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Court of Appeal, Second District, Division 3, California.

Linda Brown MARSHALL, Donald Marshall, Plaintiffs and Appellants, v. BANKERS LIFE AND CASUALTY COMPANY, et al., Defendants and Respondents.

Civ. No. B050259.

Decided: June 10, 1991

Greene, Broillet, Taylor & Wheeler, Randy McMurray and Timothy J. Wheeler, Santa Monica, Mandell, Lewis & Goldberg and Michael L. Goldberg, Vienna, Va., for plaintiffs and appellants. O'Neal & Wodin and Marc J. Wodin, Northridge, for defendants and respondents.

Plaintiffs and appellants Linda Brown Marshall and Donald Marshall appeal a judgment in favor of defendants and respondents Bankers Life and Casualty Company (Bankers) and Frank B. Hall and Company of California (FBH), (collectively, defendants).

The issue presented is whether the Marshalls' action arising out of an employment-based group health insurance program is preempted by ERISA.1


 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 employee 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 implicate the concerns which gave rise to ERISA.   Here, there was no administrative activity potentially subject to employer abuse so that ERISA's concern with regulating the administrative integrity of the program was not implicated.   The judgment is therefore reversed.


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 refused to pay certain medical benefits allegedly due them under a group health insurance policy issued by Bankers to Donald Marshall's employer, Miller Import Datsun, Inc. (Miller), with respect to the hospitalization and treatment of Donald Marshall's wife, Linda Marshall, from May 5, 1983 to June 20, 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 defendants.

The Marshalls pled six causes of action against Bankers, the insurer, as well as FBH, the administrator appointed 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' answer 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 bifurcated the issue of ERISA preemption 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, 1983, to October 1, 1983.   Miller received no compensation or consideration from Bankers for the subject insurance policy.   Miller provided this coverage, 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 dependent 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 collective 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' premiums 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 employees' files.

Miller added or deleted names of 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 coverage.   FBH calculated and made all adjustments to Miller'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 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 paying 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 distributed to its employees.   FBH sometimes sent information 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 employees' 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 anyone 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:

The employer's involvement in the program was “not extensive.”   There was no evidence Miller specifically intended 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 employer had the power to terminate the plan.   The employer collected dependent premiums and transmitted those funds.   The employer also performed various administrative 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 benefits, nor make decisions regarding coverage or benefit payments on claims.

Despite the employer's limited involvement, the trial court felt bound by California authority to hold the Marshalls' action was barred.   It concluded:  “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 Cal.App.3d 380, 253 Cal.Rptr. 541] ․ and cases cited;  Hughes v. Blue Cross of No. California [ (1989) 215 Cal.App.3d 832, 263 Cal.Rptr. 850] ) ․ 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 preempted[.]”

The Marshalls appealed.


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 administering the program was limited and ministerial and therefore did not implicate the purpose of ERISA.


1. General ERISA principles.

ERISA, which is found at 29 United States Code section 1001 et seq., in the chapter entitled Employee Retirement Income Security Program, “comprehensively regulates employee pension and welfare plans.”  (Metropolitan Life Ins. Co. v. Massachusetts (1985) 471 U.S. 724, 732, 105 S.Ct. 2380, 2385, 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 employee loss of retirement benefits, and the need for Congress 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 failure 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 participants of employee benefit plans by requiring disclosure to participants, establishing standards of conduct and fiduciary 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 Cal.3d 473, 476, 253 Cal.Rptr. 682, 764 P.2d 1059;  see Pilot Life Ins. Co. v. Dedeaux (1987) 481 U.S. 41, 44, 107 S.Ct. 1549, 1551, 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).)3  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, 103 S.Ct. 2890, 2901, 77 L.Ed.2d 490;  Fort Halifax Packing Co. v. Coyne (1987) 482 U.S. 1, 10, 107 S.Ct. 2211, 2217, 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, 107 S.Ct. at p. 2216.)

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, 107 S.Ct. at pp. 2215–2216.)   29 United States Code section 1002(1) defines an “ ‘employee welfare benefit plan’ ” as “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, 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, 109 S.Ct. 1668, 1672, 104 L.Ed.2d 98.)

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 defendant's burden to prove the facts necessary to establishing an ERISA defense.  (Elsworth v. Beech Aircraft Corp. (1984) 37 Cal.3d 540, 548, 208 Cal.Rptr. 874, 691 P.2d 630;  Kanne, supra, 867 F.2d at p. 492, fn. 4;  Metropolitan Life Ins. Co. v. Massachusetts, supra, 471 U.S. at p. 741, 105 S.Ct. at p. 2390.)

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 participants or their beneficiaries.  (Donovan v. Dillingham (11th Cir.1982) 688 F.2d 1367, 1371.)   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 constitutes 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.4  However, it does not necessarily follow that the mere payment of premiums by an employer is sufficient to give rise to an ERISA plan.  “A bare purchase of insurance, ․, does not by itself constitute an ERISA plan (Lambert v. Pacific Mutual Life Ins. Co. (1989) 211 Cal.App.3d 456, 464, 259 Cal.Rptr. 398) (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, 107 S.Ct. 2211, 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, 107 S.Ct. at p. 2217.)   An employer that “makes a commitment systematically to pay certain benefits undertakes a host of obligations, such as determining the eligibility of claimants, calculating benefit levels, making disbursements, monitoring the availability of funds for benefit 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.”  (Id., at p. 9, 107 S.Ct. at p. 2216.)

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, 107 S.Ct. at p. 2218.)   The requirement of a one-time severance payment did not create a “need for an ongoing administrative program for processing claims and paying benefits.”  (Ibid.)  As a result, 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.]”  (Id., at p. 14, 107 S.Ct. at p. 2219.)

Further, not only did the Maine statute fail to implicate 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, 107 S.Ct. at p. 2219.)   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 misappropriation of plan funds.  (Ibid.)  “The focus of [ERISA] thus is on the administrative integrity of benefit plans—which presumes that some type of administrative activity is taking place.”  (Ibid.)  Where there is no “plan” involving administrative activity potentially subject to employer abuse, preemption does not serve the overall purpose of ERISA.  (Id., at p. 16, 107 S.Ct. at p. 2220.) 5 ,6

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 p. 109, 109 S.Ct. at p. 1670, 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 outside of the control of the employee.”  (Id., at pp. 115–116, 109 S.Ct. at pp. 1673–1674.)   The court held the company's policy did not constitute an employee welfare benefit plan, noting “Congress' primary concern [in enacting ERISA] was with the mismanagement of funds accumulated to finance employee benefits and the failure to pay employees benefits from accumulated funds.”  (Id., at p. 115, 109 S.Ct. at p. 1673.)

Thus, under federal statutory and decisional law, the existence of an employee benefit plan subject to preemption 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.7

3. California appellate developments.

a. The Rizzi decision.

In Rizzi v. Blue Cross of So. California (1988) 206 Cal.App.3d 380, 382, 253 Cal.Rptr. 541, an employee insured under his employer'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 different factual context, the Rizzi court recognized the import of that decision.  Rizzi stated:  “Applying by analogy the Fort Halifax analysis here, 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 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 regulating 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, 253 Cal.Rptr. 541.)

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 operation 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, 253 Cal.Rptr. 541, 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 employees.   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 subscriber was entitled to apply for a conversion privilege.   If Blue Cross or the employer terminated the agreement, the 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, 253 Cal.Rptr. 541.)

 Nothing in the recitation of this evidence supports Rizzi 's conclusion of “other employer controls over operation of the program” in addition to payment of subscription charges.  (Rizzi, supra, 206 Cal.App.3d at p. 391, 253 Cal.Rptr. 541.)   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 require all these employers to choose between the statute's detailed requirements for reporting and disclosure or discontinuing their health insurance benefits.  (See Massachusetts v. Morash, supra, 490 U.S. at p. 118, 109 S.Ct. at p. 1674.)

While the Fort Halifax dissent would support Rizzi 's sweeping approach to preemption (Fort Halifax Packing Co., supra, 482 U.S. at p. 23, 107 S.Ct. at p. 2223), 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, 107 S.Ct. at p. 2218).   The Rizzi court could not enlarge the scope of preemption under federal law.   Thus, while Rizzi 's recitation of Fort Halifax is accurate, Rizzi 's application of those principles to its fact situation is wrong and we respectfully decline to follow it.8

b. Further relevant cases.

Lambert v. Pacific Mutual Life Ins. Co. supra, (1989) 211 Cal.App.3d 456, 259 Cal.Rptr. 398, similarly involved the issue of employer administration of a health insurance program.   In Lambert, the employer secured medical insurance coverage for its employees by subscribing to the Multi–Protection Trust which provided a group insurance plan underwritten by Pacific Mutual.   The employees did not pay premiums for employee coverage but did contribute for dependent coverage.   The agreement and application form indicated the Pacific Mutual plan was subject to ERISA, and that the undersigned employer was the named fiduciary for the plan.   The employer provided the employee with a certificate booklet which complied with ERISA summary plan description requirements, including a statement of the employee's rights under ERISA, and identified the employer as the plan administrator.  (Id., at pp. 458–460, 259 Cal.Rptr. 398.)

Thus, in addition to employer payment of premiums, the 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, supra, 211 Cal.App.3d at p. 465, 259 Cal.Rptr. 398.)

Similarly, in Faria v. Northwestern National Life Ins. Co. (1989) 216 Cal.App.3d 1129, 1135–1137, 265 Cal.Rptr. 309, contributions 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.9

Hughes v. Blue Cross of Northern California (1989) 215 Cal.App.3d 832, 263 Cal.Rptr. 850, likewise was presented with the issue of employer involvement in the administration of group health insurance so as to implicate ERISA.   (Id., at pp. 854–855, 263 Cal.Rptr. 850.)   An insured brought an action against her insurer for denial of benefits for her son's hospitalization and obtained an $850,000 verdict.  (Id., at p. 838, 263 Cal.Rptr. 850.)   The insurer raised the issue of federal preemption under ERISA for the first time on appeal.  (Id., at p. 848, 263 Cal.Rptr. 850.)

After reviewing Fort Halifax and Rizzi, Hughes “surmise[d] from the sparse record that the agreement very probably is a welfare benefit plan [.]”  (Hughes, supra, 215 Cal.App.3d at p. 859, 263 Cal.Rptr. 850.)   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.  (Id., at p. 859, 263 Cal.Rptr. 850.)

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 surrounding 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 Equalization (1975) 48 Cal.App.3d 890, 894, 122 Cal.Rptr. 249;  9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 291, p. 303.)

This principle is limited by the rule of conflicting inferences.   Even where the facts are undisputed, if conflicting 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, 213 P. 42, overruled on other grounds in Zuckerman v. Underwriters at Lloyd's (1954) 42 Cal.2d 460, 474, 267 P.2d 777;  McKinney v. Kull (1981) 118 Cal.App.3d 951, 955–956, 173 Cal.Rptr. 696;  Fullerton Union High School Dist. v. Riles (1983) 139 Cal.App.3d 369, 383, 188 Cal.Rptr. 897;  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, 25 Cal.Rptr. 363;  Fullerton Union High School Dist., supra, 139 Cal.App.3d at p. 383, 188 Cal.Rptr. 897;  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 “barepurchase of insurance” (Kanne, supra, 867 F.2d at p. 492), and a temporary one at that.

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 “commitment systematically to pay [these] benefits․”  (Fort Halifax Packing Co. v. Coyne, supra, 482 U.S. at p. 9, 107 S.Ct. at p. 2216.)

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, 107 S.Ct. at p. 2216.)   Similarly, FBH processed all claims—Miller was not positioned to calculate 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.  (Ibid.)  Also, Miller had no responsibility for monitoring the availability of funds for benefit payments.  (Ibid.)  Lastly, it does not appear that Miller assumed the burden of keeping appropriate records in order to comply with any applicable reporting requirements.   (Ibid.)

In sum, Miller's role was limited to paying the policy premiums and performing ministerial tasks such as dispensing enrollment and change forms, claim forms and informational material.   Admittedly, Fort Halifax is distinguishable in that only a single set of severance payments was involved, while here, Miller regularly paid premiums over a period of months.   Nonetheless, as the United States Supreme Court held in Fort Halifax Packing Co., supra, 482 U.S. at p. 12, 107 S.Ct. at p. 2218:  “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 formal ERISA requirements, Lambert and Faria are unavailing to defendants.   In those cases, there was an intent to create an ERISA plan, and the plan was promoted 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, 259 Cal.Rptr. 398.)   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, 265 Cal.Rptr. 309.)

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 program, 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 instrument, named fiduciaries, public reports), does not exempt a benefit plan from coverage by ERISA.   Were it otherwise, 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, 1503, disagreed with on other grounds by Lee v. E.I. 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 affecting “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 companies 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 health policy for its employees.   Yet the insurer now seeks to elevate that fact to a level sufficient to enable the insurer 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 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 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.


The purpose of Congress is the “ ‘ “ultimate touchstone” ’ ” in determining preemption under ERISA (Fort Halifax Packing Co., supra, 482 U.S. at p. 8, 107 S.Ct. at p. 2215), and ERISA's focus is on the “administrative integrity of benefit plans” (id., at p. 15, 107 S.Ct. at p. 2219).

ERISA's essential purpose is to protect employees from potential abuses, such as misappropriation of funds, stemming from employer administration of benefit plans.   The purpose of the preemption provision is to protect employers from potentially inconsistent state regulations.  (Fort Halifax Packing Co., supra, 482 U.S. at pp. 11, 15, 107 S.Ct. at pp. 2217, 2219.)   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 to Congress' intent to preempt solely the regulation of benefit plans, and not all employee benefits.10

Here, defendants failed to meet their burden of establishing the facts to show preemption.   The uncontroverted evidence reveals there was no unformed “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 employer did not generate administrative activity potentially subject to employer abuse.   Accordingly, none of the Marshalls' causes of action is preempted by ERISA.


The judgment is reversed.   The Marshalls to recover costs on appeal.


1.   Employee Retirement Income Security Act (29 U.S.C. section 1001 et seq.).

2.   The finding that the employer assisted in claims processing is unsupported by the stipulation.

3.   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, 250 Cal.Rptr. 116, 758 P.2d 58.  (Commercial Life Ins. Co., supra, 47 Cal.3d at pp. 484–485, 253 Cal.Rptr. 682, 764 P.2d 1059.)

4.   The regulation states no ERISA plan exists if:  “(1) No contributions 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 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 premiums 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 compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.”  (29 C.F.R. § 2510.3–1(j) (1990).)

5.   The dissenting opinion in Fort Halifax criticized the majority's rule making preemption turn on the existence of an administrative scheme.  (Fort Halifax Packing Co., supra, 482 U.S. at p. 23, 107 S.Ct. at p. 2223.)   It urged the characterization of certain employee benefits as nonadministrative would undermine Congress' intent to make employee benefit plans a matter of exclusive federal regulation.   (Ibid.)

6.   See also the pre-Fort Halifax case of Drummond v. McDonald Corp. (1985) 167 Cal.App.3d 428, 432, 213 Cal.Rptr. 164, wherein an ERISA plan existed where the employer processed claims and performed other administrative functions.

7.   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 actions asserting improper processing of claims made under an insured employee benefit plan.   (Pilot Life Ins. Co., supra, 481 U.S. at p. 43, 107 S.Ct. at p. 1551.)   The existence of an ERISA–regulated plan was not addressed and apparently, simply was assumed.Similarly, in Metropolitan Life Ins. Co. v. Taylor (1987) 481 U.S. 58, 60, 107 S.Ct. 1542, 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.”

8.   Rizzi also erroneously refers to the substantial evidence standard in reviewing a summary judgment.  (Rizzi, supra, 206 Cal.App.3d at p. 382, 253 Cal.Rptr. 541;  Stratton v. First Nat. Life Ins. Co. (1989) 210 Cal.App.3d 1071, 1083, 258 Cal.Rptr. 721.)

9.   See also Rogers v. Prudential Ins. Co. (1990) 218 Cal.App.3d 1132, 1137–1139, 267 Cal.Rptr. 499, wherein summary judgment was precluded due to a factual dispute as to whether the employer paid the group insurance plan premiums.

10.   While overburdened California courts may be willing to be relieved of employee insureds' tort actions, with over 100 million Americans covered by employer group health insurance, the federal courts are not eager to assume a vastly expanded jurisdiction over all disputes involving employee health insurance.  (See Massachusetts v. Morash, supra, 490 U.S. at pp. 118–119, 109 S.Ct. at pp. 1674–1675.)

KLEIN, Presiding Justice.


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