Petition for Writ of Certiorari — Marshall v. Bankers Life & Casualty Co.
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7 eS Court, U.S,
9 9°. se =
o 8 0 OCT 6 1992
SIE CLERK
IN THE
Siypwreme Court of the United States
OCTOBER TERM, 1992
LINDA BROWN MARSHALL and DONALD MARSHALL,
. Petitioners,
BANKERS LIFE AND CASUALTY COMPANY, an Illinois
Corporation, FRANK B. HALL AND COMPANY OF
CALIFORNIA, a California Corporation, and MIA
ADMINISTRATORS, a California Corporation,
: Respondents.
Petition for Writ of Certiorari to the
Supreme Court of California
PETITION FOR WRIT OF CERTIORARI
MICHAEL L. GOLDBERG *
MANDELL, LEWIS & GOLDBERG,
A Professional Corporation
2000 Corporate Ridge, Suite 1075
McLean, Virginia 22102-7858
(703) 734-9622
TIMOTHY J. WHEELER
GREENE, BROILLET, TAYLOR & WHEELER
100 Wilshire Blvd., 21st Floor
Santa Monica, California 90401
(310) 576-1200
Attorneys for Petitioners
* Counsel of Record
WILSON - Epes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001
® So 60
QUESTION PRESENTED
Does an employer establish and maintain an “employee
benefit plan” pursuant to ERISA (29 U.S.C. $$ 1001
et seq.), SO as to preempt an employee’s state law claim
for insurance bad faith, when the employer merely pur-
chases a health benefits insurance policy and the em-
ployer’s activity relating to that policy is limited to
paying premiums for employee coverage and withholding
the cost of dependent coverage from employees’ pay, for-
warding premiums to the carrier and distributing claims
forms and information to employees, and when the em-
ployer never intended to establish a “plan” under ERISA
and was under no obligation to provide the benefits and
retained the right (which it ultimately exercised) to
cancel the insurance at any time?
(i)
ii
PARTIES TO THE PROCEEDING
The parties to the proceeding in the Supreme Court of
California were Linda Brown Marshall and Donald
Marshall, Petitioners in this Court, and Bankers Life
and Casualty Company and Frank B. Hall and Company
of California, who are Respondents in this Court.
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED 0ooooooooooecccccocccoccoceeceee eee. i
PARTIES TO THE PROCEEDING .......... ii
TABLE OF AUTHORITIES 000... ..ococoecccoccecccececceeeee iv
ATT 1
hi ey 9 i, ee sientesncsarshtedenaiinhesiaedaasbanhediis 2
STATUTORY AND REGULATORY PROVISIONS
SEES EAE Os a 2
STATEMENT OF THE CASE ooo cceccccceceeeeee 2
REASONS FOR GRANTING THE WRIT... 7
I eh iictesiniiadch adedccscrtoeninesicicuiabicciinsstssanimnsteas 16
(iii)
_— en
iv
TABLE OF AUTHORITIES
Cases Page
Brundage-Peterson Vv. Compcare Health Services
Insurance Corp., 877 F.2d 509 (7th Cir. 1989).. 8
Donovan V. Dillingham, 688 F.2d 1367 (1982) ....... 6, 8, 10
Fletcher v. Western Nat. Life Ins. Co., 10 Cal.App.
oa S76, SP CaLmete. Te (ESTO) ........-...................., 9
Fort Halifax Packing Co. v. Coyne, 482 U.S. 1
SI acne i ee ea 4, 6, 11-12
Fugarino V. Hartford Life and Acc. Ins. Co., 969
et Be Bt a + Ree emo 8
Gahn V. Allstate Life Ins. Co., 926 F.2d 1449 (5th
Ce I Goteeen anise eee ee ee 8,14
International Resources Vv. New York Life Ins.
Co., 950 F.2d 294 (6th Cir. 1991) -.......00000000.. 8,13
Kanne v. Connecticut General Life Insurance Co.,
867 F.2d 489 (9th Cir. 1988), cert. denied, 492
is a a 8
Memorial Hosp. System v. Northbrook Life Ins.
Co., 904 F.2d 286 (5th Cir. 1990) -.....0.00.00.. 13
Silberg v. California Life Ins. Co., 11 Cal.3d 452,
113 Cal.Rptr. 711, 521 P.2d 1108 (1974) ............ 9
Taggert Corporation Vv. Life and Health Adminis-
tration, Inc., 671 F.2d 1208 (5th Cir. 1980), cert.
denied, 459 U.S. 851, reh’g denied, 459 U.S. 1059
CI panic oot PEA Lene) en aera ETE 8,10
Turnbow V. Pacific Mutual Life Ins. Co., 765 P.2d
1160 (Nev. 1988), cert. denied, 490 U.S. 1102
fe eee ieee Ce A ae orce Pre © APS Pd 8,15
Statutes
et I ID icici innrssticunieisinnssasuanceoosecantcencioonecien 2
Be I cierechisscd gmassncrieousepncescsntanns etnias ihiiadsaies i, 3
NT TD ic heseireisccsdcsaonissnnanmatoiinininemneciawasnascnn 2
tk Eth BE) | |) ar selec taageaeaaeloliacas 2,9
29 U.S.C. § 1144 (a) .................... ceubiilaheiaosiiadaeicsiasicasiebint 2,4
Other
29 C.F.R. § 2510.38-1(j) ........ aE EERE IT LE OE SE 2,4
SOURCE BOOK OF HEALTH INSURANCE DATA: 1991,
Health Insurance Association of America .......... 8
TF
v
TABLE OF AUTHORITIES—Continued
Page
POVERTY IN THE UNITED STATES: 1991, Series p.
60, No. 181, U.S. Bureau of the Census
Insurer’s Liability for Consequential or Punitive
Damage for Wrongful Delay or Refusal to Make
Payments Under Contract, 47 A.L.R.38d 314
(1973).
IN THE
Supreme Court of the United States
OCTOBER TERM, 1992
No.
LINDA BROWN MARSHALL and DONALD MARSHALL,
m Petitioners,
BANKERS LIFE AND CASUALTY COMPANY, an Illinois
Corporation, FRANK B. HALL AND COMPANY OF
CALIFORNIA, a California Corporation, and MIA
ADMINISTRATORS, a California Corporation,
Respondents.
Petition for Writ of Certiorari to the
Supreme Court of California
PETITION FOR WRIT OF CERTIORARI
Petitioners Linda Brown Marshall and Donald Marshall
respectfully pray that a writ of certiorari issue to review
the judgment and opinion of the Supreme Court of Cali-
fornia, entered in this matter on July 9, 1992.
OPINIONS BELOW
The opinion of the Supreme Court of California is
reported at 2 Cal.4th 1045, and is reprinted at Appendix
A, hereto.
The Supreme Court of California reversed a decision
of the California Court of Appeal for the Second Appel-
late District, Division Three, which decision had been
filed on June 10, 1991, and modified on July 10, 1991.
2
That decision as modified, is reprinted at Appendix B,
hereto.
The Court of Appeal had reversed an April 5, 1990
judgment of the Superior Court for the County of Los
Angeles, dismissing the action, which judgment is re-
printed at Appendix C, hereto.
JURISDICTION
The judgment of the Supreme Court of California was
entered on July 9, 1992. This Court has jurisdiction
pursuant to 28 U.S.C. § 1257(a).
STATUTORY AND REGULATORY
PROVISIONS INVOLVED
29 U.S.C. § 1002(1), defining “employee welfare bene-
fit plan’; 29 U.S.C. § 1182(a), describing private civil
enforcement actions under ERISA; 29 U.S.C. § 1144(a)
and (b) describing the preemption of state laws relating
to employee benefits plans, and 29 C.F.R. § 2510.3-1(j),
the Secretary of Labor’s regulation suggesting criteria
under which an insurance policy should not be considered
to be an employee benefit plan, are all set forth at
Appendix D, hereto.
STATEMENT OF THE CASE
Linda Marshall’s claim for payment of hospitalization
expenses was denied by her health insurance carrier,
Bankers Life. Bankers claimed that she was suffering
from a preexisting condition, sickle cell anemia, even
though, as alleged in the complaint, the carrier knew at
that time that she was being treated for the aftereffects
of an aneurysm and brain surgery. Fourth Amended
Complaint at 7/11, 13. As a result, Linda Marshall was
prematurely discharged from the hospital. Jd. at § 11.
Bankers Life resisted the Marshalls’ repeated requests
for payment of the hospitalization expenses over a period
of some twenty months, until the Marshalls retained a
3
lawyer, at which time, Bankers Life paid the disputed
claim. /d. at § 13. 16. This insurance bad faith action,
under the Jaws of California, followed.
Linda Marshall was an insured under a medical bene-
fits insurance policy to which her husband, Donald Mar-
shall, subscribed at his place of employment, Miller Im-
ports, an automobile dealer. As an affirmative defense,
Bankers Life asserted that all causes of action were pre-
empted by the federal Employees’ Benefits Income Security
Act (29 U.S.C. §§ 1001 et seg.) (“ERISA”). Both sides
moved, unsuccessfully, for summary judgment on the
issue of ERISA preemption, and ultimately, that issue
was separated out and tried in the superior court on
stipulated facts. (The Stipulation is reprinted at Appen-
dix E, hereto. )
The Bankers Life policy was effective from March 1,
1983 to October 1, 1983. Through a separate contract
with Bankers, Frank B. Hall Company and MIA Adq-
ministrators administered the health insurance program,
for which they received a monthly fee from Bankers for
each covered employee. Hall/MIA billed the employer,
Miller Imports, monthly. Miller paid the employees’
premiums, including Donald Marshall’s, and deducted
premiums for dependent coverage from the paychecks of
employees who had elected dependent coverage. Thus,
Donald paid for Linda’s health insurance coverage.
Miller did not set aside a separate account to pay these
premiums; rather, it paid them from its operating
account.
Miller provided Bankers and Hall/MIA with current
lists of employees and passed on enrollment cards which
were filled out by employees, but Bankers and Hall/MIA
exclusively determined whether employees and dependents
were eligible for benefits. Miller was provided with claims
forms which it passed on to employees, but all completed
forms were submitted directly to Hall/MIA by the em-
ployee or the health care provider; Miller did not review
4
claims forms and had no responsibility for evaluating
claims. Miller passed along to employees a booklet and
a letter provided by Hall/MIA explaining the policy and
how to file claims; and while Miller would attempt to
answer employee questions, Hall/MIA had _ instructed
Miller to have employees direct all questions to it. All
decisions on claims payment were made by Bankers and
Hail MIA which paid benefits directly to employees or
providers.
Miller never handled funds used for the payments of
benefits, and had no opportunity to misappropriate or
improvidently invest those funds, nor did it have responsi-
bility for monitoring those funds. Miller never intended
to create an ERISA Plan. Miller reserved the right to
cancel the insurance at any time, and it did cancel the
Bankers policy, which was in effect for only seven months.
The superior court concluded that the employer’s in-
volvement in the program was not extensive, and that the
employer did not specifically intend to establish a pro-
gram which would be covered by ERISA. Relying, in
part, upon the Secretary of Labor’s so-called “safe har-
bor” regulation (29 C.F.R. § 2510.3-1(j), the superior
court found that the insurance policy provided benefits
of the type typically covered by ERISA and was an
employee benefit plan within the meaning of ERISA,
and accordingly, that all of the Plaintiffs’ causes of action
were preempted. See, 29 U.S.C. § 1144(a).
The California Court of Appeal reversed. Relying on
the distinction which this Court drew in Fort Halifax
Packing Co. v. Coyne, 482 U.S. 1 (1987), the court of
appeal’s underlying premise was that ERISA preempts
only state laws relating to employee benefit plans, not
state laws relating merely to employee benefits. The Act
does not define “plan” and the court of appeal examined
the employer’s involvement in the administrative aspects
of the insurance policy to determine whether that involve-
ment was of the nature which implicated the concerns
5
which gave rise both to ERISA and to ERISA’s preemp-
tion provisions.
The court of appeal concluded that Miller Import’s
involvement in the Bankers Life policy did not implicate
those concerns. Noting that Miller was not obligated to
provide the insurance benefit for its employees, and that
it could, and ultimately did, cancel the policy, the court
concluded that Miller had no “commitment systematically
to pay [these] benefits... .” and that what was involved
was “‘a bare purchase of insurance’ [citation deleted]
and a temporary one at that.” Court of Appeal Decision,
App. B at 40a. Finding that Bankers and Hall/MIA (not
Miller) determined the eligibility of claimants for bene-
fits, calculated benefits, and paid them, and that Hall/MIA
(and not Miller) was responsible for keeping records and
monitoring the availability of funds to pay claims, the
court concluded that Miller’s role was limited to paying
the premiums and performing ministerial tasks, and ac-
cordingly, that an employee benefit plan had not been
established and that Plaintiffs’ state law-based causes of
action were not preempted.
The court of appeal noted that neither Hall/MIA nor
Miller had complied with any of the ERISA reporting
requirements, nor with the regulations requiring that
employees be provided with a statement of their rights
under ERISA. The court of appeal noted the context of
the issue before it; that the employer, without intent to
create an ERISA plan, had purchased an insurance policy,
and the insurer sought to elevate that fact to the level
which would permit it to avoid liability for its bad faith
in handling claims under the policy.
In short, the insurer seeks the protection of a federal
regulatory scheme without any evidence that any of
the purposes or concerns, which Congress had when it
enacted that regulatory scheme, were in any way im-
plicated. Although Miller’s employees had none of the
protections or benefits or a bona fide ERISA plan, the
6
insurer now seeks to use the illusion of such a plan
to deprive them of the benefits of state laws regulat-
ing insurer misconduct. /d., App. B at 43a.
The Supreme Court of California, with one justice
dissenting, reversed, holding that ‘despite the employer’s
minimal involvement in plan administration and complete
noninvolvement in claims processing” an employee benefit
plan was established, and accordingly, that the state law
actions were preempted. California Supreme Court De-
cision, App. A at la-2a.
The court viewed Fort Halifax v. Coyne as distinguish-
able because in that case the payments were to be made
direct'y by the employer. Determining that in cases where
the benefits are secured through an insurance policy, the
extent of employer involvement in plan administration is
not a relevant consideration in determining the existence
of an employee benefit plan (California Supreme Court
Decision, App. A at 8a), the court instead focused on
the test articulated by the llth Circuit in Donovan v.
Dillingham (688 F.2d 1367, 1873 (11th Cir. 1982)
(en banc)): a plan exists if the court may determine
“ ‘whether from the surrounding circumstances a reason-
able person could ascertain the intended benefits, bene-
ficiaries, source of financing, and procedures for receiving
benefits.’ California Supreme Court Decision, App. A at
9a. The court concluded that these criteria were easily
met in this case: the intended benefits were the payment
of health benefits; the beneficiaries were Miller’s em-
ployees and their dependents; the source of financing was
the premiums; and the procedure for securing benefits
was to submit a claim to Hall/MIA on a form secured
from Miller. Jd., App. A at 9a-10a."
1In his dissenting opinion, Justice Mosk pointed out that any
employer purchase of insurance would perforce meet these criteria
(California Supreme Court Decision, App. A. at 22a (Mosk Dis-
senting) ) thus blurring the distinction between an employee benefit
and an employee benefit plan, where the benefit was secured through
purchase of insurance.
7
The court determined that the Plan was an ERISA
plan because it provided benefits of the type specified in
the ERISA statute, and because it was established and
maintained by the employer. With respect to this latter,
the court noted that while the four criteria in the Secre-
tary of Labor’s safe habor regulations were not met in
this case, that regulation was not intended to be conclu-
sive on the issue. The court reasoned that while the
“hare purchase’ of insurance . . . with no employer
endorsement or involvement other than deducting premi-
ums from employees’ paychecks and forwarding them to
the insurer—does not conclusively establish the existence
of an ERISA plan” the fact that Miller actually paid
employees’ premiums is “evidence” that an ERISA plan
was established and maintained and “the purchase of a
policy covering a class of employees offers substantial
evidence that the employer has established a plan.” Jd.,
App. A at lla.
REASONS FOR GRANTING THE WRIT
In its decision, Division Three of the Second Appellate
District styled the Miller Imports/Bankers Life arrange-
ment as a “garden variety employee health insurance
benefit”. Court of Appeal Decision, App. B at 37a.
In its amicus brief to the Supreme Court of California,
the Association of California Life Insurance Companies
asserted that “[olf the estimated 4.5 million employer-
sponsored health care plans the overwhelming majority
are established simply by the employer’s purchase of
insurance.” Amicus Brief in Supreme Court of California
at p. 7. Indeed, this is the most common arrangement of
insuring for health care costs in the United States;
150,073,000 persons in the United States are covered by
health insurance related to the current or past employ-
ment of themselves or a relative. Poverty in the United
8
States: 1991, Series P60, Number 181, U.S. Bureau of
the Census, p. 149.*
Notwithstanding the significance of the question, there
remains a split in authority among both federal and state
courts as to whether an employer’s purchase of a health
insurance policy with little more constitutes the establish-
ment of an ERISA plan. The Sixth, Seventh, Ninth and
Eleventh Circuits would say that such a purchase of
insurance established a “plan”,* while authority in the
Fifth Circuit * would say that no “plan” was established.
The instant case places the Supreme Court of California
directly in conflict with the Nevada Supreme Court deci-
sion in Turnbow v. Pacific Mutual Life Ins. Co., 765 P.2d
1160 (Nev. 1988), cert. denied, 490 U.S. 1102 (1989).
Thus, a clear determination of whether such routine
insurance policies are ERISA Plans will define for tens
of millions of insureds in these types of insurance ar-
rangements their remedies for egregious bad faith. The
insured’s remedy under ERISA is most generally limited
to compelling the carrier to pay the benefits called for in
the insurance contract. If the insureds question these
denials of coverage, if they can secure legal assistance, if
2 The health insurance industry reports, similarly, that the num-
ber of individuals whose health insurance is provided through an
employment relationship is 153,800,000 in 1989. Source Book of
Health Insurance Data: 1991, Health Insurance Association of
America, Table 1.1.
3 International Resources V. New York Life Ins. Co., 950 F.2d 294
(6th Cir. 1991); Fugarino v. Hartford Life and Acc. Ins. Co., 969
F.2d 178 (6th Cir. 1992); Brundage-Peterson v. Compcare Health
Services Insurance Corp., 877 F.2d 509 (7th Cir. 1989); Kanne v.
Connecticut General Life Insurance Co., 867 F.2d 489 (9th Cir.
1988), cert. denied, 492 U.S. 906 (1989); Donovan v. Dillingham,
688 F.2d 1367.
4 Taggert Corporation Vv. Life and Health Benefits Administration,
Inc., 617 F.2d 1208 (5th Cir. 1980), cert. denied, 459 U.S. 851, reh’g
denied, 459 U.S. 1059 (1982); Gahn v. Allstate Life Ins. Co., 926
F.2d 1449 (5th Cir. 1991).
9
they can attract the attention of the Secretary of Labor,
if they don’t lose heart first or die first, if they prevail
and secure their remedy under ERISA, they win only
what they were entitled to all along under the contract of
insurance—the payment of the claim. Thus, if state bad
faith law® is preempted under 29 U.S.C. § 1132, there is
nothing under this scheme to discourage insurance car-
riers from denying potentially expensive claims such as
chronic disease, cancer and AIDS, and attempting to pass
the burden of these claims off on other health care sys-
tems, generally those supported by the taxpayers. With
this much at stake, the distinction which Congress so
carefully drew between employee “benefits” and employee
benefit “plans” in setting forth the scope of ERISA
preemption should not be readily blurred.
Since Congress intended that ERISA only preempt state
laws relating to employee benefit plans and not those with
relate merely to employee benefits (Fort Halifax, 482
U.S. at 7), distinguishing between the two becomes criti-
cal to implementing the intention of the Congress. In the
view of these Petitioners, the Court has already defined
the basis for such a distinction in Fort Halifax. Cer-
tainly prior to this Court’s decision in Fort Halifax, there
was some considerable confusion in distinguishing between
the two when the employee benefit was provided by means
of an insurance policy.
5 Well established law in California provides a cause of action in
tort, permitting consequential damages, against an insurer which
in bad faith denies an insured’s claim under a policy. Fletcher V.
Western Nat. Life Ins. Co., 10 Cal.App.3d 376, 89 Cal.Rptr. 78
(1970) ; Silberg v. California Life Ins. Co., 11 Cal.38d 452, 113 Cal.
Rptr. 711, 521 P.2d 1103 (1974). At least 33 states recognize an
insured’s right to consequential damages (and in some circum-
stances, punitive damages) in an action at law on account of an
insurer’s wrongful delay or refusal to pay claims. Jnsurer’s Lia-
bility for Consequential or Punitive Damage for Wrongful Delay
or Refusal to Make Payments Under Contract, 47 A.L.R.3d 314
(1973).
10
Early on, the Fifth Circuit had focused in such a
situation on the employer’s relationship with the insur-
ance program to determine whether an employer estab-
lished or maintained a plan when it provided benefits by
means of insurance; specifically, it focused on the em-
ployer’s commitment to the ongoing provision of the
benefit. Zaggert Corporation v. Life and Health Admin-
istration, Inc., 671 F.2d 1208. In that case, Taggert Cor-
poration purchased a health insurance policy for its sole
employee from a multi-employer trust. The Fifth Circuit
held that the trust itself, a for-profit, proprietary enter-
prise established for the purpose of marketing the insur-
ance policies to employers, was not an appropriate party
to confer ERISA jurisdiction. Jd. at 1210. The court
specifically rejected a suggestion by the Secretary of
Labor that Taggert’s subscription to the trust by itself
established an ERISA plan. “Considering the history,
structure and purposes of ERISA, we cannot believe that
that Act regulates bare purchases of health insurance
where, as here, the purchasing employer neither directly
not directly owns, controls, administers or assumes re-
sponsibility for the policy or its benefits.” Jd. at 1211.
Subsequently, but still before this Court’s decision in
Fort Halifax, the 11th Circuit, decided that the appropri-
ate focus should be on the provisions of the insurance
policy itself. The Eleventh Circuit also rejected as “sweep-
ing too broadly” the Secretary of Labor’s suggestion that
an employer’s decision to provide the type of benefits de-
scribed in the ERISA legislation is sufficient to establish
an employee benefit plan. Donovan v. Dillingham, 688
F.8d at 1873. “{T]he purchase of insurance does not con-
clusively establish a plan . .. but the purchase is evidence
of the establishment of a plan... .” Jd. Rather, the court
ruled that in determining whether the purchase of an in-
surance policy constituted establishing and maintaining
an employee benefit plan, it should focus on the policy it-
self, and “whether from the surrounding circumstances a
reasonable person could ascertain the intended benefits,
beneficiaries, source of financing, and procedures for re-
ee
11
ceiving benefits.” Jd. As Justice Mosk pointed out in
the California Supreme Court, this can hardly be a basis
for differentiation as it is difficult to conceive of an insur-
ance policy that would not meet this test. See App. A at 22a.
This Court’s decision in Fort Halifax established that
the focus properly belongs on the nature of the employer’s
activity in connection with the insurance program, not on
the policy. In Fort Halifax, as noted, the Court drew a
distinction between an employee benefit and an employee
benefit plan, and demonstrated that because of the plain
language of the ERISA preemption provision, the purpose
of that provision, and the overall objectives of ERISA it-
self, state laws could only be preempted where they related
to an employee benefit plan. Fort Halifax, 482 U.S. at 7.
The Court reasoned that this is so because ERISA’s pre-
emption provisions were intended to insulate employers
from inconsistent regulation of the complex administra-
tive activities associated with employee benefit plans. /d.
at 11.
An employer that makes a commitment systemati-
cally to pay certain benefits undertakes a host of ob-
ligations, such as determining the eligibility of claim-
ants, calculating benefit levels, making disbursements,
monitoring the availability of funds for benefit pay-
ments, and keeping appropriate records. The most
efficient way to meet these responsibilities is to estab-
lish a uniform administrative scheme, which provides
a set of standard procedures to guide processing of
claims and disbursement of benefits. Jd. at 9.
On the other hand, the Court observed, where the em-
ployer engages in none of these activities in connection
with providing an employee benefit (as was the case with
Miller Imports in the instant matter) none of the con-
cerns which the ERISA preemption was intended to
address are present, and therefore there is no preemption.
In the Court’s view, it was the assumption by an employer
of these myriad responsibilities which defines an employee
benefit plan.
12
Congress intended pre-emption to afford employers
the advantages of a uniform set of administrative
procedures governed by a single set of regulations.
This concern only arises, however, with respect to
benefits whose provision by nature requires an on-
going administrative program to meet the employer’s
obligation. It is for this reason that Congress pre-
empted state laws relating to plans, rather than sim-
ply to benefits. Only a plan embodies a set of admin-
istrative practices vulnerable to the burden that
would be imposed by a_ patchwork scheme of
regulation.
Id. at 11-12.
Regrettably, confusion remains: does any program
which provides benefits of the type described in ERISA
and which requires ongoing administrative activity con-
stitute a “plan” or does only a program of benefits de-
scribed in ERISA which requires ongoing administrative
activity by an employer constitute a “plan”? The answer
is the latter. “Only ‘plans’ involve administrative ac-
tivity potentially subject to employer abuse.” Jd. at 16.
Certainly, the dissenting justices in Fort Halifax read
the majority decision that way. “I dissent because it is
incredible to believe that Congress intended that the broad
preemption provision contained in ERISA would depend
upon the extent to which an employer exercised adminis-
trative foresight in preparing for the eventual payment
of employee benefits.” Jd. at 23 (White, J., dissenting).
Thus, in Fort Halifax, this Court established that the
appropriate way to determine whether an employer
established and maintained an employee benefit plan is
to focus on the degree and nature of the employer’s
activity and commitment in the provision of that bene-
fit. However, Fort Halifax has not found consistent
application in cases in which the employee benefit is pro-
vided by means of an insurance policy. Because Fort
Halifax did not involve insurance, and because it involved
obligations for one-time, rather than ongoing, payment of
13
benefits, application of this Court’s holding to the most
common types of insurance arrangements, such as that
exemplified in the instant case, remains inconsistent. Con-
flict remains among the federal Circuits in applying the
holding of Fort Halifax where employers provide benefits
through insurance. Similarly, the two highest state courts
which have addressed the issue have reached conflicting
results.
Notwithstanding this Court’s guidance in Fort Halifax,
several circuits have adopted the approach of the
Eleventh Circuit in Donovan v. Dillingham and continue
to examine the issue from the perspective of the insurance
policy rather than from the perspective of the employer’s
relationship to the benefit program. The Dillingham ap-
proach was endorsed by the Sixth Circuit in International
Resources v. New York Life, 950 F.2d 294.
The Fifth Circuit, however, continues to focus on the
employer’s role. In Memorial Hosp. System v. Northbrook
Life Ins. Co., 904 F.2d 236 (5th Cir. 1990), the court
held that the purchase of insurance by an employer which
paid one-half of employees’ premiums was more than a
“bare bones” purchase of insurance because the employer
assumed sole responsibility for paying premiums monthly,
and thus showed the “intent to provide its employees
with a welfare benefit program through the purchase
and maintenance of a group health insurance policy.”
Id. at 241. The court noted that the complaint had alleged
that the employer had “administered and maintained”
the policy and had engaged in conduct constituting the
handling of insurance matters in connection with the
policy pursuant to Texas insurance law. Id. at 243 n.&.
The court distinguished its earlier decision in Taggert
on the basis that Taggert involved only a bare purchase
of insurance, while in Memorial Hosp., the employer had
engaged in activities consistent with an intent to “admin-
ister the plan as well as insure it.” Jd. at 242-243.
14
The Fifth Circuit subsequently underscored its view
that the determination of the issue should be from the
perspective of the employer’s role in providing the insur-
ance benefit rather than from the perspective of whether
the elements of the statutory definition of an employee
benefit plan could be gleaned from the insurance policy
itself in Gahn v. Allstate Life Ins. Co., 926 F.2d 1449.
There, the Fifth Circuit, reversing the district court,
found that the purchase from a multi-employer trust of
a health insurance policy by a gift shop owner to cover
himself and his employees (who were his wife and chil-
dren) did not constitute the establishment of an employee
benefit plan. The Fifth Circuit held that the district
court had improperly focused on the activity of the multi-
employer trust, and that to determine whether the pur-
chase of the policy constituted the establishment and
maintenance of a “plan” the court “should have focused
on the employer... and his involvement with the admin-
istration of the plan.” Jd. at 1452. The court remanded
the matter for factual determinations relevant to this
examination, noting that the only factual record (the
employer’s affidavit that he played no part in formulation
of policy, held no monies in trust, but merely forwarded
premiums to the carrier and did not own, control or
administer the policy and had no responsibility for bene-
fits) suggested that the policy was not an ERISA plan.
Id. at 1452-1453. Thus, while in both the Memorial Hosp.
and Gahn decisions the Fifth Circuit, paying lip service
to Dillingham, said the determination should involve ex-
amination of the circumstances to see if the elements of
an ERISA plan are present, it is clear from both decisions
that the Fifth Circuit’s examination of the question re-
mains focussed on the employer’s activities in relation to
the provision of the benefit.
Thus, two threads of reasoning have been established
in the federal circuit courts in determining whether an
employer establishes and maintains an employee benefit
15
plan when it provides benefits of the type described in
ERISA by purchasing an insurance policy. Some circuits
follow the lead of the Eleventh Circuit and focus on the
insurance policy itself, to determine whether the “ele-
ments” of an employee benefit can be read from the policy.
The Fifth Circuit has followed the lead of this Court, and
focuses on the activities of the employer and its relation
to the provision of and continuation of benefits. The same
indecision has been demonstrated by the state courts.
While the Supreme Court of California has following
the Dillingham approach, the Supreme Court of Nevada
has reached the opposite result in a substantively iden-
tical case. Turnbow v. Pacific Mutual Life Ins. Co., 765
P.2d 1160. In Turnbow, the employer purchased health
benefits insurance from a multi-employer trust, paying
the premiums for herself and her three full-time em-
ployees. Starting from the premise that more than the
mere purchase of insurance is necessary to establish a
“plan”, the Nevada Supreme Court determined that no
ERISA plan was created because there was no indication
of employer commitment to continue such benefits.
This uncertainty in how to determine if an employer
establishes an employee benefit plan by purchasing an
insurance policy and performing, at best, ministerial
functions in connection with that policy, as reflected by
the conflict in decisional authority both in the federal
courts of appeal and among the state supreme courts
which have considered the issue, complicates the assertion
and protection of the rights of insured employees. The
rights of millions of insureds are at stake. And because,
as noted, the remedies under ERISA for bad faith by
carriers are so limited, and correspondingly, the potential
for abuse so great, at stake, ultimately, is the question of
who will pay potentially billions of dollars of health care
costs.
16
CONCLUSION
For these various reasons, the Petition for Certiorari
should be granted.
Respectfully submitted,
MICHAEL L. GOLDBERG *
MANDELL, LEWIS & GOLDBERG,
A Professional Corporation
2000 Corporate Ridge, Suite 1075
McLean, Virginia 22102-7858
(703) 734-9622
TIMOTHY J. WHEELER
GREENE, BROILLET, TAYLOR & WHEELER
100 Wilshire Blvd., 21st Floor
Santa Monica, California 90401
(310) 576-1200
Attorneys for Petitioners
* Counsel of Record
APPENDICES
la
APPENDIX A
IN THE SUPREME COURT
OF THE STATE OF CALIFORNIA
$022055
(Ct. of Appeal No. B050259)
(Sup. Ct. No. C544301 )
LINDA BROWN MARSHALL et al.,
Plaintiffs and Appellants,
Ve
BANKERS LIFE AND CASUALTY COMPANY et al.,
Defendants and Respondents.
[Filed July 9, 1992]
We granted review in this case to determine whether
an employer that purchases a group health insurance
policy to cover its employees and their dependents, but
whose involvement in administration of benefits under
the policy is minimal, thereby establishes an “employee
benefit plan’ within the meaning of the Employee Retire-
ment Income Security Act of 1974 (ERISA) (29 U.S.C.
§ 1001 et seq.), so that an action seeking damages under
state law for the denial of a claim for policy benefits is
preempted by federal law.' We conclude that an em-
ployee benefit plan is established on these facts despite
1 See 29 United States Code sections 1002(1) (definition of “em-
ployee welfare benefit plan’’), 1144(a) (supersedure of state laws
relating to employee benefit plans).
2a
the employer’s minimal involvement in plan administra-
tion and complete noninvolvement in claims processing.
An action seeking remedies under state law for an im-
proper denial of benefits is, therefore, preempted. (Pilot
Life Ins. Co. v. Dedeaux (1987) 481 U.S. 41, 47-57;
Commercial Life Ins. Co. Vv. Superior Court (1988), 47
Cal.3d 473, 484-485. )
BACKGROUND
In 1983 Donald Marshall was employed by Miller Im-
port Datsun, Ine. (Miller Import). Miller Import’s em-
ployee manual stated that all employees would be pro-
vided with group health insurance coverage. From March
1, 1983, to October 1, 1983, Miller Import provided its
employees with health insurance coverage under a group
health, life, and disability insurance policy issued by
Bankers Life and Casualty Company (Bankers) and ad-
ministered by Frank B. Hall & Company of California,
MIA Administrators (Hall/MIA). All of Miller Import’s
employees were covered under the policy. Miller Import
allowed its employees to enroll their dependents for cover-
age under the group policy, and Donald Marshall enrolled
his wife, Linda. Miller Import paid the entire cost of
premiums for its employees. It also paid the cost of
premiums for covered dependents and then deducted those
amounts from employees’ paychecks. Hall/MIA billed
Miller Import for premiums on a monthly basis.
Miller Import’s role in administration of the policy
was minor. It directed its employees to fill out enrollment
ecards and forms for changes of beneficiaries and depend-
ent coverage; it then submitted the completed cards to
Hall/MIA. Miller Import received, and distributed to its
employees, booklets entitled “Your Group Insurance Plan,”
containing information about the policy and procedures
for filing claims. Additionally, Miller Import gave its
employees copies of a three-page letter, prepared by Hall /
MIA, explaining coverage under the policy. Miller Import
provided its employees with claim forms, which they
|
3a
or their health care providers submitted directly to Hall,
MIA. Miller Import neither reviewed nor evaluated
claim forms; Hall/MIA made all determinations regard-
ing eligibility for medical benefits. Miller Import em-
ployees were asked to contact Hall/MIA with any ques-
tions regarding the policy. However, when employees
occasionally asked questions regarding enrollment, cover-
age changes, and claims, Miller Import personnel would
try to respond before contacting Hall/MIA.
Miller Import did not intend to create an ERISA-gov-
erned benefit plan, and never filed any reports with the
United States Department of Labor with respect to its
group insurance policy.
The present suit arose out of the denial of Linda
Marshall’s claim for medical benefits. The operative
pleading (the fourth amended complaint) alleged that
Linda Marshall suffered aftereffects of an aneurysm and
brain surgery, requiring hospitalization, during the term
of the Bankers policy. Although Hall/MIA confirmed
coverage under the policy at the time of her hopitaliza-
tion, coverage was later revoked and her claims for bene-
fits were denied on the basis that her claim related to a
preexisting condition, sickle-cell anemia. The Marshalls
sued Bankers and Hall/MIA, alleging breach of the duty
of good faith and fair dealing, fraud, intentional inflic-
tion of emotional distress, negligence, and violation of
Insurance Code section 790.038. Defendants denied lia-
bility. Both sides moved unsuccessfully for summary
judgment on the issue of whether ERISA preempted the
Marshalls’ action. (29 U.S.C. § 1144(a).) That issue was
bifurcated for trial on stipulated facts as set forth in
the preceding three paragraphs.
The trial court ruled that Miller Import’s insurance
program constituted an “employee welfare benefit plan”
within the meaning of ERISA, so that the Marshalls’
claims were preempted. Accordingly, it entered judgment
for defendants. The Court of Appeal reversed, holding
4a
that because there was no administrative activity poten-
tially subject to employer abuse, ERISA was not impli-
eated. For the reasons that follow, we conclude the
Court of Appeal erred in focusing on the employer’s in-
volvement in administration of policy benefits.
ANALYSIS
ERISA is a comprehensive federal law designed to
promote the interests of employees and their beneficiaries
in employee pension and benefit plans. (Shaw V. Delta
Air Lines, Inc. (1983) 463 U.S. 85, 90.) As a part of
this integrated regulatory system, Congress enacted var-
ious safeguards to preclude abuse and to secure the
rights and expectations that ERISA brought into being.
(29 U.S.C. $1001; see also Sen. Rep. No. 93-127, Ist
Sess., p. 36 (1973).) Prominent among these safeguards
is an expansive preemption provision, found at section
514 of ERISA (29 U.S.C. § 1144; Ingersoll-Rand v. Mc-
Clendon (1990) 498 U.S. ' [112 L.Ed.2d 474,
482-483]; Carpenters So. Cal. Admin. Corp. v. El Capi-
tan Development Co. (1991) 53 Cal.3d 1041, 1047.)
ERISA’s preemption clause is conspicuous for its
breadth, establishing as an area of exclusive federal con-
cern the subject of every State law that “relates to” an
employee benefit plan governed by ERISA. (FMC Corp.
v. Holliday (1990) 498 U.S. ' [112 L.Ed.2d
356, 364].) ERISA preempts “any and all State laws in-
sofar as they . .. relate to any employee benefit plan,”
except laws “which regulate insurance... .” (29 U.S.C.
§1144(a), (b) (2) (A).) An employee benefit plan is not
deemed to be an insurance company or other insurer, or
to be engaged in the business of insurance, for purposes
of any state law purporting to regulate insurance com-
panies or insurance contracts. (29 U.S.C. § 1144(b) (2)
(B).)
In Pilot Life Ins. Co. v. Dedeaux, supra, 481 U.S. 41,
the high court held that ERISA preempts state common
>a
5a
law tort and contract actions based on an insurer’s im-
proper processing of a claim for benefits under an in-
sured employee benefit plan because such actions “re-
late to”’ an employee benefit plan, and because the state
common law of tort and contract does not “regulate in-
surance” within the intent of ERISA. (/d. at pp. 47-57.)
In Commercial Life Ins. Co. v. Superior Court, supra, 47
Cal.3d 473, we held that ERISA preempts a surviving
private cause of action brought under California Insur-
ance Code section 790.03, subdivision (h), when the ac-
tion asserts a claim arising from an employee benefit
plan. (47 Cal.3d at p. 484; see Moradi-Shalal v. Fire-
men’s Fund Ins. Companies (1988) 46 Cal.3d 287 [pros-
pectively eliminating private causes of action under Ins.
Code, § 790.03, subd. (h)].) Clearly, Pilot Life and Com-
mercial Life require us to conclude that all of the Mar-
shalls’ causes of action are preempted if the group health
plan under which Linda Marshall filed a claim for bene-
fits is an employee benefit plan governed by ERISA.
We turn accordingly to that question.”
* Although the United States Supreme Court has not addressed
the question expressly, it has assumed that employer-sponsored
group insurance plans are ERISA plans. In Pilot Life, as in this
case, the employer purchased a group disability insurance policy,
collected and matched its employees’ contributions to the plan and
forwarded premiums to the insurer; the employer also provided
claim forms to its employees and forwarded the completed forms
to the insurer, which bore the responsibility of determining who
would receive benefits. (Pilot Life Ins. Co. v. Dedeaux, supra, 481
U.S. at p. 43.) Similarly, in Commercial Life the employer spon-
sored an insured medical benefit plan for its employees; the plaintiff
employee forwarded his medical bills to the insurer for payment;
and the insurer refused payment, denying coverage. (Commercial
Life Ins. Co. Vv. Superior Court, supra, 47 Cal.3d at p. 475.) In
neither case is there any indication that the employer took a role
in the processing of claims. The Marshalls do not attempt to draw
any factual distinctions between this case, on one hand, and Pilot
Life and Commercial Life, on the other. However, Pilot Life did
not explicitly address the requirements of an ERISA plan, and in
Commercial Life the parties did not dispute that the plan was of
3
|
a
6a
ERISA governs any employee benefit plan established
or maintained by an employer engaged in commerce or in
an industry or activity affecting commerce. (29 U.S.C.
§ 1003(a).) An “employee welfare benefit plan,” within
the meaning of ERISA, is “any plan, fund, or program
. established 0: maintained by an employer . . . to the
extent that such plan, fund, or program was established
or is maintained for the purpose of providing for its par-
ticipants or their beneficiaries, through the purchase of
insurance or otherwise, (A) medical, surgical, or hosm-
tal care or benefits, or benefits in the event of sickness,
accident, disability, death or unemployment, or vacation
benefits, apprenticeship or other training programs, or
day care centers, scholarship funds, or prepaid legal serv-
ices... .”’ (29 U.S.C. § 1002(1), emphasis added. )
The existence of an ERISA plan is a question of fact,
to be answered in light of all of the surrounding cir-
cumstances as viewed by a reasonable person. (Kanne V.
Connecticut General Life Ins. Co. (9th Cir. 1988) 867
F.2d 489, 492.) The burden is on defendants to prove
facts necessary to establish the defense of ERISA pre-
emption. (/d. at p. 492, fn. 4.)
The Marshalls contend that Miller Import did not es-
tablish an employee benefit plan under ERISA when it
purchased the Bankers policy, arguing that there is no
employee benefit plan unless the employer is involved in
the plan’s administration. Initially, we must observe that
the statutory language does not support such a require-
ment. Instead, ERISA applies when an employer “es-
tablishes or maintains” a plan for the purpose of provid-
ing its employees and their dependents with medical
benefits. (29 U.S.C. § 1002(1), emphasis added.) The
the type regulated by ERISA. Appellate courts in this state and in
the federal system have in a number of cases articulated tests for
determining whether a given arrangement constitutes an employee
benefit plan within the contemplation of ERISA. We are now called
upon to do the same.
sill
7a
statute expressly contemplates the purchase of insurance
as a possible means of providing those benefits. (Jbid.)
ERISA’s definition of “administrator” covers a person
so designated by the terms of the instrument under
which the plan is operated, who may be someone other
than the employer sponsoring the plan. (29 U.S.C. § 1002
(16) (A); see also 29 U.S.C. §§ 1102(b) (2) [plan must
describe any procedure for allocation of responsibilities
for operation and administration of plan], 1105(c) [plan
instrument may provide for procedures to allocate fidu-
ciary responsibilities among named fiduciaries and may
provide for named fiduciaires to designate others to carry.
out fiduciary responsibilities under plan].) In addition,
the United States Department of Labor’s regulations im-
plementing ERISA contemplate that benefits under an
insured employee-welfare-benefit plan may be adminis-
tered by an insurance company or service. (29 C.F.R.
§ 2560.503-1(¢c), (g) (2) (1984).) Finally, we note that
holders of group insurance policies commonly do not bear
primary responsibility for processing claims. That func-
tion is generally either retained by the insurer of dele-
gated to a third party administrator, as in this case.
Thus, considerations founded in the statute, implementing
regulations, and common practice militate against the
argument advanced by the Marshalls.
Fort Halifax Packing Co. v. Coyne (1987) 482 U.S. 1
(Fort Halifax), on which the Marshalls rely, does not
support a contrary conclusion. Fort Halifax was an ac-
tion to enforce rights under a Maine statute requiring
employers to make a one-time severance payment to em-
ployees in the event of a plant closing. (Me. Rev. Stat.
Ann., tit. 26, §625-B.) The employer asserted ERISA
preemption as a defense against the action. The high
court held that the Maine statute was not preempted
by ERISA “because the statute neither establishes, nor
requires an employer to maintain, an employee welfare
benefit ‘plan’ under that federal statute.” (Fort Halifax,
supra, 482 U.S. at p. 6.) The high court reasoned that
} |
8a
“(t]he requirement of a one-time, lump-sum payment
triggered by a single event requires no administrative
scheme whatsoever to meet the employer’s obligation... .
The theoretical possibility of a one-time obligation in the
future simply creates no need for an ongoing administra-
tive program for processing claims and paying benefits.”
(Id. at p. 12.) ERISA’s regulatory concerns are impli-
cated only when there is ongoing administrative activity
subject to abuse. When delivery of a benefit requires no
administrative scheme—as with the nonrecurring sever-
ance payment at issue in Fort Halifaw—then ERISA’s
interest in ensuring national uniformity of regulation is
not implicated. When a continuing administrative scheme
is required, on the other hand, ERISA’s preemption pro-
vision eliminates the threat of conflicting and inconsistent
state and local regulation. (Jd. at p. 9.)
Fort Halifax, supra, 482 U.S. 1, dealt with a benefit
payable directly by an employer, not pursuant to an in-
surance policy. Consequently, the high court had no
occasion to address the situation of an employer that
chooses to provide its employees with a benefit through
the mechanism of a group insurance policy administered
by the insurer or another person so designated. Its
reference to the “employer’s obligation” must he read
in the light of its facts. Properly understood, Fort Hali-
fax requires us to consider not the level of the employer’s
participation in an ongoing administrative program, but
rather whether such a program exists at ail.*
3 The Marshalls urge that Gahn v. Allstate Life Ins. Co. (5th
Cir. 1991) 926 F.2d 1449 dictates a contrary rule. We cannot
agree. Gahn was a suit arising out of an alleged wrongful termina-
tion of coverage under a group health insurance policy. The plain-
tiff was an employee of her husband’s business; he purchased the
insurance to cover himself and his employees (his wife and their
two sons). Defendant Allstate provided the insurance through a
multiple employer trust. In determining whether an employee wel-
fare benefit plan was established on these facts, the district court
focused on the relationship between Allstate and the trust. The
court of appeals held that focus to be erroneous, noting that the
9a
While a plan is not established merely by the em-
ployer’s deciding to have one, the plan need not be in
writing in order to exist. (James v. National Business
Systems, Inc. (7th Cir. 1991) 924 F.2d 718, 720.) To
hold that a plan exists, the court must be able to deter-
mine ‘whether from the surrounding circumstances a
reasonable person could ascertain the intended benefits,
beneficiaries, source of financing, and procedures for re-
ceiving benefits.” (Donovan v. Dillingham, supra, 688
F.2d 1367, 1373 [en banc]; see also Brown v. Ampco-
Pittsburgh Corp. (6th Cir. 1989) 876 F.2d 546, 551
[adopting Dillingham test]; Ed. Miniat, Inc. v. Globe Life
Ins. Group, Inc. (7th Cir. 1986) 805 F.2d 732, 739
[same]; Harris v. Arkansas Book Co. (8th Cir. 1986)
794 F.2d 358, 360 [same]; Scott v. Gulf Oil Corp. (9th
Cir. 1985) 754 F.2d 1499, 1503-1504 [same].) These
criteria are easily met in this case. A reasonable person
would conclude that the intended benefits were the pay-
ment of medical and hospitalization expenses under the
group insurance policy Miller Import purchased; the bene-
ficiaries were Miller Import’s employees and covered de-
pendents; the source of financing was the premiums paid
by Miller Import and the employees; and the procedure
trust itself was not established or maintained by an employer and
was therefore not an employee welfare benefit plan. (/d. at p. 1452.)
In the case before us, the Marshalls focus on the Gahn court’s
statement that the district court should have looked to “the em-
ployer, Mr. Gahn, and his involvement with the administration of
the plan.” (Gahn vy. Allstate Life Ins. Co., supra, 926 F.2d at
p. 1452.) Despite the quoted language, the court of appeals did not
consider whether it was Mr. Gahn’s responsibility to process claims
under the policy. Rather, the court employed the tests formulated
in Donovan vy. Dillingham (11th Cir. 1982) 688 F.2d 1367, 1373,
and in the Department of Labor’s safe-harbor regulation (29
C.F.R. § 2510.3-1(j)), discussed post at pages —— - (typed
maj. opn. at pp. 12-13), and concluded the record was insufficient
to enable it to determine whether Mr. Gahn’s group health plan was
an employee benefit plan. Gahn does not, therefore, stand for the
proposition that an employer must administer a benefit plan in
order for ERISA to apply.
ao
10a
for receiving benefits was the submission to Hall/MIA
of claim forms procured from Miller Import. (Hansen V.
Continental Ins. Co. (5th Cir. 1991) 940 F.2d 971, 977.)
Having concluded that a “plan” exists, we must de-
termine whether it is an ERISA plan. (Hansen v. Con-
tinental Ins. Co., supra, 940 F.2d at p. 977.) An ERISA
plan is one established or maintained by the employer
with the purpose of providing its employees with any of
the types of benefits specified in ERISA. (See 29 U.S.C.
£ 1002(1) [‘medical, surgical, or hospital care or bene-
fits’ ].) There is no dispute that the hospitalization bene-
fits Linda Marshall sought fall within the enumerated
categories of benefits.
The remaining question, then, is whether Miller Import
“established or maintained” the plan in order to provide
its employees with medical or hospitalization benefits. No
single act in itself necessarily constitutes the establish-
ment of a plan (Donovan v. Dillingham, supra, 688 F.2d
at p. 1373), but an employer can establish an ERISA
plan “rather easily.” (Credit Managers Ass’n v. Kenne-
saw Life & Acc. Ins. (9th Cir. 1987) 809 F.2d 617, 625.)
The Court of Appeals for the Ninth Circuit has noted in
dicta that “[e]ven if an employer does no more than
arrange for a ‘group-type insurance program,’ it can
establish an ERISA plan, unless it is a mere advertiser
who makes no contributions on behalf of its employees.”
(Jbid., citing 29 C.F.R. § 2510.3-1(j) (1975).) The
United States Department of Labor has promulgated a
regulation excluding group insurance programs from
ERISA’s definition of “employee benefit plan” when: (1)
the employer makes no contributions toward premiums;
(2) participation is completely voluntary for employees;
(3) the employer’s sole functions are, without endorsing
the program, to allow the insurer to publicize it to em-
ployees, to collect premiums through payroll deductions,
and to remit them to the insurer; and (4) the employer
receives no consideration in connection with the program
anata aaa
lla
other than reasonable compensation for administrative
services rendered in connection with the payroll deduc-
tions. (29 C.F.R. § 2510.3-1(j).) All four conditions must
be present in order for the plan to fall outside ERISA
(Kidder v. H & B Marine, Inc. (5th Cir. 1991) 9382 F.2d
347, 351), although as the Court of Appeals for the
Seventh Circuit has pointed out, “in creating a safe
harbor [the regulation] does not automatically invali-
date all arrangements on the high seas.” (Brundage-
Peterson Vv. Compcare Health Services Ins. (7th Cir. 1989)
877 F.2d 509, 511; see also 29 C.F.R. § 2510.3-1(a) (4)
(1975) [safe-harbor regulation should not be read as
indicating Department of Labor’s view of possible scope
of “employee welfare plan” under ERISA].) Because
Miller Import paid the premiums for its employees’ cov-
erage, the regulation undercuts rather than supports
the Marshalls’ position.
A “bare purchase” of insurance—one meeting the con-
ditions set forth in the Depatment of Labor’s regulation,
with no employer endorsement or involvement other than
deducting premiums from employees’ paychecks and for-
warding them to the insurer—does not conclusively
establish the existence of an ERISA plan. (Kanne v. Con-
necticut General Life Ins. Co., supra, 867 F.2d at p. 492.)
However, a purchase of insurance is evidence of the
establishment of a plan, and the purchase of a_ policy
covering a class of employees offers substantial evidence
that the employer has established a plan. (Donovan v.
Dillingham, supra, 688 F.2d at p. 1373.)
The Marshalls rely on Taggart Corp. v. Life & Health
Benefits Admin. (5th Cir. 1980) 617 F.2d 1208, 1211,
certiorari denied 450 U.S. 1030, for the proposition that
an employer must administer benefits under a group in-
surance policy in order for ERISA to apply. However,
in a case decided after Taggart, the Court of Appeals for
the Fifth Circuit rejected the contention that Taggart
held an employer’s purchase of an insurance policy to be
x
ieaiieteieeenee eee
12a
outside the scope of ERISA. (Memorial Hosp. System v.
Northbrook Life Ins. Co. (5th Cir. 1990) 904 F.2d 236,
241-242.) The court emphasized that Taggart involved
a claim by a corporation and its only employee that a mul-
tiple employer trust (MET) constituted an ERISA plan;
the corporation, through its president and sole employee,
subscribed to the MET in order to obtain health care for
the president and his family at reduced premiums. The
corporation and its president sued under ERISA to re-
cover benefits allegedly owing the president’s wife. The
United States District Court dismissed for lack of sub-
ject matter jurisdiction, concluding the evidence showed
the transaction simply involved a purchase of insurance
by the plaintiff for himself and his family. (See Tagger?
Corp. Vv. Efros (S.D.Tex. 1979) 475 F.Supp. 124, 127.)
The Court of Appeals affirmed, holding that neither the
MET nor the corporation’s subscription to its constituted
an ERISA plan. The court reasoned that the corporation
did no more than make payments to a purveyor of insur-
ance, evidently for tax reasons. (Taggart Corp. v. Life
& Health Benefits Admin., supra, 617 F.2d at p. 1211;
cf. 29 C.F.R. § 2510.8-3(b), (¢) (1) [plans without em-
ployees are not governed by ERISA; an individual and
his or her spouse shall not be deemed employees of a
business, whether incorporated or unincorporated, that is
wholly owned by the individual or by the individual and
the spouse].) Taggart, therefore, does not avail the Mar-
shalls.
Miller Import did more than make a “bare purchase”
of insurance. It selected the Bankers policy from among
other available policies, choosing to provide health care
benefits to all of its employees at its own cost, and to
provide the opportunity for its employees to enroll their
dependents in the group plan. Miller Import paid monthly
premiums, submitted enrollment cards and forms for
changes of beneficiary to Hall/MIA, and cancelled the
Bankers policy after six months’ time, substituting
(einen
13a
another group policy purchased from a different insurer.
Miller Import’s actions demonstrated beyond peradventure
that it established and maintained the policy. The fact
that Miller Import’s administrative functions under the
policy are minimal is perfectly in keeping with its intent
that Hall/MIA administer the plan that Bankers insured.
(See Memorial Hosp. System v. Northbrook Life Ins. Co.,
supra, 904 F.2d at pp. 242-243.) Delegation of plan ad-
ministration is a common feature of employee benefit
plans, one contemplated, as we have seen, by ERISA.
(Brundage-Peterson v. Compcare Health Services Ins.,
supra, 877 F.2d at p. 511; see 29 U'S.C. $$ 1002(16) (A),
1102(b) (2), 1105(¢) ; see also 29 C.F.R. § 2560.508-1(c),
(g)(2).) Such a delegation in no way precludes the
establishment or maintenance of an ERISA plan.
We conclude that an employer that—in order to pro-
vide its employees with any of the benefits specified in
ERISA—purchases a group insurance policy, contributes
toward premiums and remits them to the insurer, and
retains authority to terminate the policy or change its
terms has “established or maintained” an ERISA plan
regardless of whether it also processes claims or otherwise
administers the policy. (See also International Resources
v. New York Life Ins. (6th Cir. 1991) 950 F.2d 294, 297-
298 [applying Donovan and Brundage analyses to find
ERISA plan on similar facts].)
Our conclusion is consistent with the views of the
United States Department of Labor. In a 1976 interpre-
tive opinion, the department took the position that an
ERISA plan is created in an arrangement whereby the
employer purchases a group insurance policy providing
life, accident, and health benefits and contributes the en-
tire cost of premiums for employees, with employees con-
tributing the cost of premiums for covered dependents
through payroll deductions. (U.S. Dept. Labor, ERISA
Opn. Letter 76-06 (April 30, 1976).) The department’s
reasonable views, while not binding on us, are entitled
l4a
to deference. (Massachusetts v. Morash (1989) 490 U.S.
107, 116.)
Language in several decisions by California Courts
of Appeal can be read to suggest that employer involve-
ment in the administration of policy benefits is necessary
in order to trigger the application of ERISA. In Rizzi v.
Blue Cross of So. California (1988) 206 Cal.App.3d 380
(Rizzi), the first of these decisions, the court relied on
Fort Halifax, supra, 482 U.S. 1, to declare that ERISA’s
concern with regulating the administrative integrity of a
program arises when an employer provides benefits in a
way that requires the employer’s administration of funds.
The Rizzi court stated that “|[t]he ultimate determination
depends on an evaluation of all the circumstances, keeping
in mind ERISA’s purpose of regulating an employer’s ad-
ministration of benefit plans.” (206 Cal.App.3d at p. 390,
emphasis in original; see also Lambert v. Pacific Mutual
Life Ins. Co. (1989) 211 Cal.App.38d 456, 463-465 [ap-
plying similar analysis}.)
As the court in Hughes v. Blue Cross of Northern Cali-
fornia (1989) 215 Cal.App.8d 832 recognized, however,
Rizzi’s language must be read in light of its actual hold-
ing: affirmance of summary judgment dismissing an
action on the ground of ERISA preemption “on a showing
only that the employer procured the group insurance policy
for the benefit of its employees, maintained control over
amendment or termination of the policy, and performed
certain incidental services, such as transmission of sub-
scription charges and notices.” (Jd. at pp. 854-855.)
Rizzi, supra, 206 Cal.App.3d 380, as the court below
and the parties seem to agree, involved facts virtually
indistinguishable from those in this case. Unlike the court
below, we believe Rizzi correctly held the employee’s action
preempted. Rizzi’s emphasis on the employer’s adminis-
tration of the program, however, predicated on an over-
expansive reading of Fort Halifax, supra, 482 U.S. 1,
does not accurately reflect the law.
a
l5a
Our conclusion that Miller Import established and
maintained a plan under ERISA is not altered by the
fact that Miller Import neither complied with ERISA’s
requirements nor intend to create an ERISA plan. (Scott
Vv. Gulf Ow Corp., supra, 754 F.2d at pp. 1503-1504;
see also Firestone Tire & Rubber Co. v. Bruch (1989) 489
U.S. 101, 105 [claims under termination pay plan, estab-
lished by employer unaware of ERISA’s applicability and
requirements, adjudicated under ERISA].) The test of
whether a benefit plan is exempt from ERISA is not one
of the employer’s motivation. (Shaw v. Delta Air Lines,
Inc., supra, 463 U.S. at p. 107.) An employer cannot “opt
out” of ERISA by noneompliance.
For the first time on appeal, the Marshalls assert that
defendants are equitably estopped to raise preemption as
a defense. Assuming, without deciding, that the doctrine
of estoppel might in an appropriate case be applied to
avoid ERISA preemption, we decline to address the issue
in the absence of a fully developed record. Although the
Marshalls refer to evidence that the defendants failed to
disclose that the plan was governed by ERISA, they cite
no evidence establishing that defendants were aware
either that the policy was subject to ERISA or that
ERISA would preclude the Marshalls from asserting state
law causes of action. Nor do they cite evidence to support
their contention that they relied on defendants’ conduct
to their injury. (See Ellenburg v. Brockway (9th Cir.
1985) 763 F.2d 1091, 1096 [prerequisites to application
of equitable estoppel].) Additionally, defendants suggest
*The Marshalls cite a number of cases in support of their estop-
pel argument, but none is apposite; the cases hold that a defend-
ant may be estopped to deny coverage under ERISA of benefits
promised in a plan, not that a defendant may be estopped to raise
the defense of ERISA preemption in an action under state law.
(Davidian v. Southern California Meat Cutters Union (9th Cir.
1988) 859 F.2d 134, 186; Dockray v. Phelps Dodge Corp. (9th Cir.
1986) 801 F.2d 1149, 1155; see also Black v. TIC Investment Corp.
(7th Cir. 1990) 900 F.2d 112, 114-115.)
16a
that it was Miller Import’s conduct, if anyone’s that might
give rise to an estoppel. (See 29 U.S.C. §§ 1002 (16) (A),
(B) [plan “administrator” defined as person so desig-
nated under plan’s governing instrument; absent specific
designation, administrator is plan’s sponsor, the em-
ployer], 1021, 1024 [administrator’s filing, reporting, and
disclosure duties].) These unsettled factual issues and
insufficiently briefed legal arguments render this an in-
appropriate case in which to depart from the ordinary
rule limiting an appellate decision to issues the parties
raised below. (See Panopluos v. Maderis (1956) 47 Cal.
2d 337, 340-341; Blatt v. Farley (1990) 226 Cal.App.3d
621, 627.)
The Marshalls urge that when neither the employer
purchasing the group insurance policy covering its em-
ployees nor the insurer or administrator of the policy
complies with ERISA requirements, ERISA’s objectives
are not served by preemption of state law remedies. We
cannot agree. Although failure to comply with ERISA’s
reporting requirements may subject the responsible fidu-
ciaries to statutory penalties and liability for relief (see
29 U.S.C. $$ 1109, 1132(c) (2)), it does not deprive em-
ployees of their right to sue under ERISA to secure their
benefits. (Blau v. Del Monte Corp. (9th Cir. 1984) 748
F.2d 1348, 1352; 29 U.S.C. §1132(a)(1)(B).) Con-
gress has clearly expressed its intent that the civil en-
forcement provisions of ERISA be the exclusive vehicle
for actions by ERISA-plan participants and beneficiaries
asserting improper processing of claims for benefits.
(Commercial Life Ins. Co. v. Superior Court, supra, 47
Cal.3d at p. 480.) ERISA’s enforcement scheme care-
fully balances the need for prompt and fair claims settle-
ment procedures against the public interest in encour-
aging the formation of employee benefit plans. The policy
choices reflected in the inclusion of certain remedies and
the exclusion of others under the federal scheme would be
completely undermined if ERISA-plan participants and
beneficiaries were free to obtain remedies under state law
17a
that Congress rejected in ERISA. (Pilot Life Ins. Co. Vv.
Dedeaux, supra, 481 U.S. at p. 54.)
DISPOSITION
The judgment of the Court of Appeal is reversed.
PANELLI, J.
WE CONCUR:
Lucas, C.J.
KENNARD, J.
ARABIAN, J.
BAXTER, J.
GEORGE, J. ~
18a
DISSENTING OPINION BY MOSK, J.
I dissent. The majority misinterpret the holding of
Fort Halifax Packing Co. v. Coyne (1987) 482 U.S. 1
(hereinafter Fort Halifax), as well as other cases per-
mitting preemption of state law by the Employee Retire-
ment Income Security Act (ERISA) only if the employer
takes a substantial role in administering an insurance
policy. Moreover, their conclusion that the employer in
this case “established and maintained” an “employee bene-
fit plan” is based on reasoning inconsistent on the face
of the opinion.
In analyzing the preemption issue, it must be kept
in mind the “basic assumption [is] that Congress did not
intend to displace state law.” (Maryland v. Louisiana
(1981) 451 U.S. 725, 746.) The presumption applies
most strongly where, as here, Congress legislates in an
area traditionally occupied by the states (Rice v. Santa Fe
Elevator Corp. (1947) 331 U.S. 218, 230), such as tort
law. Since there is a strong presumption against pre-
emption, we should not, as the majority do, read the pro-
visions of ERISA expansively, so as to enlarge the scope
of its preemption language.
Fort Halifax (supra, 482 U.S. 1) is directly contrary
to the majority’s holding. In distinguishing that case, the
majority rely on the fact that the severance payment
there involved was made directly by the employer to the
employee, rather than pursuant to an insurance policy.
However, the rationale of that case cannot be so easily
dismissed. Almost the entire analysis in the opinion re-
lates to the purpose served by the preemption provisions
of ERISA and the reason why that purpose is not vio-
lated unless the employer performs such administrative
tasks as the calculation and payment of benefits pursuant
to an “employee benefit plan.”
The opinion in Fort Halifax provides three reasons in
support of its conclusion that the Maine statute requiring
RRR 0
\
19a
payment of severance benefits in that case was not pre-
empted by ERISA. First, ERISA does not preempt state
laws that grant employee benefits, but only those that
relate to an “employee benefit plan.” (482 U.S. at p. &.)
A payment to an employee that does not require ongoing
administrative activity by the employer is not such a plan.
Second, one reason only an “employee benefit plan” is
Subject to preemption is that an employer who adminis-
ters such a plan would be subject to state regulation, rais-
ing the prospect of a conflict between ERISA and state
regulation. That is, an employer-administered plan would
require the employer to perform functions like determin-
ing the eligibility of claimants and calculating benefit
levels. The most efficient way to meet these obligations is
to provide a set of standard procedures to guide the
processing of claims and disbursement of benefits. This
conduct would be subject to state regulatory requirements,
thereby interfering with ERISA’s goal of assuring that
administrative practices of a benefit plan will be gov-
erned by a single set of regulations. (Fort Halifax,
Supra, 482 U.S. at pp. 8-14.)
Third, the statute was not preempted by ERISA be-
cause the severance payment did not implicate a second
concern of the preemption provision, namely, the regula-
tory purposes of ERISA. The fiduciary standards con-
tained in the federal legislation were designed to safe-
guard employees who were the beneficiaries of an “em-
ployee benefit plan” from such abuses by an employer as
self-dealing, imprudent investment, and misappropriation
of plan funds. “Only ‘plans’ involve administrative ac-
tivity potentially subject to employer abuse.” (Fort Hali-
fax, supra, 482 U.S. at p. 16.) Without such activity
by the employer, “[i]t would make no sense for pre-
emption to clear the way for exclusive federal] regulation,
for there would be nothing to regulate.” (Ibid.)
In sum, Fort Halifax holds that state laws are not
preempted by ERISA unless the employer administers an
. 20a
“employee benefit plan,” because it is only such adminis-
tration that would violate the dual purpose of the pre-
emption provision, i.e., the avoidance of conflict between
state and federal regulations governing administration
of the plan, and the danger that the employer might
abuse its administrative function.
The dissenting opinion in Fort Halifax also under-
stands the majority as holding that the issue of preemp-
tion turns on whether the employer has established an
“administrative scheme” for paying benefits. (“I dis-
sent because it is incredible to believe that Congress
intended that the broad preemption provision contained
in ERISA would depend upon the extent to which an
employer exercised administrative foresight in preparing
for the eventual payment of employee benefits.” (Fort
Halifax, supra, 482 U.S. 1, 23, dis. opn. of White, J.)
The majority in the instant case barely mention the
high court’s reasoning in Fort Halifax. Instead, they
attempt to distinguish the decision on the ground that the
employer there paid the severance benefit directly to the
employee. This attempted distinction is patently invalid.
The reason the severance payment in that case did not
invoke preemption, as the court expressly stated, was be-
cause it did not require administration by the employer;
it was not, as the majority here claim, because the pay-
ment was made directly to the employee by the employer.
(“Some severance benefit obligations by their nature
necessitate an ongoing administrative scheme, but others
do not. Those that do not, such as the obligation imposed
in this case, simply do not involve a state law that ‘re-
late[s] to’ an employee benefit ‘plan.’” (Fort Halifax,
supra, 482 U.S. at p. 18.)
If anything, direct payment by the employer is more
likely to indicate preemption under the Supreme Court’s
rationale than indirect payment, such as payment-by an
insurer. The court describes the type of activities of an
employer that will invoke federal preemption, as follows:
neem
2la
Preemption occurs if the employer “makes a commitment
systematically to pay certain benefits” by undertaking
such activities as “determining the eligibility of claim-
ants, calculating benefit levels, making disbursements . . .
and keeping appropriate records in order to comply with
applicable reporting requirements.” (Fort Halifax, supra,
482 U.S. at p. 9, italics added.) Thus, the employer who
pays the employee directly is, under the Supreme Court’s
analysis, more involved in administration of a_ benefit
- plan and therefore more likely to invoke preemption than
one who pays a benefit only by purchasing a policy of
insurance.
No case, so far as I am aware, has interpreted the
holding of Fort Halifax as being confined merely to cases
in which the employer made direct payment to the em-
ployee, nor is there any authority for the proposition that
employer administration of a policy is irrelevant to the
issue of preemption. A number of cases following the
high court’s decisiun have properly viewed it as standing
for the proposition that an employer’s involvement in plan
administration is the touchstone of the preemption analy-
sis. (Gahn v. Allstate Life Ins. Co. (5th Cir. 1991) 926
F.2d 1449, 1452 [although the court ultimately concluded
that the record was insufficient to enable it to decide
whether a benefit plan was involved, the principle that
the employer’s “involvement with the administration of
the plan” is the determining factor in the preemption
analysis was clearly stated]; Taggart Corp. v. Life &
Health Benefits Admin. (5th Cir. 1980) 617 F.2d 1208,
1210-1211; Turnbow v. Pacific Mut. Life Ins. Co. (Nev.
1988) 765 P.2d 1160, 1161; Lambert v. Pacific Mutual
Life Ins. Co. (1989) 211 Cal.App.3d 456, 463-465; Rizzi
v. Blue Cross of So. California (1988) 206 Cal.App.3d
380, 389 [“the line of demarcation between ERISA plans
and non-ERISA plans depends on the level of involvement
by the employer in the program so as to warrant federal
regulation of the administrative integrity of the pro-
gram’’}.)
|
22a
Furthermore, the majority’s reasoning is inconsistent
on its face. While it concedes that the mere purchase of
insurance does not establish a plan, it effectively holds
that preemption occurs if the employer does no more than
make such a purchase. Thus, it concludes that a plan
exists if a “reasonable person could ascertain the intended
benefits, beneficiaries, source of financing, and procedures
for receiving benefits.” I fail to see how an employer can
purchase any insurance without the specification of- these
details.
The majority’s conclusion that the employer in this case
did more than merely purchase insurance suffers from
the same defect. Its conclusion is based on the following
factors: The employer (1) selected the policy from among
other available policies, (2) chose to provide health care
benefits to all of its employees at its own cost and to
provide the opportunity for dependent coverage, (3) paid
the monthly premiums, (4) submitted enrollment cards
and forms for changes of beneficiary to the administrator,
and (5) cancelled the policy after six months and sub-
stituted another policy from a different insurer. Aside
from number 4 on this list, an employer who makes a
“bare purchase” of insurance must perform all these
tasks, assuming that it has the power to cancel the policy,
as the employer had in this case.' That is, the employer
cannot purchase insurance without choosing a policy and
paying the premiums. Only the fact that the employer
submitted enrollment and change of beneficiary forms to
the insurer’s administrator goes beyond “mere purchase.”
The notion that an insurer is totally immunized from
liability under state law because the employer rather
than the employee transmits these routine forms to the
insurer is incomprehensible.
The same problem with the majority’s reasoning is
evident in its conclusion that the employer “established
1The fact that the employer was not obligated to continue to
provide health benefits weighs against preemption. (Donovan Vv.
Dillingham (11th Cir. 1982) 684 F.2d 1367, 1374-1375.)
23a
and maintained” an ERISA plan because it purchased a
group insurance policy, contributed to premiums and re-
mitted them to the insurer, and retained the authority to
terminate it. How can an employer purchase a _ policy
without complying with these requirements?
Today’s decision deprives countless Californians de-
frauded by insurers of the protection afforded by state
law. It is ironic indeed that a federal statute designed
to defend the interests of insured employees is construed
to sanction such a result. Sadly, it bears repeating, as
stated in my dissent in Garvey v. State Farm Fire &
Casualty Co. (1989) 48 Cal.3d 395, 416, “in this court,
the insurer wins and the insureds lose.”
I would affirm the judgment of the Court of Appeal.
Mosk, J.
24a
APPENDIX B
IN THE COURT OF APPEAL
OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
2d Civil No. B050259
(Super. Ct. No. C544301)
LINDA BROWN MARSHALL,
DONALD MARSHALL,
Plaintiffs and
Appellants,
Ve
BANKERS LIFE AND CASUALTY COMPANY, et al.,
Defendants and
Respondents.
[Filed June 10, 1991]
APPEAL from a judgment of the Superior Court of
Los Angeles County. Norman L. Epstein, Judge. Re-
versed.
Greene, Broillet, Taylor & Wheeler, Randy McMurray
and Timothy J. Wheeler; Mandell, Lewis & Goldberg and
Michael L. Goldberg, for Plaintiffs and Appellants.
O’Neal & Wodin and Mare J. Wodin, for Defendants
and Respondents.
25a
Plaintiffs and appellants Linda Brown Marshall and
Donald Marshall appeal a judgment in favor of defend-
ants and respondents Bankers Life and Casualty Com-
pany (Bankers) and Frank B. Hall and Company of
California (EBH), (collectively, defendants).
The issue presented is whether the Marshalls’ action
arising out of an employment-based group health insur-
ance program is preempted by ERISA.’
SUMMARY STATEMENT
The purpose of ERISA is to protect employees from
potential abuses as a result of employer involvement in
the administration of benefit plans. Employee insurance
benefits which are not provided through such plans are
outside the contemplation of ERISA and are governed by
California common law and statutory law. Insurance
companies which merely contract with employers for em-
ployee health benefits cannot hide behind nonexistent
ERISA plans to avoid California bad faith actions.
Due to the focus of ERISA, preemption thereunder
turns on the extent to which the employer is involved in
the administration of a benefit program so as to impli-
cate the concerns which gave rise to ERISA. Here, there
was no administrative activity potentially subject to em-
ployer abuse so that ERISA’s concern with regulating
the administrative integrity of the program was not im-
plicated. The judgment is therefore reversed.
FACTUAL AND PROCEDURAL BACKGROUND
After commencing the action on April 23, 1985, the
Marshalls filed the operative pleading, a fourth amended
complaint, on May 23, 1986, naming Bankers; FBH; and
MIA Administrators, a subsidiary of FBH.
The plaintiffs alleged: Defendants had failed and re-
fused to pay certain medical benefits allegedly due them
1 Employment Retirement Income Security Act (29 U.S.C. section
1001 et seq.).
26a
under a group health insurance policy issued by Bankers
to Donald Marshall’s employer, Miller Import Datsun,
Inc. (Miller), with respeet to the hospitalization and
treatment of Donald Marshall’s wife, Linda Marshall,
from May 5, 1983 to June 26, 1983. Defendants had
denied the claim on the ground her hospitalization was
for preexisting sickle-cell anemia, and under the policy,
preexisting conditions were allowed a maximum benefit of
$1,000. However, Linda Marshall was not being treated
for sickle-cell anemia but for aftereffects of an aneurysm
and brain surgery, and these facts were known to de-
fendants.
The Marshalls pled six causes of action against Bank-
ers, the insurer, as well as FBH, the administrator ap-
pointed by Bankers, as follows: (1) breach of the duty
of good faith and fair dealing; (2) fraud (against
Bankers); (3) fraud (against FBH); (4) breach of
statutory duties (Ins. Code, § 790.03); (5) intentional
infliction of emotional distress and willful and wanton
misconduct; and (6) negligence.
The thirteenth affirmative defense of defendants’ an-
swer asserted that all causes of action were preempted
by ERISA. Thereafter, both sides unsuccessfully sought
summary judgment on the preemption issue, and the
matter proceeded to trial before the court without a jury.
The trial court birfurcated the issue of ERISA pre-
emption and tried the matter on stipulated facts.
a. Contents of the stipulation.
The stipulation consisted of 24 defendants’ facts and
25 plaintiffs’ facts. It established the following:
Bankers approved Miller’s application for a group
health insurance policy, and coverage was in effect from
March 1, 19838, to October 1, 1983. Miller received no-
compensation or consideration from Bankers for the sub-
ject insurance policy. Miller provided this coverage,
27a
which included health, life and disability insurance, to
all its employees as part of an employee benefit package.
Donald Marshall, as a Miller employee, was enrolled as
an insured, while Linda Marshall was enrolled for de-
pendent coverage.
While Miller’s employee manual stated all employees
would be provided with group health insurance coverage,
Miller was not required to provide any health insurance
to its employees pursuant to any written contract or col-
lective bargaining agreement. Miller had the authority
and the right at any time to cancel the subject group
insurance policy and eventually it did so.
While the policy was in effect, Miller was billed by
FBH and paid the premiums on a monthly basis out of
Miller’s own account. Miller did not set aside a separate
fund for payment of the premiums. Miller paid the
premiums for its employees in their entirety. Miller also
paid the premiums for covered dependents, such as Linda
Marshall, but deducted the amount of dependents’ pre-
miums from the employees’ paychecks.
Miller was provided with enrollment cards and change
forms, which it provided to its employees, and then sent
the completed forms to FBH. Miller did nothing with
completed enrollment cards or change forms, other than
to forward them to FBH and to insert a copy in the em-
ployees’ files.
Miller added or deleted names or employees who were
hired or terminated and sent those changes to FBH.
FBH or Bankers had all responsibility for determining
whether an employee or dependents were eligible for cov-
erage. FBH calculated and made all adjustments to Mil-
ler’s premiums.
Miller also was provided with claim forms which it
passed on to its employees. All completed claim forms
were submitted directly by the employee or health care
provider to FBH. FBH had been appointed by Bankers
28a
as its agent to administer the plan and FBH processed
all claims. Miller did not review the completed claim
forms and had no responsibility for evaluating claims
which had been submitted. Nor was Miller responsible
for monitoring how much money was available for pay-
ing claims. Miller could not deny any benefits under the
policy. Benefits were paid directly to the employee or to
the health care provider at the employee’s request. Miller
never handled the funds used to pay benefits and had no
opportunity to misappropriate or improvidently invest
those funds.
Miller also was provided with informational booklets,
as well as a three-page explanatory letter, which it dis-
tributed to its employees. FBH sometimes sent informa-
tion to Miller’s employees via Miller. Occasionally, FBH
requested Miller to have employees complete various
forms, and Miller provided the employees with the forms.
Personnel at Miller would attempt to respond to em-
ployees’ insurance questions which arose. If Miller could
not resolve the problem, it would contact FBH or place
the employee in contact with FBH. FBH directed Miller
to have its employees contact FBH regarding benefits
or claims. Donald Marshall spoke with FBH personnel
regarding policy questions. He never spoke with any-
one at Miller regarding the subject insurance.
Miller did not intend to create an ERISA plan. Donald
Marshall was never informed his rights and obligations
under the policy were governed by ERISA, and he was
never told the insurance was to be an ERISA plan.
Miller never filed any reports with the Department of
Labor with respect to the subject insurance policy. Miller
had no offices or employees outside California.
b. Trial court’s ruling.
Following argument by counsel, the matter was taken
under submission. Thereafter, the trial court held:
QO
29a
The employer’s involvement in the program was “not
extensive.” There was no evidence Miller specifically in-
tended to establish a program that would be covered by
ERISA. But, the program which was established was for
ongoing benefits of the type typically covered by ERISA.
The employer paid employees’ premiums, although the
employees paid the cost of dependent coverage. The em-
ployer had the power to terminate the plan. The em-
ployer collected dependent premiums and transmitted those
funds. The employer also performed various administra-
tive duties such as disseminating insurance pamphlets
to employees, handling enrollment forms and changes,
answering questions and forwarding some questions to
FBH and assisting in claims processing.2 The employer
did not handle money received by FBH, nor disburse bene-
fits, nor make decisions regarding coverage or benefit pay-
ments on claims.
Despite the employer’s limited involvement, the trial
court felt bound by California authority to hold the Mar-
shalls’ action was barred. It concluded: “While the em-
ployer’s involvement is not extensive, application of the
ERISA standards to these facts, under established prece-
dent (see Rizzi v. Blue Cross of So. California... and
cases cited; Hughes v. Blue Cross of No. California .. .
leads to the conclusion that the involvement is sufficient
to establish the benefit program as an ERISA plan. [{]
: [P]laintiffs’ causes of action are therefore pre-
empted[.]”
The Marshalls appealed.
CONTENTIONS
The Marshalls contend there is insufficient evidence to
support the finding the subject health insurance policy
was an ERISA “plan.” The employer’s involvement in
2 The finding that the employer assisted in claims processing is
unsupported by the stipulation.
|
30a
administering the program was limited and ministerial
and therefore did not implicate the purpose of ERISA.
DISCUSSION
1. General ERISA principles.
ERISA, which is found at 29 United States Code sec-
tion 1001 et seq., in the chapter entitled Employee Retire-
ment Income Security Program, “comprehensively regu-
lates employee pension and welfare plans.” (Metropolitan
Life Ins. Co. Vv. Massachusetts (1985) 471 U.S. 724, 732
[85 L.Ed.2d 728]; 29 U.S.C. §§ 1002, 1003.)
The congressional findings and declaration of policy
underlying ERISA are set forth in 29 United States Code
section 1001. This section recognizes the proliferation of
employee benefit plans, certain abuses resulting in em-
ployee loss of retirement benefits, and the need for Con-
gress to establish certain minimal standards to assure
“the equitable character of such plans and their financial
soundness.” (29 U.S.C. § 1001, subd. (a).)
The general objective of this legislation was to increase
the number of individuals in employer-financed benefit
plans and to “ ‘assure that those who do participate
actually receive benefits and do not lose benefits as a
result of unduly restrictive forfeiture provisions or fail-
ure of the pension plan to retain sufficient funds to meet
its obligations.’ [1974] U.S.Code Cong. & Admin.News
pp. 4676-77.” (In re C. D. Moyer Co. Trust Fund (E.D.
Pa. 1977) 441 F.Supp. 1128, 1131, affd. without pub.
opn. (3d Cir. 1978) 582 F.2d 1273, 1275.)
The act “protects interstate commerce and the partici-
pants of employee benefit plans by requiring disclosure
to participants, establishing standards of conduct and fi-
duciary duties, and providing for remedies, sanctions, and
ready access to federal courts. (29 U.S.C. § 1001(b).)”
(Commercial Life Ins. Co. v. Superior Court (1988) 47
———
3la
Cal.3d 473, 476; see Pilot Life Ins. Co. v. Dedeaux (1987)
481 U.S. 41, 44 [95 L.Ed.2d 39].)
ERISA contains a broad preemption provision which
States that with certain exceptions, its provisions “shall
supersede any and all State laws insofar as they may now
or hereafter relate to any employee benefit plan... .”
(29 U.S.C. § 1144(a).)* The preemptive aspect of ERISA
protects employers from conflicting and inconsistent state
and local regulation of employee benefit plans. (Shaw v.
Delta Air Lines, Inc. (1983) 463 U.S. 85, 99 [77 L.Ed.2d
490]; Fort Halifax Packing Co. v. Coyne (1987) 482
US. 1, 10 [96 L.Ed.2d 1].) “In analyzing whether
ERISA’s preemption is applicable... , ‘ “the purpose of
Congress is the ultimate touchstone.”’” (Fort Halifax
Packing Co., supra, at p. 8.)
ERISA only preempts state laws relating to “employee
benefit plans”, not all state legislation regarding employee
benefits. (Fort Halifax Packing Co. v. Coyne, supra, 482
U.S. at pp. 7-8.) 29 United States Code section 1002 (1)
defines an “‘ ‘employee welfare benefit plan’” as “any
plan, fund, or program which was heretofore or is here-
after 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 other-
wise, (A) medical, surgical, or hospital care or benefits,
or benefits in the event of sickness, accident, disability,
[or] death ....” The Act “does not further define ‘plan,
fund, or program.’” (Massachusetts v. Morash (1989)
490 U.S. 107, 114 [104 L.Ed.2d 98].)
% ERISA preempts private causes of action under Insurance Code
section 790.03, subdivision (h), as to those cases which survive
Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d
287. (Commercial Life Ins. Co., supra, 47 Cal.3d at pp. 484-485. )
32a
a. ERISA plan is a question of fact.
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.” (Kanne v. Connecticut General Life Ins. Co.
(9th Cir. 1988) 867 F.2d 489, 492.)
The presumption is against preemption and it is a de-
fendant’s burden to prove the facts necessary to estab-
lishing an ERISA defense. (Elsworth v. Beech Aircraft
Corp. (1984) 87 Cal.8d 540, 548; Kanne, supra, 867
F.2d at p. 492, fn. 4; Metropolitan Life Ins. Co. Vv. Mas-
sachusetts, swpra, 471 U.S. at p. 741.)
Here, defendants argue Miller’s plan is an ERISA
plan within the meaning of section 1002 because it is (1)
a plan, fund or program, (2) established or maintained
(3) by an employer (4) for the purpose of providing
medical, surgical or hospital care benefits (5) to partici-
pants or their beneficiaries. (Donovan v. Dillingham
(11th Cir. 1982) 688 F.2d 1867, 1871.) However, merely
to repeat the language of the statute in its application to
this fact situation begs the question.
2. The administrative scheme test as to what consti-
tutes a plan.
Section 2510.3-1(j), 29 Code of Federal Regulations, a
Department of Labor regulation, states an ERISA plan
does not exist if, inter alia, no contributions are made by
the employer.‘ However, it does not necessarily follow
4The regulation states no ERISA plan exists if: “(1) No con-
tributions are made by an employer or employee organization;
[{] (2) Participation [sic] the program is completely voluntary
for employees or members; [{] (3) The sole functions of the em-
ployer or employee organization with respect to the program are,
without endorsing the program, to permit the insurer to publicize
the program to employees or members, to collect premiums through
payroll deductions or dues checkoffs and to remit them to the
insurer; and [{%}] (4) The employer or employee organization re-
33a
that the mere payment of premiums by an employer is
sufficient to give rise to an ERISA plan. (Lambert Vv.
Pacific Mutual Life Ins. Co. (1989) 211 Cal.App.3d 456,
464.) “A bare purchase of insurance, ... , does not by
itself constitute an ERISA plan (although it may be
evidence of the existence of an ERISA plan).” (Kanne
v. Connecticut General Life Ins. Co., supra, 867 F.2d at
p. 492.)
In Fort Halifax Packing Co. v. Coyne, supra, 482 U.S.
1, the United States Supreme Court considered whether a
Maine statute requiring an employer to provide a one-
time severance payment to employees in the event of a
plant closing was preempted by ERISA. .
Fort Halifax observed: “It is... clear that ERISA’s
pre-emption provision was prompted by recognition that
employers establishing and maintaining employee benefit
plans are faced with the task of coordinating complex
administrative activities.” (Fort Halifax Packing Co.,
supra, 482 U.S. at p. 11.) An employer that ‘makes a
commitment systematically to pay certain benefits under-
takes a host of obligations, such as determining the eligi-
bility of claimants, calculating benefit levels, making dis-
bursements, monitoring the availability of funds for ben-
efit payments, and keeping appropriate records in order
to comply with applicable reporting requirements. The
most efficient way to meet these responsibilities is to
establish a uniform administrative scheme, which provides
a set of standard procedures to guide processing of claims
and disbursement of benefits. Such a system is difficult to
achieve, however, if a benefit plan is subject to differing
regulatory requirements in different States.” (/d., at p.
9.)
ceives no consideration in the form of cash or otherwise in connec-
tion with the program, other than reasonable compensation, ex-
cluding any profit, for administrative services actually rendered in
connection with payroll deductions or dues checkoffs.” (29 C.F.R.
§ 2510-3-1(j) (1990).)
34a
The court held the Maine statute was not preempted
because it “‘neither establishes, nor requires an employer
to maintain, an employee benefit plan” under ERISA.
(Fort Halifax Packing Co., supra, 482 U.S. at p. 12.)
The requirement of a one-time severance payment did not
create a “need for an ongoing administrative program for
processing claims and paying benefits.” (/bid.) As a re-
sult, the Maine statute did not “[create] the potential
for the type of conflicting regulation of benefit plans that
ERISA pre-emption was intended to prevent. [Fn.
omitted.]”’ (Jd., at p. 14.)
Further, not only did the Maine statute fail to impli-
cate the concerns of ERISA’s preemption provision, but
it also failed to implicate the regulatory concerns of
ERISA itself. (Fort Halifax Packing Co., supra, 482
U.S. at p. 15.) As indicated, ERISA was enacted because
Congress found it desirable that disclosure be made and
safeguards be provided with respect to the establishment,
operation, and administration of employee benefit plans.
(Ibid.) ERISA’s fiduciary standards were intended to
prevent abuses of the special responsibilities borne by
those dealing with such plans, and to shield employees
from employer self-dealing, imprudent investing, and mis-
appropriation of plan funds. (Jbid.) “The focus of
[ERISA] thus is on the administrative integrity of bene-
fit plans—which presumes that some type of administra-
tive activity is taking place.” (Jbid.) Where there is no
“plan” involving administrative activity potentially sub-
ject to employer abuse, preemption does not serve the
overall purpose of ERISA. (/d., at p. 16.)°°
5 The dissenting opinion in Fort Halifax criticized the majority’s
rule making preemption turn on the existence of an administra-
tive scheme. (Fort Halifax Packing Co., supra, 482 U.S. at p. 23.)
It urged the characterization of certain employee benefits as non-
administrative would undermine Congress’ intent to make em-
ployee benefit plans a matter of exclusive federal regulation. (/bid.)
® See also the pre-Fort Halifax case of Drummond v. McDonald
Corp. (1985) 167 Cal.App.3d 428, 432, wherein an ERISA plan
|
35a
Since Fort Halifax, the United States Supreme Court
again has addressed the issue of employer involvement in
benefit administration. In Massachusetts v. Morash,
supra, 490 U.S. at page 109, the court considered the
application of ERISA to a company’s policy of paying
discharged employees for their unused vacation time. It
observed the distinguishing feature of most benefit plans
is that “they accumulate over a period of time and are
payable only upon the occurrence of a contingency out-
side of the control of the employee.” (Jd., at pp. 115-
116.) The court held the company’s policy did not con-
stitute an employee welfare benefit plan, noting “Con-
gress’ primary concern [in enacting ERISA] was with
the mismanagement of funds accumulated to finance em-
ployee benefits and the failure to pay employees benefits
from accumulated funds.” (/d., at p. 115.)
Thus, under federal statutory and decisional law, the
existence of an employee benefit plan subject to preemp-
tion under ERISA depends on the extent to which an
employer is involved in the administration of the benefit
program so as to implicate the concerns which gave rise
to ERISA.’
existed where the employer processed claims and performed other
administrative functions.
‘ Although the employer in Pilot Life paid disability insurance
premiums and forwarded completed claim forms to the insurer,
which processed the claims, the issue addressed in that case was
whether ERISA preempts state common law tort and contract ac-
tions asserting improper processing of claims made under an in-
sured employee benefit plan. (Pilot Life Ins. Co., supra, 481 U:S.
at p. 43.) The existence of an ERISA-regulated plan was not ad-
dressed and apparently, simply was assumed.
Similarly, in Metropolitan Life Ins. Co. v. Taylor (1987) 481
U.S. 58, 60 [95 L.Ed.2d 55], the first paragraph of Part I simply
states the employer “set up an employee benefit plan subject to
the provisions of ERISA for its salaried employees.”
36a
3. California appellate developments.
a. The Rizzi decision.
In Rizzi v. Blue Cross of So. California (1988) 206
Cal.App.3d 380, 382, an employee insured under his em-
ployer’s group health policy brought an action against the
insurer, alleging, inter alia, violation of Insurance Code
section 790.03 in the denial of his claim for benefits.
Rizzi affirmed a grant of summary judgment in favor of
the insurer due to ERISA preemption.
While acknowledging that Fort Halifax arose in a dif-
ferent factual context, the Rizzi court recognized the
import of that decision. Rizzi stated: “Applying by
analogy the Fort Halifax analysis here, the line of de-
mareation between ERISA plans and non-ERISA plans
depends on the level of involvement by the employer in
the program so as to warrant federal regulation of the
administrative integrity of the program. That is, when
employers provide benefits to employees in a manner
which involves the employer’s administration of funds
to be used for the employees, ERISA’s concern with regu-
lating the administrative integrity of the program arises.
This in turn supports characterizing [a] program as an
ERISA ‘plan.’” (Rizzi v. Blue Cross of So. California,
supra, 206 Cal.App.3d at p. 389.)
After summarizing the evidence presented in the case
before it, Rizzi concluded: “We are satisfied . . . that
the employer contributed to the insurance premiums. In
light of that fact in context with the form of the Blue
Cross plan showing other employer controls over opera-
tion of the program, Blue Cross carried its burden at the
summary judgment hearing to establish the existence of
an ERISA plan.” (Rizzi, supra, 206 Cal.App.3d at p.
391, italics added. )
The plan under consideration in Rizzi required the
employer to pay monthly to Blue Cross, in advance, all
subscription charges of its subscribers, i.e. eligible em-
37a
ployees. If the employer failed to pay any installment,
the agreement would terminate without notice. If the
subscriber ceased to be employed by the employer, his or
her certificate would terminate, but the the subscriber
was entitled to apply for a conversion privilege. If Blue
Cross or the employer terminated the agreement, then
individual certificates would be terminated without any
conversion privilege. Blue Cross could not cancel any
individual certificate, and, any notice required of Blue
Cross would be deemed sufficient if mailed to the employer.
(Rizzi, supra, 206 Cal.App.3d at pp. 390-391.)
Nothing in the recitation of this evidence supports
Rizzi’s conclusion of “other employer controls over opera-
tion of the program” in addition to payment of subscrip-
tion charges. (Rizzi, supra, 206 Cal.App.3d at p. 391.)
The employer’s role in Rizzi essentially was limited to
paying the monthly premiums. The fact the employer
purchased the policy, could control the termination of the
policy, and passed along various notices, does not amount
to employer administration of a benefit plan.
If such slight involvement were sufficient to invoke
ERISA, every garden variety employee health insurance
benefit program would fall within ERISA and would
subject the paying employer, large or small, to ERISA’s
regulatory burdens. Rizzi’s overbroad reading would re-
quire all these employers to choose between the statute’s
detailed requirements for reporting and disclosure or dis-
continuing their health insurance benefits. (See Massa-
chusetts v. Morash, supra, 490 U.S. at p. 118.)
While the Fort Halifax dissent would support Rizzi’s
sweeping approach to preemption (Fort Halifax Packing
Co., supra, 482 U.S. at p. 23), the controlling opinion
in Fort Halifax rejected such an approach in favor of an
administrative scheme test based upon actual employer
involvement (id., at p. 12). The Rizzi court could not en-
large the scope of preemption under federal law. Thus,
while Rizzi’s recitation of Fort Halifax is accurate,
38a
Rizzi’s application of those principles to its fact situa-
tion is wrong and we respectfully decline to follow it.*
b. Further relevant cases.
Lambert v. Pacific Mutual Life Ins. Co., supra, 211
Cal.App.3d 456, similarly involved the issue of employer
administration of a health insurance program. In Lam-
bert, the employer secured medical insurance coverage
for its employees by subscribing to the Multi-Protection
Trust which provided a group insurance plan underwrit-
ten by Pacific Mutual. The employees did not pay pre-
miums for employee coverage but did contribute for de-
pendent coverage. The agreement and application form
indicated the Pacific Mutual plan was subject to ERISA,
and that the undersigned employer was the named fiduci-
ary for the plan. The employer provided the employee
with a certificate booklet which complied with ERISA
summary plan description requirements, including a state-
ment of the employee’s rights under ERISA, and identi-
fied the employer as the plan administrator. (/d., at pp.
458-460. )
Thus, in addition to employer payment of premiums,
evidence established the Multi-Protection Trust intended
to create an ERISA plan and promoted it as such, and
the employer, as the designated plan administrator and
fiduciary, had endorsed the plan, The fact the employer’s
president was unfamiliar with ERISA or its obligations
under ERISA incident to the plan, did not refute the
endorsement. Based thereon, Lambert found “sufficient
employer involvement and administration under Fort
Halifax to bring the... plan within [ERISA]... .”
(Lambert, swpra, 211 Cal.App.3d at p. 465.)
Similarly, in Faria v. Northwestern National Life Ins.
Co. (1989) 216 Cal.App.3d 1129, 1135-1137, contribu-
8 Rizzi also erroneously refers to the substantial evidence stand-
ard in reviewing a summary judgment. (Rizzi, supra, 206 Cal.
App.3d at p. 382; Stratton v. First Nat. Life Ins. Co. (1989) 210
Cal.App.3d 1071, 1083.)
caine aaa ieeaeiaamemaniiiaiail
39a
tions were made by the employer toward group medical
coverage, the employer tacitly endorsed the plan, and the
booklet given to employees named a plan administrator
and described the insured’s rights under ERISA, so as to
bring the plan within ERISA.’
Hughes v. Blue Cross of Northern California (1989)
215 Cal.App.3d 832, likewise was presented with the
issue of employer involvement in the administration of
group health insurance so as to implicate ERISA. (/d.,
at pp. 854-855.) An insured brought an action against
her insurer for denial of benefits for her son’s hospitali-
zation and obtained an $850,000 verdict. (Jd., at p. 838.)
The insurer raised the issue of federal preemption under
ERISA for the first time on appeal. (/d., at p. 848.)
After reviewing Fort Halifax and Rizzi, Hughes “sur-
mise[d] from the sparse record that the agreement very
probably is a welfare benefit plan[.]” (Hughes, supra,
215 Cal.App.3d at p. 859.) However, that portion of the
decision is mere dictum because Hughes affirmed the
judgment on procedural grounds. Hughes observed the
insured had lacked notice of the preemption defense and
an opportunity to refute it at trial, and because the issue
did not involve subject matter jurisdiction but merely
raised a choice of law question, a remand for a further
hearing on the issue was unwarranted. (/d., at p. 859.)
With this overview, we examine the facts of the instant
case.
4. Miller did not establish an administrative scheme
so as to implicate ERISA.
a. Standard of appellate review.
As indicated, the existence of an ERISA plan is a
factual question, to be determined in light of all the sur-
® See also Rogers v. Prudential Ins. Co. (1990) 218 Cal.App.3d
1132, 1137-1139, wherein summary judgment was precluded due to
a factual dispute as to whether the employer paid the group insur-
; ance plan premiums.
|
40a
rounding facts and circumstances from the point of view
of a reasonable person. (Kanne v. Connecticut General
Life Ins. Co., supra, 867 F.2d at p. 492.)
Where a judgment is founded upon stipulated facts,
with no conflict in the evidence or question of credibility
of witnesses, the issue becomes one of law which can be
resolved by an appellate court as well as a trial court.
(Oliver & Williams Elevator Corp. v. State Bd. of Equali-
zation (1975) 48 Cal.App.3d 890, 894; 9 Witkin, Cal.
Procedure (3d ed. 1985) Appeal, § 291, p. 303.)
This principle is limited by the rule of conflicting in-
ferences. Even where the facts are undisputed, if con-
flicting inferences reasonably may be drawn therefrom,
the trier of fact’s conclusion must be accepted by the
reviewing court. (Mah See v. North American Acc. Ins.
Co. (1923) 190 Cal. 421, 426, overruled on other grounds
in Zuckerman v. Underwriters at Lloyd’s (1954) 42
Cal.2d 460, 474; McKinney v. Kull (1981) 118 Cal.App.
3d 951, 955-956; Fullerton Union High School Dist. v.
Riles (1983) 139 Cal.App.3d 369, 383; 9 Witkin, supra,
§ 288, p. 300.) However, if only one reasonable inference
can be drawn from the evidence, the question is one of
law and the appellate court is not bound by the trial
court’s determination. (State of California v. Superior
Court (1962) 208 Cal.App.2d 659, 665; Fullerton Union
High School Dist., supra, 139 Cal.App.3d at p. 383; 9
Witkin, supra, § 289, pp. 301-302.)
These principles govern our review of this case.
b. Only reasonable inference to be drawn from
uncontroverted evidence is that Miller did not
establish a “plan.”
The uncontroverted evidence establishes none of the
Fort Halifax criteria for an ERISA plan are present.
What we have here is a “bare purchase of insurance”
(Kanne, supra, 867 F.2d at p. 492), and a temporary
one at that.
4la
As indicated, while Miller’s employee manual stated
that all employees would be provided with group health
insurance coverage, Miller was not required to provide
any health insurance to its employees by any written
contract or collective bargaining agreement. Further,
Miller had the authority and the right to cancel the
subject group insurance policy and eventually it did so.
Thus, it cannot be said that Miller had made a “commit-
ment systematically to pay [these] benefits... .” (Fort
Halifax Packing Co. v. Coyne, supra, 482 U.S. at p. 9.)
In addition, the eligibility of claimants was determined
by FBH or Bankers, not by Miller. (See Fort Halifax
Packing Co., supra, 482 U.S. at p. 9.) Similarly, FBH
processed all claims—Miller was not positioned to calcu-
late benefit levels or to deny benefits under the policy.
(Ibid.) Further, all funds were disbursed directly from
the insurer to the employee or the employee’s health care
provider, without any handling by Miller. (Jbid.) Also,
Miller had no responsibility for monitoring the availabil-
ity of funds for benefit payments. (/bid.) Lastly, it does
not appear that Miller assumed the burden of keeping
appropriate records in order to comply with any applica-
ble reporting requirements. (Jbid.)
In sum, Miller’s role was limited to paying the policy
premiums and performing ministerial tasks such as dis-
pensing enrollment and change forms, claim forms and
informational material. Admittedly, Fort Halifax is dis-
tinguishable in that only a single set of severance pay-
ments was involved, while here, Miller regularly paid
premiums over a period of months. Nonetheless, as the
_ United States Supreme Court held in Fort Halifax Pack-
ing Co., supra, 482 U.S. at page 12: “To do little more
than write a check hardly constitutes the operation of a
benefit plan. [Fn. omitted.]”’
Further, due to the lack here of any compliance with
forme] ERISA requirements, Lambert and Faria are
unavailing to defendants. In those cases, there was an
42a
intent to create an ERISA plan, and the plan was pro-
moted or endorsed as such. In Lambert, the participating
employer was designated the plan administrator, and the
certificate booklet complied with ERISA summary plan
description requirements and included a statement of the
employee’s rights under ERISA. (Lambert, supra, 211
Cal.App.3d at pp. 460, 465.) Similarly, in Faria, there
was an in-house plan administrator, and the summary
plan description apprised the employees of their ERISA
rights. (Faria, supra, 216 Cal.App.3d at pp. 1135-1137.)
Here, in contrast, Miller did not intend to create an
ERISA plan, no reports were filed with the Department
of Labor regarding Miller’s health insurance benefit pro-
gram, and Donald Marshall was never advised his rights
and obligations under the policy were governed by ERISA
or that this was to be an ERISA plan.
We recognize an employer’s failure to meet ERISA’s
requirements for establishing a plan (i.e., written instru-
ment, named fiduciaries, public reports), does not exempt
a benefit plan from coverage by ERISA. Were it other-
wise, employers could escape ERISA’s coverage merely
by failing to comply with its formal administrative and
reporting requirements. (Scott v. Gulf Oil Corp. (9th
Cir. 1985) 754 F.2d 1499, 1508, disagreed with on other
grounds by Lee v. E.J. DuPont de Nemours and Co. (5th
Cir. 1990) 894 F.2d 755, 757.)
Here, however, not only is there no formal compliance
with ERISA, there is not even employer involvement in
benefit administration. Without employer means of af-
fecting “the equitable character of [ERISA] plans and
their financial soundness” (29 U.S.C. § 1001, subd. (a) ),
the ERISA scheme cannot be invoked by insurance com-
panies solely as a means of resisting an employee’s state
law claims.
Finally, we cannot avoid the context in which this issue
comes before us. An employer which, without any intent
to create an ERISA plan, simply purchased a- group
43a
health policy for its employees. Yet the insurer now seeks
to elevate that fact to a level sufficient to enable the in-
surer to avoid liability for its alleged bad faith conduct
in the handling of claims arising under that policy. In
short, the insurer seeks the protection of a federal regula-
tory scheme without any evidence that any of the pur-
poses or concerns, which Congress had when it enacted
that regulatory scheme, were in any way implicated.
Although Miller’s employees had none of the protections
or benefits of a bona-fide ERISA plan, the insurer now
seeks to use the illusion of such a plan to deprive them
of the benefits of state laws regulating insurer misconduct.
CONCLUSION
The purpose of Congress is the “ ‘ “ultimate touch-
stone”’” in determining preemption under ERISA
(Fort Halifax Packing Co., supra, 482 U.S. at p. 8),
and ERISA’s focus is on the “administrative integrity
of benefit plans” (id., at p. 15).
ERISA’s essential purpose is to protect employees from
potential abuses, such as misappropriation of funds, stem-
ming from employer administration of benefit plans. The
purpose of the preemption provision is to protect em-
ployers from potentially inconsistent state regulations.
(Fort Halifax Packing Co., supra, 482 U.S. at pp. 11,
15.) Where there is neither an employer administrative
scheme, nor any accumulation of benefits, nor any intent
to create a plan under ERISA, neither concern of ERISA
is implicated. Thus, ERISA does not preempt California
common law and statutory law with respect to ordinary
employee insurance benefits.
The mere payment by an employer of premiums for
employee health insurance is insufficient to constitute a
plan governed by ERISA. Otherwise, all employer-paid
health benefits would fall within ERISA’s ambit, contrary
44a
to Congress’ intent to preempt solely the regulation of
benefit plans, and not all employee benefits."
Here, defendants failed to meet their burden of estab-
lishing the facts to show preemption. The uncontroverted
evidence reveals there was no uniformed “plan” subject to
ERISA, and the employer’s role essentially was limited
to paying the policy premiums and taking care of minor
ministerial details. This limited obligation of the em-
ployer did not generate administrative activity potentially
subject to employer abuse. Accordingly, none of the
Marshalls’ causes of action is preempted by ERISA.
DISPOSITION
The judgment is reversed. The Marshalls to recover
costs on appeal.
CERTIFIED FOR PUBLICATION
KLEIN, P.J.
We concur:
DANIELSON, J.
CROSKEY, J.
10 While overburdened California’s courts may be willing to be
relieved of employee insureds’ tort actions, with over 100 million
Americans covered by employer group health insurance, the fed-
eral courts are not eager to assume a vastly expanded jurisdiction
over all disputes involving employee health insurance. (See Massa-
chusetts v. Morash, supra, 490 U.S. at pp. 118-119).
45a
APPENDIX C
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
Case No: C 544 301
LINDA BROWN MARSHALL, DONALD MARSHALL,
Plaintiffs,
VS.
BANKERS LIFE AND CASUALTY COMPANY, an_ Illinois
corporation; FRANK B. HALL AND COMPANY OF CALI-
FORNIA, a California corporation, MIA ADMINISTRATORS,
a California corporation; and Dogs 1 through 50,
Inclusive,
Defendants.
JUDGMENT
[Filed Apr. 6, 1990]
' 1. This is a judgment upon the bifurcated trial of the
thirteenth affirmative defense of the First Amended An-
swer of defendants, BANKERS LIFE AND CASUALTY
COMPANY and FRANK B. HALL AND COMPANY
OF CALIFORNIA to the Fourth Amended Complaint of
plaintiffs, LINDA BROWN MARSHALL and DONALD
MARSHALL.
2. Said affirmative defense states:
“The First, Second, Third, Fourth, Fifth and Sixth
Causes of Action of plaintiffs’ Forth Amended Com-
plaint are preempted by the Employee Retirement
Income Security Act of 1974 (ERISA) 88 Stat. 829
as amended 29 U.S.C. Sections 1001 et seq.”
46a
3. Said bifurcated trial came on for trial on February
13, 1990, February 23, 1990 and March 2, 1990, in
Department “44” of the Los Angeles Superior Court,
located at 111 North Hill Street, Los Angeles, California,
before Judge Norman Epstein, Greene, Broillet, Paul,
Simon & Wheeler, by Timothy Wheeler and Randy Mc-
Murray appearing for plaintiffs, O’Neal & Wodin by
Mare J. Wodin appearing for defendants.
4. Said trial was conducted upon a stipulation as to
facts and evidence filed with the Court on February 28,
1990.
5. Said trial was taken under submission by the Court
on March 2, 1990, following argument of counsel.
6. On March 8, 1990, the Court issued its decision on
submitted matter, filed March 8, 1990, finding as follows:
“The Court determines that the insurance program
in this case is an ‘employee welfare benefit plan’
within the meaning of the Employee Retirement In-
come Security Act (ERISA; 29 U.S.C. Sections 1001
et seq.). Since it is, plaintiffs’ causes of action are
preempted by the federal statute. Pilot Life Insur-
ance Co. v. Dedeaux (1987) 107 S.Ct. 1549; Com-
mercial Life Insurance Co. v. Superior Court (1988)
47 C.3d 473.
The employer’s involvement in the program was
not extensive. There is no evidence that it specifi-
cally intended to establish a program that would be
covered by ERISA (cf. Lambert v. Pacific Mutual
Life Ins. Co. (1989) 211 C.A.3d 456, 463). But the
program that it did establish was for ongoing benefits
of the kind typically covered by ERISA (cf. Fort
Halifax Parking Co. v. Coyne (1989) 109 S.Ct. 1668
[lump sum payment of unused vacation time] ).
Here, the stipulated statement of facts establishes
that the employer established the plan. It paid
premiums for its employees, although the cost of
, eee
47a
dependent coverage (involved in this case) was borne
by the employee. (Lambert indicates that such pay-
ment brings the employer within the ‘benefit cover-
age’ aspect of the federal guidelines, 29 C.F.R. Sec-
tions 2510.3-1(j) (1); Lambert, 211 C.A.8d at p.
465).) The employer had the power to terminate
the plan and collected dependent premiums from the
employees and transmitted those funds, together with
its own funds for employee insurance to pay cover-
age premiums. The employer also performed a num-
ber of administrative duties under the program such
as disseminating insurance pamphlets to employees,
handling enrollment forms and changes, answering
questions about coverage and forwarding some ques-
tions to the plan administrator and assisting in
claims processing. The employer did not handle
money received by the administrator disburse benefits
or make decisions about coverage or benefit payments
on particular claims.
While the employer’s involvement is not extensive,
application of the ERISA standards to these facts,
under established precedent (see Rizzi v. Blue Cross
of So. California (1988) 206 C.A.3d 380 and cases
cited; Hughes v. Blue Cross of No. California (1989)
215 C.A.3d 832, 853) leads to the conclusion that the
involvement is sufficient to establish the benefit pro-
gram as an ERISA plan.
Since plaintiffs’ causes of action are therefore pre-
empted, judgment must be for defendants. Counsel
for defendants shall prepare the judgment and sub-
mit it to the Court.
The Clerk is directed to mail a copy of their
memorandum to counsel of record.”
7. Now therefore the Court orders that judgment be
entered in favor of defendants, BANKERS LIFE AND
CASUALTY COMPANY and FRANK B. HALL AND
48a
COMPANY OF CALIFORNIA and against plaintiffs,
LINDA BROWN MARSHALL and DONALD MAR-
SHALL, with respect to the thirteenth affirmative de-
fense of defendants’ First Amended Answer to plaintiffs’
Fourth Amended Complaint as aforesaid.
DATED: April 5, 1990
/s/ NLE
NORMAN L. EPSTEIN
Judge of the Superior Court
49a
APPENDIX D
STATUTORY PROVISIONS
29 U.S.C. § 1002. Definitions
For purposes of this subchapter:
(1) The terms “employee welfare benefit plan’ and
“welfare plan” mean 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, surgi-
cal, 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 or day care centers, scholarship funds, or pre-
paid legal services, or (B) any benefit described in sec-
tion 186(c) of this title (other than pensions on retire-
ment or death, and insurance to provide such pensions).
* * * *
(5) The term “employer” means any person acting
directly as an employer, or indirectly in the interest of
an employer, in relation to an employee benefit plan; and
includes a group or association of employers acting for
an employer in such capacity.
29 U.S.C. § 1132. Civil enforcement
(a) Persons empowered to bring a civil action
A civil action may be brought—
(1) by a participant or beneficiary—
(A) for the relief provided for in subsection
(ce) of this section, or
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(B) to recover benefits due to him under the
terms of his plan, to enforce his rights under
the terms of the plan, or to clarify his rights to
future benefits under the terms of the plan;
(2) by the Secretary, or by a participant, bene-
ficiary or fiduciary for appropriate relief under sec-
tion 1109 of this title;
(3) by a participant, beneficiary, or fiduciary (A)
to enjoin any act or practice which violates any pro-
vision of this subchapter or the terms of the plan, or
(B) to obtain other appropriate equitable relief (i)
to redress such violations or (ii) to enforce any
provisions of this subchapter or the terms of the
plan;
(4) by the Secretary, or by a participant, or bene-
ficiary for appropriate relief in the case of a viola-
tion of 1025(c) of this title;
(5) except as otherwise provided in subsection
(b) of this section, by the Secretary (A) to enjoin
any act or practice which violates any provision of
this subchapter, or (B) to obtain other appropriate
equitable relief (i) to redress such violation or (ii)
to enforce any provision of this subchapter; or
(6) by the Secretary to collect any civil penalty
under subsection (c) (2) or (i) or (l) of this section.
* * * *
29 U.S.C. § 1144. Other laws
(a) Supersedure ; effective date
Except as provided in subsection (b) of this section,
the provisions of this subchapter and subchapter III of
this chapter shall supersede any and all State laws insofar
as they may now or hereafter relate to any employee
benefit plan described in section 1003(a) of this title and
not exempt under section 1003(b) of thir title. This
section shall take effect on January 1, 1975.
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(b) Construction and application
(1) This section shall not apply with respect to any
cause of action which arose, or any act or omission which
occurred, before January 1, 1975.
(2) (A) Except as provided in subparagraph (B),
nothing in this subchapter shall be construed to exempt
or relieve any person from any law of any State which
regulates insurance, banking, or securities.
(B) Neither an employee benefit plan described in
section 1003(a) of this title, which is not exempt under
section 1003(b) of this title (other than a plan estab-
lished primarily for the purpose of providing death bene-
fits), nor any trust established under such a plan, shall
be deemed to be an insurance company or other insurer,
bank, trust company, or investment company or to be
engaged in the business of insurance or banking for
purposes of any law of any State purporting to regulate
insurance companies, insurance contracts, banks, trust
companies, or investment companies.
(3) Nothing in this section shall be construed to pro-
hibit use by the Secretary of services or facilities of a
State agency as permitted under section 1136 of this title.
” * * *
(ce) Definitions
For purposes of this section:
(1) The term “State law” includes all laws, deci-
sions, rules, regulations, or other State action having
the effect of law, of any State. A law of the United
States applicable only to the District of Columbia
shall be treated as a State law rather than a law
of the United States.
(2) The term “State” includes a State, any politi-
cal subdivisions thereof, or any agency or instru-
mentality of either, which purports to regulate, di-
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rectly or indirectly, the terms and conditions of
employee benefit plans covered by this subchapter.
29 C.F.R. § 2510.3-2
(j) Certain group or group-type insurance programs.
For purposes of title I of the Act and this chapter, the
terms “employee welfare benefit plan” and ‘welfare plan”
shall not include a group or group-type insurance pro-
gram offered by an insurer to employees or members of
an employee organization, under which
(1) No contributions are made by an employer or
employee organization;
(2) Participation the program is completely voluntary
for employees or members;
(3) The sole functions of the employer or employee
organization with respect to the program are, without
endorsing the program, to permit the insurer to publicize
the program to employees or members, to collect premi-
ums through payroll deductions or dues checkoffs and to
remit them to the insurer; and
(4) The employer or employee organization receives
no consideration in the form of cash or otherwise in
connection with the program, other than reasonable com-
pensation, excluding any profit, for administrative serv-
ices actually rendered in connection with payroll deduc-
tions or dues checkoffs.
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APPENDIX E
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
Case No: C 544 301
LINDA BROWN MARSHALL, DONALD MARSHALL,
Plaintiffs,
Vs. .
BANKERS LIFE AND CASUALTY COMPANY, an Illinois
corporation; FRANK B. HALL AND COMPANY OF CALI-
FORNIA, a California corporation, MIA ADMINISTRATORS,
a California corporation; and Dogs 1 through 50,
Inclusive,
Defendants.
STIPULATION
[Filed Mar. 1, 1990]
TO: THE INTERESTED PARTIES AND TO THEIR
ATTORNEYS OF RECORD:
The parties to the instant matter, by and through their
attorneys of record, hereby stipulate to the following
facts as evidence in the bifurcated trial of the thirteenth
affirmative defense of defendants’ answer to plaintiffs’
fourth amended complaint in the instant matter, to wit:
“The first, second, third, fourth, fifth and sixth causes
of action of plaintiffs’ fourth amended complaint are
pre-empted by the Employee Retirement Income Security
Act of 1974 (ERISA) 88 Stat. 829, as amended 29
U.S.C., sections 1001, et seq.”
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DEFENDANTS’ FACTS
1. Plaintiffs alleged that BANKERS LIFE AND
CASUALTY COMPANY (hereinafter BANKERS), as
insurer, and FRANK B. HALL & COMPANY OF
CALIFORNIA/MIA ADMINISTRATORS (hereinafter
HALL/MIA), as third party administrator, breached the
common law duty of good faith and fair dealing and
breached certain provisions of California Insurance Code,
section 790.08, in failing and refusing to pay certain
medical benefits allegedly due plaintiffs under a group
health insurance policy issued by BANKERS to plaintiff
DONALD MARSHALL’s employer, MILLER IMPORT
DATSUN, INC. (hereinafter MILLER), with respect to
a certain hospitalization of plaintiff, LINDA MARSHALL,
an insured under the subject policy, at Queen of Angels
Hospital between May 5, 1983, and June 20, 1983.
2. BANKERS is an insurance company and was the
insurance company which issued the subject insurance
policy.
3. HALL/MIA is an administrator and acted in that
capacity with respect to the subject insurance policy.
4. On or about February 18, 1983, MILLER applied
to BANKERS for the subject insurance policy. On or
about March 25, 19838, MILLER was advised by BANK-
ERS that coverage was approved effective March 1, 1983.
5. The subject insurance policy, #3091, was in effect
from March 1, 1983, to October 1, 1983.
6. MILLER provided this health insurance coverage to
its employees as part of an employee benefit package.
7. The subject insurance policy was a policy which
provided group, health, life and disability insurance cov-
erage to employees of MILLER and their covered
dependents.
8. All employees of MILLER were covered under the
subject group insurance policy.
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9. Plaintiff, DONALD MARSHALL, was an employee
of MILLER and was enrolled as an insured under the
subject insurance policy. Plaintiff, LINDA MARSHALL,
the wife of plaintiff, DONALD MARSHALL, was en-
rolled for dependent coverage under the subject insur-
ance policy.
10. MILLER purchased the subject insurance policy.
11. MILLER was billed for insurance premiums by
HALL/MIA on a monthly basis and paid the premiums
on a monthly basis.
12. MILLER paid the premiums out of its own ac-
count. MILLER had control over that account. It had
the power to use (or misuse) the monies in that account.
It had the power to use those monies to pay premiums
or not.
13. The payment of these premiums were items which
were recorded in MILLER’S financial records, including
tax returns and monthly and annual financial reports.
14. MILLER paid the premium for employees, such
as DONALD MARSHALL. MILLER paid these premi-
ums in their entirety and did not deduct any sums for
the payment of employee premiums from employees’
paychecks.
15. MILLER paid the premiums for covered depend-
ents, such as LINDA MARSHALL. It then deducted the
amount of the premiums from the employees’, e.g.,
DONALD MARSHALL’s, paycheck.
16. MILLER added or deleted names of employees
who were employed or terminated with dates of such
employment or termination on monthly premium state-
ments received from HALL/MIA and sent those changes
to HALL/MIA to reflect new persons coming under the
coverage and persons leaving the coverage for the purpose
of adjusting premium payments under the subject insur-
ance policy.
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17. MILLER was provided with enrollment cards to
enroll employees under the subject insurance policy.
MILLER put the names of the employees on these ecards,
or some of them, and provided them to employees, who
filled out the remaining portions and returned them to
MILLER. MILLER sent the completed cards to HALL/
MIA.
18. MILLER was provided with change forms which
it provided to employees to fill out for the purpose of
changing beneficiaries and adding or dropping dependent
coverage under the subject insurance policy. MILLER
sent the completed forms to HALL/MIA.
19. MILLER was provided with claim forms for em-
ployees to make claims under the subject insurance policy.
MILLER provided these claim forms to employees to
make claims under the subject insurance policy.
90. Sometimes, employees would have questions and/or
problems with regard to enrollment, coverage changes and
claims, or other matters relating to the insurance. In
such case, persons at MILLER would attempt to answer
such questions or resolve such problems. If they could
not do so, they would contact persons at HALL/MIA or
others, or place the employee in such contact.
21. MILLER was provided with booklets, “Your Group
Insurance Plan,” to provide to employees. Said booklet
contained information with respect to the subject group
insurance policy, including information as to “How to
file claims for disability and medical expense benefits.”
MILLER provided these booklets to employees, including
DONALD MARSHALL.
22. MILLER requested and obtained from HALL/MIA
copies of a three page letter to employees with a brief
explanation of the insurance coverage under this group
insurance policy. MILLER provided this document to
employees.
23. On one occasion, MILLER was asked by HALL/
MIA to have an employee’s beneficiary complete and sub-
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mit a certain claimant’s statement. MILLER gave the
form to the employee. On another occasion, MILLER was
asked by HALL/MIA to have an employee submit a
waiver card for dependent coverage. MILLER gave the
card to the employee to fill out. On another occasion,
MILLER was asked by HALL/MIA to have an employee
complete a health declaration to obtain dependent cover-
age. MILLER gave the form to the employee. On certain
occasions, HALL/MIA sent information to employees
with regard to their claims and sent this information
through MILLER, who handed this information to its
employees.
24. MILLER had the authority and right to cancel
the subject group insurance policy and did so.
PLAINTIFFS’ FACTS
1. BANKERS had a contract with HALL/MIA. The
contract states, among other things, “Sec. 1. The agent
hereby accepts appointment by the carrier to act as its
agent in the administration of a plan underwritten by
the above contract (policy), herein referred to as the
plan. Sec. 2. The agent will perform duties in connection
with the administration of the plan as directed by the
COPTN 66."
2. HALL/MIA provided a document to MILLER to be
provided to its employees, which states, among other
things, “All claims will be processed by MIA Admin-
istrators.”
3. HALL/MIA provided a document to MILLER to
be provided to its employees, which states, among other
things, “If there are any questions regarding benefits or
the processing of your claims, be feel free to call (Francie
at MIA Administrators) .”
4._ MILLER was not required to provide any health
insurance to its employees by any written contract or any
collective bargaining agreement. The employee manual
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did state that all employees would be provided with group
health insurance coverage.
5. All claim forms were submitted to HALL/MIA.
These claim forms were submitted directly by the em-
ployee or health care provider to HALL/MIA.
6. MILLER did not review any claim forms submitted
to obtain benefits under the subject insurance policy.
7. MILLER had no responsibility for evaluating claims
submitted under the subject insurance policy.
8. HALL/MIA or BANKERS had all of the responsi-
bility for determining whether an employee or an employ-
ee’s dependents were eligible for medical benefits under
the subject insurance policy.
9. MILLER could not deny any niet under the
subject insurance policy.
10. MILLER never filed any reports with the Depart-
ment of Labor with respect to the subject insurance
policy.
11. Benefits under the subject insurance policy were
paid directly to the employee or, at his direction, to the
health care provider.
12. MILLER never handled any of the funds used
to pay benefits under the subject insurance policy.
13. MILLER never had any opportunity to mis-
appropriate or improvidently invest the funds used to
pay benefits under the subject insurance policy.
14. MILLER did not intend to create an ERISA plan.
15. MILLER had no responsibility for monitoring how
much money was available for paying claims under the
subject insurance policy.
16. MILLER had no offices or employees outside of the
State of California.
17. MILLER did nothing with enrollment cards or
change forms filled out by employees other than sending
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them to HALL/MIA, and, sometimes, putting a copy in
the employees’ files.
18. MILLER received no compensation or considera-
tion from BANKERS for the subject insurance policy.
19. MILLER did not set aside a separate fund for the
payment of insurance premiums.
20. DONALD MARSHALL was never told that this
was to be an ERISA-plan.
21. DONALD MARSHALL was never informed that
any rights or obligations he had under the subject insur-
ance policy were rights or obligations under ERISA.
22. Employees of MILLER were also directed to con-
tact HALL/MIA with any questions with regard to the
subject insurance policy.
23. DONALD MARSHALL did call Francie Perez of
HALL/MIA with questions about the subject insurance
policy.
24. DONALD MARSHALL never spoke to anyone at
MILLER with questions about the subject insurance
policy.
25. HALL/MIA calculated and made all adjustments
to the premiums to be paid by MILLER.
The parties to the instant matter, by and through their
attorneys of record, further stipulate that the exhibits
attached to this stipulation (defendants’ exhibits ‘A’
through ‘X’ and plaintiffs’ exhibit 1) are marked, as set
forth in defendants’ list of exhibits and plaintiffs’ list of
exhibits attached, anc are admitted into evidence for and
at the trial of the instant matter.
The parties to the instant matter, by and through their
attorneys of record, further stipulate that the following
depositions, the originals, of which, are attached hereto
and lodged with the court, are admitted into evidence for
and at the trial of the instant matter:
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1. Robert LaVigne;
2. DONALD MARSHALL;
3. Francie Perez.
DATED: February 28, 1990
O’NEAL & WODIN
By /s/ Mare J. Wodin
MARC J. WODIN
Attorneys for Defendants
BANKERS LIFE AND CASUALTY
COMPANY and FRANK B. HALL AND
COMPANY OF CALIFORNIA
DATED: February 28, 1990
By /s/ Randy H. McMurray
RANDY MCMURRAY
Attorney for Plaintiffs,
DONALD MARSHALL and
LINDA MARSHALL
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.