Wiggins v. Guardian Life Ins. Co. of America, C91-0276.

• Decision Date: 19 February 1993
• Docket Number: No. C91-0276.,C91-0276.
• Citation: 820 F. Supp. 419
• Parties: Timothy F. WIGGINS, Plaintiff, v. The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, Defendant.
• Court: U.S. District Court — Northern District of Iowa

820 F. Supp. 419

Timothy F. WIGGINS, Plaintiff, v. The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, Defendant.

No. C91-0276.

United States District Court, N.D. Iowa, Cedar Rapids Division.

February 19, 1993.

Richard A. Pundt, Luehrsmann & Pundt, Cedar Rapids, IA, for Timothy F. Wiggins.

Sean W. McPartland, Hugo C. Burdt, Lynch, Dallas, Smith & Harman, Cedar Rapids, IA, for Guardian Life Ins. Co. of America.

ORDER

MELLOY, Chief Judge.

This matter appears before the court on Plaintiff's resisted Motion To Dismiss Petition For Removal. The following opinion and order denies the Plaintiff's motion.

Background

The Defendant is an insurance company doing business in Iowa. In August of 1988 the Defendant issued a group insurance policy to the Rick Miller Construction Company. The Plaintiff, an employee of the Rick Miller Construction Company, was an eligible employee under the group insurance policy.

In August of 1989 the Plaintiff alleges that he had to undergo emergency medical treatment, surgery, and a lengthy hospitalization for an acute bowel obstruction. After his stay in the hospital, the Plaintiff submitted a claim to the Defendant. The Defendant processed the Plaintiff's claim. The Plaintiff did not agree with the Defendant's award and filed a complaint against the Defendant in the District Court of Iowa in and for Linn County on July 24, 1991. The Plaintiff's complaint alleged that the Defendant "willfully and wantonly refused to pay all the medical benefits to which the Plaintiff was entitled under the plan." The Plaintiff further alleged that the Defendant "committed bad faith in dealing with the legitimate claim of the Plaintiff."

In response, the Defendant petitioned this court to remove the Plaintiff's case to the United States District Court for the Northern District of Iowa. The Plaintiff resisted and filed the motion currently before the court. The Defendant argues that the Plaintiff's complaint falls within the purview of 29 U.S.C. § 1001, et seq., the Employee Retirement Income Security Act (ERISA) and, as such, invokes federal jurisdiction. See 29 U.S.C. § 1132.

The Plaintiff disagrees. The Plaintiff contends 1) that Iowa insurance law governs this case—not ERISA; 2) that federal jurisdiction would not apply since the amount in controversy does not exceed $50,000; and 3) that the Defendant waived its right to removal by filing an acceptance of service in the state court.

ERISA

The Employee Retirement Income Security Act ("ERISA") comprehensively regulates employee pension and welfare plans. Title 29 U.S.C. § 1002(1) defines an employee welfare benefit plan as "any plan, fund or program which ... is maintained by an employer ... for the purpose of providing ... employees with 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). The statute sets various uniform standards, including rules concerning reporting, disclosure, and fiduciary responsibilities. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 137, 111 S.Ct. 478, 482, 112 L.Ed.2d 474 (1990) (citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91, 103 S.Ct. 2890, 2897, 77 L.Ed.2d 490 (1983)). As part of this closely integrated regulatory scheme, the Congress included various safeguards to prevent abuse. Prominent among these safeguards is a provision of particular relevance to this case: 29 U.S.C. § 1144, ERISA's broad preemption provision. Ingersoll-Rand, 498 U.S. at 137, 111 S.Ct. at 482.

29 U.S.C. § 1144(a), the "preemption clause", preempts "any and all State laws in so far as they may now or hereafter relate to any employee benefit plan" covered by ERISA. Id. (emphasis added). The United States Supreme Court has consistently affirmed the broad preemptive scope of ERISA and the prohibition of even indirect state action relating to self-funded employee benefit plans. See, e.g., FMC Corp. v. Holliday, 498 U.S. 52, 56, 111 S.Ct. 403, 407, 112 L.Ed.2d 356 (1990); Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2388, 85 L.Ed.2d 728 (1985); Shaw, 463 U.S. at 98-99, 103 S.Ct. at 2901; Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 525, 101 S.Ct. 1895, 1907, 68 L.Ed.2d 402 (1981). In explaining the scope of the "relates to" language of the preemption clause, the Supreme Court has stated the following:

A law "relates to" an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan. Under this "broad commonsense meaning," a state law may "relate to" a benefit plan, and thereby be preempted, even if the law is not specifically designed to affect such plans, or the effect is only indirect. Pre-emption is also not precluded simply because a state law is consistent with ERISA's substantive requirements.

Ingersoll-Rand, 498 U.S. at 139, 111 S.Ct. at 483 (citations omitted).

An exception to this general preemption provision is found in 29 U.S.C. § 1144(b)(2)(A). This section, known as the "insurance saving clause," exempts state laws regulating insurance, banking, or securities from the preemption clause. 29 U.S.C. § 1144(b)(2)(A). The scope of the "insurance saving clause" is limited, however, by the "deemer clause" which makes clear that "a state law that purports to regulate insurance" cannot deem an employee benefit plan to be an insurance company. 29 U.S.C. § 1144(b)(2)(B); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45, 107 S.Ct. 1549, 1551, 95 L.Ed.2d 39 (1987).

While the preemption, saving, and deemer clauses may not "be models of legislative drafting," FMC Corp., 498 U.S. at 407, 111 S.Ct. at 407 (quoting Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2388, 85 L.Ed.2d 728 (1985)), actual application of the three clauses is straightforward. The "preemption clause" establishes as an area of exclusive federal concern the subject of every state law that "relates to" an employee benefit plan governed by ERISA. The "saving clause" returns to the States the power to enforce those state laws that "regulate insurance," except as provided in the deemer clause. FMC Corp., 498 U.S. at 56, 111 S.Ct. at 407.

An examination of recent Supreme Court cases illustrates the Court's expansive view of the "relates to" language of the preemption clause and, conversely, the Court's restrictive view of the insurance savings clause. In Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987), the Court ruled that state common law contract and tort claims arising from an employer's termination of disability benefits were preempted by ERISA and removable from state to federal court. In Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987), the Court went further, holding that ERISA preempts all state common law causes of action based on the alleged improper processing of a claim for benefits. In Pilot Life the plaintiff sought contract damages, tort damages for mental and emotional distress, and punitive damages, but failed to assert any ERISA causes of action. All of the plaintiff's claims were held preempted. In FMC Corp. v. Holliday, 498 U.S. 52, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990), the Court held that ERISA preempts a state law precluding employee welfare benefit plans from exercising subrogation rights on a claimant's tort recovery. And in Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990), the Court held that a state common law cause of action based on an alleged wrongful discharge, which sought punitive damages and recovery for future lost wages and mental anguish rather than lost pension benefits, was also preempted by ERISA. In short, "ERISA's preemptive power remains virtually undefeated." Maciosek v. Blue Cross & Blue Shield United, 930 F.2d 536, 539 (7th Cir.1991).

In this case, the Plaintiff's efforts to avoid the clear preemptive mandate of ERISA are unpersuasive. The state law causes of action alleged by the Plaintiff are preempted under the Supreme Court's construction of ERISA. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). Although the Plaintiff maintains that his actions are rooted in Chapters 507, 509, and 514A of Iowa's insurance code, and thus, exempt from ERISA via the insurance savings clause, the court finds that the Plaintiff has, in reality, alleged a common law bad faith claim which is clearly preempted by ERISA. The court further finds that the Iowa insurance code sections cited by the Plaintiff would be preempted by ERISA, even if they were in fact supporting the Plaintiff's causes of action, since the Plaintiff is an ERISA plan participant suing an ERISA insurer for a mishandled claim. Several courts have held that state insurance provisions, even if clearly falling within the scope of the insurance savings clause, can be preempted by ERISA if the state insurance provisions provide additional remedies to an ERISA plan participant who sues for a mishandled claim. See, e.g., In re Life Ins. Co., 857 F.2d 1190 (8th Cir.1988); Roberson v. Equitable Life Assurance Soc'y, 661 F.Supp. 416 (C.D.Cal.1987), aff'd, 869 F.2d 1498 (9th Cir.1989); Lee v. Prudential Ins. Co., 673 F.Supp. 998 (N.D.Cal.1987).

In re Life Ins. Co., 857 F.2d 1190 (8th Cir.1988), is indicative of the interplay between the preemption clause and the insurance savings clause. In In re Life Ins. Co., an employee covered by an ERISA employee benefits plan suffered a work-related injury. The employee applied for disability benefits but was denied benefits after the insurance company found that the employee was not disabled. Id. at 1191. The employee brought suit against the insurance company alleging breach of contract, tortious inference with a contract, and a claim under Missouri's insurance code for "vexatious refusal to pay insurance benefits." Id.; see Mo.Rev.Stat. § 375.420. The district court concluded...