Opposition Brief — Pacific Mutual Life Insurance v. Turnbow

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i ” JOSEPH F SPANIOL, JR.

No. 88-1546 a

In The

. Supreme Court of the United States

October Term, 1988

_—

PACIFIC MUTUAL LIFE INSURANCE COMPANY, et al.,

Petitioners,

HARRIETTE TURNBOW,

Respondent

Petition For Writ Of Certiorari To The

Supreme Court Of Nevada

RESPONDENT’S BRIEF IN OPPOSITION

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Of Counsel:

Cart F. MARTILLARO Rittey M. Beckett

Henry C. MARTILLARO (Counsel of Record)

MArTILLARO & MARTILLARO Ritty M. Beckett, Ltp

412 North Curry Street 223 South Division Street

Carson City, Nevada 89703 Carson City, Nevada 89703

(702) 882-1629 (702) 883-8833

PAUL A. SHERMAN

202 North Curry Street

Carson City, Nevada 89703

(702) 882-2222 Counsel for Respondent

COCKLE LAW BRIEF PRINTING CO, (800) 2254 es were),

OR CALL COLLECT (402) 342-283

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES........ ii

' OPINION BELOW.............cccccccccccccccccces

STATEMENT OF THE CASE l

A. The Facts...... |

B. Procedural History eg ee 4

C. Trial Court Dismissed Case Based on ERISA

Preemption ai atde aes haa ee RR cara 6

D. Nevada Supreme Court Unanimously Reverses

oer en ee eee oe ee ee eee 5

REASONS FOR DENYING THE WRIT.. 7

] Recent Case of Morash Is Dispositive of Issue 7

2. Case Turned On Own Facts: Affect Few Liti-

gants... ~

CONCLUSION re)

7 Law Week

OPINION BELOW

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those premiums and inquired as to what action to take.

As a result of her discussions with MCGOWAN no fur-

ther premiums were paid from May, 1983 on. The medi-

cal, hospital, convalescent and other health providers

expenditures which previously had been covered by

B.E.S.T. became so excessive it financially destroyed

TURNBOW and her business “The Bottle Stop”.

The gravamen of TURNBOW’S position is that she

was to receive $1,000,000.00 in benefits. B.E.S.T. cut off

her benefits after paying approximately $46,000.00,

assigning as a cause for termination of the benefits that

she had to receive all benefits she was entitled within a

two-year period, according to the insurance policy.

TURNBOW maintains that no such provision was con-

tained in the “brochure” which induced her to purchase

the insurance, and, even if the insurance contract con-

tained such language, it was ambiguous

B.E.S.T. ard PACIFIC MUTUAL also embarked on a

course of “creaming” the good risks in the American Series

‘lan. The American Series Plan was operating under a

California trust. B.E.S.T. and Pacific Mutual set up a

competing trust in Missouri naming that B.E.S.T’s Prefer

i Series Plan. B.E.S.T. then actively solicited from

. insureds in the American Series Plan seeking them to

vitch from the American Series Plan to the Preferred Series

Creaming” is an actuarial term whereby an insurance

mpany entices or removes the healthy people or good

surance risks out of the insurance pool thus leaving

ly the sick insured or bad insurance risks in the plan

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is is obvious, with only sick insureds and bad risks in

he remaining insurance 1 the pren ms f reomet

rically and self-destructs whe tl e remaining it I

cannot afford the pren ry

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read Series Plan at , ed to pay pri

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eason that TURN A, eceive he

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t Dismissed Case Based On

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REASONS FOR DENYING THE WRIT

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Like unused vacation pay the bare purchase of health

insurance especially by a sole proprietor of a business

does not by itself constitute an ERISA plan.

Petitioners make reference to Fort Halifax Packing Co

v. Coyne 482 US 1 (1987) stating that ERISA was intended

by Congress to replace a patchwork of state and local

rules concerning employee benefit plans. This Court’s

latest admonition expressed in Massachusetts v. Morash,

supra states:

“Absent any indication that Congress intended such

far-reaching consequences, we are reluctant to so sig-

nificantly interfere with ‘the separate spheres of gov-

ernmental authority preserved in our federalist

system.’” id at 49 CCH S.Ct Bull Pg. B2108.

Per Morash, ERISA cannot interfere with state law

unless the object of that inference is a risk or danger to

employees which Congress intended to address. In this

case at bar, TURNBOW is the owner and procurer of the

very health insurance policy in question. Congress never

intended to extend ERISA coverage to a sole proprietor

who merely purchased health insurance. For this Court to

say “yes”, there is, ERISA coverage on the bare purchase

of health insurance would put employers throughout the

United States to the choice of complying with the stat-

ute’s detailed requirements for reporting and disclosing

or not buying health insurance for their employees.

2. Case Turned On Own Facts; Affect Few Litigants.

The Nevada Supreme Court in making its ruling had

to rely upon the record made by the district court on its

summary judgment ruling. No trial has occurred in the

underlying action. No finder of fact has made any deter-

mination of what TURNBOW intended when she pur-

chased health insurance for her and her daughter.

The Nevada Supreme Court decision does not

attempt to deviate from central holding of Pilot Life Ins.

Co. v. Dedeaux 481 US 41 (1987). Viewed in its most

common denominator the Nevada Supreme Court says

that ERISA does not apply to the bare purchase of group

health insurance by an aggrieved sole proprietor of a

business. That effects few litigants contrary to petitioners

expansive claims.

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CONCLUSION

For the forgoing reasons the petition for a writ of

certiorari should be denied.

Respectfully Submitted,

Of Counsel:

CARL F. MArTILLARO Ritey M. Becketr

Henry C. MArtTILLAKO (Counsel of Record)

MArTILLARO & MARrTILLARO Ritey M. Beckett, Ltp.