiropractic services. Today, the Court holds (1) that insurers of employee benefit plans covered by ERISA are not subject to La.R.S. 22:657 and (2) that insurers may exclude coverage for chiropractic services without violating either La.R.S. 22:668 or ERISA; the Court leaves for another day the issue of whether ERISA preempts La.R.S. 22:668.

I.

Plaintiffs' complaint as amended alleges the following: (1) plaintiff James Taylor went to plaintiff Berman Chiropractic Clinic for chiropractic treatment and services, (2) defendant Blue Cross is the group health insurer for Mr. Taylor's employer, Alsthom, Inc., and is "an insurance company and/or health care service corporation which sells insurance policies," (3) defendant's policy with Alsthom covers Berman's treatment and services to Mr. Taylor, (4) despite amicable demands, defendant has refused to pay the $1,230 Mr. Taylor seeks for Berman's bills, and (5) Mr. Taylor has assigned his claims against Blue Cross to Berman.

Mr. Taylor and the Berman Clinic joined as plaintiffs in Louisiana state court to sue Blue Cross for the $1,230 along with attorney's fees and a 100% penalty under La.R. S. 22:657. They allege two causes of action: (1) a wrongful-delay-in-making-insurance-payments in violation of La.R.S. 22:657, which claim depends on (2) a breach-of-policy in violation of La.R.S. 22:668.

Under the authority of two Supreme Court cases decided last term, Metropolitan Life Insurance Co. v. Taylor² and Pilot Life Insurance Co. v. Dedeaux,³ defendant petitioned this Court for removal of this matter under 28 U.S.C. § 1441.

Defendant has not answered the complaint, but instead now moves to dismiss it for failure to state a cause of action upon which relief may be granted or alternatively for summary judgment. To support its motion, defendant argues two reasons for its refusal to pay: (1) ERISA preempts plaintiffs' claims and (2) the policy with Alsthom clearly and specifically excludes coverage for chiropractic services.⁴

II.

ERISA is a "massive undertaking" that comprehensively regulates, among other things, employee welfare benefit plans that, "through the purchase of insurance or otherwise," provide medical, surgical, or hospital care or benefits in the event of sickness, accident, disability, or death.⁵

Three clauses regulate ERISA's general preemptive effect over state law: the preemption clause,⁶ the saving clause,⁷ and the deemer clause.⁸ The mechanics of these three clauses have been summarized as follows: if a state law "relates to any employee benefit plan," it is preempted by the preemption clause; the saving clause excepts from the preemption clause those laws that "regulate insurance"; and the deemer clause makes it clear that a state law that "purports to regulate insurance" cannot deem an employee benefit plan to be an insurance company.⁹

A recent Supreme Court trilogy has addressed the effect of ERISA on state law actions such as this one.

First in the trilogy is Justice Blackmun's unanimous opinion Metropolitan Life Insurance Co. v. Massachusetts.¹⁰ In that case, the Massachusetts Attorney General sought to enforce against an insurer a state statute that mandates specified minimum health-care benefits to be provided to persons insured under, among other policies, employee health care plans.¹¹ At issue was whether ERISA preempts the statute. The Court held that the state statute is a "law which regulates insurance" within the meaning of ERISA's savings clause and thus is not preempted by ERISA.¹²

Upon noting, as all parties conceded, that the Massachusetts statute "clearly `relates to' pension plans governed by ERISA so as to fall within the reach of ERISA's pre-emption provision,"¹³ the Court discussed why ERISA does not preempt this statute. The Court first stated the "obvious ... common-sense view" that the statute regulates the terms of certain insurance contracts.¹⁴ It then added that any distinction between "traditional" and "innovative" insurance laws is irrelevant inasmuch as ERISA's saving and deemer clauses make no such distinctions.¹⁵ It further noted that the statute satisfies the three established criteria for determining whether a particular practice falls within the reference in the McCarran-Ferguson Act¹⁶ to the "business of insurance": "first, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry."¹⁷ It found no "contrary case authority suggesting that laws regulating the terms of insurance contracts should not be understood as laws that regulate insurance."¹⁸ In concluding, it observed that nothing in the scant legislative history on the saving clause suggests otherwise.¹⁹

Next in the trilogy is Justice O'Connor's unanimous opinion Pilot Life Insurance Co. v. Dedeaux.²⁰ In Pilot Life, an employee brought a common-law bad-faith tort action for the misprocessing of benefit claims by the insurer under his ERISA-covered employee benefit plan. The Court held this general common law preempted by ERISA.

In reaffirming the standard from Metropolitan Life, the Court noted that to be a law that regulates insurance, the "law must not just have an impact on the insurance industry, but be specifically directed toward that industry."²¹ The Court found that the state law in question meets "at most" only one of the three McCarran-Ferguson criteria outlined in Metropolitan Life.²²

"Finally, and most important, the Court justified a narrower view of the saving clause by looking at the ERISA statute as a whole."²³ The Court noted that the state law asserted recognizes punitive damages,²⁴ while ERISA's civil enforcement provisions,²⁵ like its breach-of-fiduciary-duty provision,²⁶ recognize no express or implied cause of action for punitive damages.²⁷ ERISA's civil enforcement provisions, it concluded, were intended to be exclusive.²⁸ In distinguishing Metropolitan Life, the Court noted: "Metropolitan Life, however, did not involve a state law that conflicted with a substantive provision of ERISA."²⁹

It is clear that Pilot Life does not purport, and should not be read, to overrule Metropolitan Life v. Massachusetts. Rather, Pilot Life distinguishes, and to a large extent bases its holding on, the earlier case. Both cases apply the same basic test for determining if a state law is preempted by ERISA or not: whether the law solely concerns the business of insurance and whether the law conflicts with any of ERISA's substantive provisions.³⁰ In sum, the two cases illustrate what the text of ERISA makes obvious: some state laws are preempted by ERISA and others are not.

Last in the trilogy is Justice O'Connor's opinion Metropolitan Life Insurance Co. v. Taylor,³¹ decided the same day as Pilot Life. In Taylor, the issue was not whether a certain state law—in that case, general state contract and tort common law—was preempted by ERISA, but whether a concededly preempted state law cause of action for misprocessing benefit claims could be removed to federal court by virtue of ERISA. This issue was left open from Justice Brennan's unanimous opinion Franchise Tax Board v. Construction Laborers Vacation Trust,³² which held that ERISA preemption, without more, does not convert a state claim into an action arising under federal law (i.e., that ERISA does not always displace those state laws it preempts).³³

The state claims in Franchise Tax Board did not come within ERISA's civil enforcement provisions, while the state claims in Taylor did.³⁴ This change made all the difference. The Court in Taylor held that an employee claim preempted by ERISA's civil enforcement provisions (specifically, the one for recovery and enforcement of benefits to an employee³⁵) was also displaced thereby and thus may be removed to federal court under the general "well-pleaded complaint" rule³⁶ of 28 U.S.C. § 1441(b). In other words, it held that complaints filed in state court purporting to plead state law causes of action only (and not purporting to plead any federal question) are nonetheless properly removable to federal court whenever the state law is preempted by ERISA's civil enforcement provisions.

III.

The first issue for the Court to decide is the effect of ERISA on La.R.S. 22:657 and 22:668.³⁷ On the one hand, if ERISA preempts and displaces either statute, then this Court has subject matter jurisdiction over the entire matter under 28 U.S.C. §§ 1331 and 1441 by virtue of the holding in Taylor³⁸ and may decide the merits of defendant's motion. On the other hand, if these ERISA provisions do not preempt and displace either statute,³⁹ then no federal question arises under plaintiffs' complaint and the Court must remand the matter under 28 U.S.C. § 1447(c) for lack of subject matter jurisdiction and must leave the merits of plaintiffs' causes of action to the state court.⁴⁰ As explained below, the Court holds that ERISA preempts and displaces La.R.S. 22:657 and thus that this Court has subject matter jurisdiction.

The second issue is whether defendant's policy violates the...