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Gilbert J. SAYBLE and Sybil Sayble, Plaintiffs and Appellants, v. BLUE CROSS OF SOUTHERN CALIFORNIA and Biles & Cook Administrators, Inc., Defendants and Respondents.
Plaintiffs and appellants Gilbert J. Sayble (Gilbert) and Sybil Sayble (collectively, the Saybles) appeal a grant of summary judgment in favor of defendants and respondents Blue Cross of Southern California, a California corporation (Blue Cross), and Biles & Cook Administrators, Inc. (Biles & Cook) (collectively respondents).
Because the subject employer-paid health insurance was not a plan within the meaning of ERISA,1 the judgment is reversed and we grant the Saybles' request for summary adjudication.
FACTUAL & PROCEDURAL BACKGROUND
The National Employers Security Trust (NEST) is a multiple employer trust which offers employers with small groups of employees the opportunity to obtain health insurance benefits. Blue Cross issued a group hospital and professional service agreement, effective May 1, 1976, to NEST to furnish benefits to eligible employees of employers participating in NEST. Coverage under the NEST/Blue Cross agreement remained in effect until December 31, 1982.
Swiss American applied to NEST as a participating employer in September 1976, and paid premiums for health insurance from Blue Cross through Nest through 1982. Blue Cross issued certificates of insurance to each employee/subscriber detailing the terms of coverage.
Gilbert was a 50 percent owner as well as an employee of Swiss American Credit Jewelers (Swiss American). At all times through 1982, Edward Sayble (Edward) was a dependent of Gilbert and an eligible family member under the NEST/Blue Cross agreement.
Biles & Cook, under a contract with Blue Cross, provided administrative services pursuant to standard policies and procedures under the NEST/Blue Cross agreement, including processing of claims for professional services. Blue Cross determined eligibility and processed benefits for hospital claims.
Gilbert submitted medical expense claims on behalf of Edward to Blue Cross for payment. Gilbert contended some of the submitted claims were improperly processed and that additional benefits were due under the NEST/Blue Cross agreement.
On February 29, 1984, the Saybles filed a first amended complaint against respondents for tortious breach of insurance contract. The complaint alleged breaches of fiduciary and statutory duties and the duty of good faith and fair dealing, and conspiracy to violate said duties, and sought declaratory relief as well as compensatory and punitive damages.
Respondents generally denied the allegations and asserted various affirmative defenses.
On July 24, 1987, respondents filed a motion for summary judgment on the ground each cause of action alleged by the Saybles was preempted by ERISA. Respondents argued Swiss American's health insurance program was an “employee welfare benefit plan” governed by ERISA, and ERISA preempted the Saybles' common law and Insurance Code section 790.03 (section 790.03) claims.
On the same day, the Saybles filed a cross-motion for summary adjudication of issues. The Saybles contended the purchase by Swiss American of health insurance was an employee benefit but did not constitute a plan within ERISA, so that neither their statutory nor common law causes of action were preempted by ERISA. In the alternative, the Saybles argued section 790.03 is a law regulating insurance and is saved from preemption by 29 U.S.C. § 1144(b)(2)(A); thus, even assuming the Swiss American plan were an ERISA plan, the causes of action for violation of section 790.03 and conspiracy to breach statutory duties were not preempted by ERISA.
The parties joined in a statement of uncontroverted facts which provided in relevant part: Swiss American paid the premiums for health insurance; Biles & Cook provided administrative services and processed claims for professional services under the terms of the NEST/Blue Cross agreement; Blue Cross made all determinations with regard to eligibility and processed claims for hospital benefits; neither Blue Cross nor Swiss American filed reports with the Department of Labor; Swiss American had no express agreement with its employees to provide health insurance.
The matter came on for hearing on August 13, 1987. On October 6, 1987, the trial court entered summary judgment in respondents' favor, ruling that all of the Saybles' causes of action were preempted under ERISA.
The Saybles appealed from the judgment denying their motion for summary adjudication of issues and granting summary judgment in favor of respondents.
CONTENTIONS
The Saybles contend: (1) the mere purchase of health insurance by an employer for employees, without more, does not constitute an employee-benefit plan within the ambit of ERISA, as ERISA preempts only employee-benefit plans, not employee benefits; and (2) even assuming an ERISA plan is involved, section 790.03 falls within the ERISA savings clause which holds laws regulating insurance are not preempted.
DISCUSSION
1. Standard of appellate review.
Summary judgment is properly granted only if no material fact issue exists or where the record establishes as a matter of law that a cause of action asserted against a party cannot prevail. (Avila v. Standard Oil Co. (1985) 167 Cal.App.3d 441, 446, 213 Cal.Rptr. 314.)
A motion for summary judgment is addressed to the sound discretion of the trial court. (Leo F. Piazza Paving Co. v. Foundation Constructors, Inc. (1981) 128 Cal.App.3d 583, 589, 177 Cal.Rptr. 268.) However, because the determination of the trial court is one of law based upon the papers submitted, the reviewing court must make its own independent determination of their construction and effect. (Larsen v. Johannes (1970) 7 Cal.App.3d 491, 496, 86 Cal.Rptr. 744.)
2. General ERISA principles.
ERISA is located at 29 United States Code section 1001 et seq., in the chapter entitled Employee Retirement Income Security Program. Congressional findings and declaration of policy are set forth in 29 United States Code section 1001, which 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(a).)
“ERISA 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, 735–736]; 29 U.S.C. §§ 1003, 1002.) 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; accord Pilot Life Ins. Co. v. Dedeaux (1987) 481 U.S. 41, 43–45, 107 S.Ct. 1549, 1550–1552, 95 L.Ed.2d 39, 45–46.)
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, 103 S.Ct. 2890, 2901, 77 L.Ed.2d 490; Fort Halifax Packing Co. v. Coyne (1987) 482 U.S. 1, ––––, 107 S.Ct. 2211, 2217, 96 L.Ed.2d 1, 11.)
ERISA preempts only plans, not benefits, and nowhere in the statute are said terms treated as the equivalent of one another. (Fort Halifax Packing Co. v. Coyne, supra, at p. ––––, 107 S.Ct. at p. 2215, 96 L.Ed.2d at p. 9.) “ ‘[E]mployee benefit plan’ and ‘plan’ are defined only tautologically in [29 U.S.C. § 1002(3) ], each being described as ‘an employee welfare benefit plan or employee pension benefit plan or a plan which is both an employee welfare benefit plan and an employee pension benefit plan.’ ” (Id., at pp. –––– – ––––, 107 S.Ct. at p. 2216, 96 L.Ed.2d at pp. 9–10.)
29 United States Code section 1002(1) defines an “ ‘employee welfare benefit plan’ ” as including “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․”
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) 859 F.2d 96, 98.)
Here, respondents argue the Swiss American 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 the Swiss American fact situation begs the question.
3. 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. 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 (although it may be evidence of the existence of an ERISA plan).” (Kanne v. Connecticut General Life Ins. Co., supra, 859 F.2d at p. 99.) 2
In Fort Halifax Packing Co. v. Coyne, supra, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 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 required an employer to establish or maintain an employee benefit plan, and concluded it did not.
The United States Supreme Court observed that under the administrative realities of employee benefit plans, “[a]n employer ․ 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.” (Id., at p. ––––, 107 S.Ct. at p. 2216, 96 L.Ed.2d at p. 10.) The Fort Halifax court found “[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.” (Id., at p. ––––, 107 S.Ct. at p. 2218, 96 L.Ed.2d at p. 12.)
The Fort Halifax court further found the Maine statute failed to implicate the regulatory concerns of ERISA, which 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. (Fort Halifax Packing Co. v. Coyne, supra, 482 U.S. at pp. –––– – ––––, 107 S.Ct. at pp. 2219–2220, 96 L.Ed.2d at pp. 13–14.) 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 self-dealing, imprudent investing, and misappropriation of plan funds. (Id., at p. ––––, 107 S.Ct. at p. 2219, 96 L.Ed.2d at p. 14.) Where there is no administrative activity potentially subject to employer abuse, preemption does not serve the overall purpose of ERISA. (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.) 3 , 4
Thus, the existence of an ERISA plan depends on the extent to which the employer is involved in the administration of the benefit program so as to implicate the concerns which gave rise to ERISA.
4. Application here.
As indicated, the parties' statement of uncontroverted facts establishes the following: Swiss American paid the premiums for health insurance available from Blue Cross through NEST for employees and their eligible family members; Biles & Cook, under a contract with Blue Cross, provided administrative services pursuant to standard policies and procedures under the NEST/Blue Cross agreement, including the processing of claims for professional services; Blue Cross made all determinations regarding eligibility and processed claims for hospital benefits; neither Blue Cross nor Swiss American filed reports with the Department of Labor; Swiss American had no express agreement with its employees to provide health insurance.5
Preliminarily, due to the lack of an express agreement by Swiss American to provide health insurance for its employees, it is questionable whether it had made a “commitment systematically to pay [these] benefits․” (Fort Halifax Packing Co. v. Coyne, supra, 482 U.S. at p. ––––, 107 S.Ct. at p. 2216, 96 L.Ed.2d at p. 10.)
It is manifest that Swiss American did not administer the subject health program, and its role was essentially limited to paying the policy premiums.6 Again, the United States Supreme Court stated in Fort Halifax Packing Co. v. Coyne, supra, 482 U.S. at p. ––––, 107 S.Ct. at p. 2218, 96 L.Ed.2d at p. 12: “To do little more than write a check hardly constitutes the operation of a benefit plan. [Fn. omitted.]”
Admittedly, Fort Halifax is distinguishable in that only a single set of severance payments was involved, while here, Swiss American regularly paid premiums over a period of years. However, Swiss American did not undertake administrative responsibilities “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.” (Id., at p. ––––, 107 S.Ct. at p. 2216, 96 L.Ed.2d at p. 10.) 7 , 8
Due to the lack of participation by Swiss American in the administration of the subject insurance benefit, the regulatory concerns of ERISA are not implicated. (Fort Halifax Packing Co. v. Coyne, supra, 482 U.S. at pp. –––– – ––––, 107 S.Ct. at pp. 2219–2220, 96 L.Ed.2d at pp. 13–14.) Because there was no employer-operated plan, there was no potential for employer abuses such as self-dealing, imprudent investing, and misappropriation of plan funds. (Id., at p. ––––, 107 S.Ct. at p. 2219, 96 L.Ed.2d at p. 14.) Therefore, the rationale of ERISA is not served in this fact situation.
We conclude Swiss American's health insurance benefit was not a plan within the meaning of ERISA. Accordingly, none of the Saybles' causes of action are preempted thereby.9 r, 10
CONCLUSION
Respondents in effect argue the mere payment by an employer of premiums for employee health insurance is sufficient to constitute a plan governed by ERISA. Were that the case, every garden variety employee health insurance benefit would subject the paying employer, large or small, to ERISA's regulatory burdens, and would bind the insured employee to ERISA's remedies.
However, where an obligation generates no administrative activity potentially subject to employer abuse, the regulatory concerns of ERISA are not implicated. Here, the trial court was bound by the joint statement of uncontroverted facts, which established that Swiss American's role was limited to paying the policy premiums.
The trial court erred in granting respondents' motion for summary judgment because Swiss American did not establish or maintain a plan governed by ERISA.
Ordinarily, an erroneous grant of summary judgment results in a simple reversal. However, the instant judgment consists of both the granting of respondents' summary judgment motion as well as the erroneous denial of the Saybles' motion for summary adjudication of issues. Accordingly, we grant the Saybles' request for summary adjudication. (Code Civ.Proc., § 437c, subd. (f).)
DISPOSITION
The grant of summary judgment in respondents' favor is reversed. The Saybles' request for summary adjudication is granted with respect to the following issue, which is established as a matter of law:
“The purchase by Swiss American of health insurance for Gilbert did not constitute a plan under ERISA; accordingly, none of the Saybles' causes of action are preempted thereby.”
The Saybles to recover their costs on appeal.
FOOTNOTES
1. Employee Retirement Income Security Act (29 U.S.C. section 1001 et seq.).
2. NEST, a multiple employer trust, is not itself an employee welfare benefit plan. (Donovan v. Dillingham, supra, 688 F.2d at p. 1372.)
3. The dissenting opinion in Fort Halifax criticized the majority's rule requiring an established administrative scheme as essential to the existence of a plan. (Id., at p. ––––, 107 S.Ct. at p. 2223, 96 L.Ed.2d at p. 19.) The dissent argued that by making preemption turn on the existence of an employer's administrative scheme, the court had undermined Congress' intent to preempt all state laws relating to employee benefit plans. (Id., at ––––, 107 S.Ct. at p. 2225, 96 L.Ed.2d at p. 21.)
4. See also the pre-Fort Halifax case of Drummond v. McDonald Corp. (1985) 167 Cal.App.3d 428, 432, 213 Cal.Rptr. 164, which noted an ERISA plan existed where the employer processed claims and performed other administrative functions.
5. On review, “this court will consider only the facts before the trial court at the time it ruled on the [summary judgment] motion [citations].” (Jacobs v. Retail Clerks Union, Local 1222 (1975) 49 Cal.App.3d 959, 966, 123 Cal.Rptr. 309.)
6. There is no issue here as to nonpayment of premiums.
7. We recognize, however, that 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 plan from coverage by ERISA; were it otherwise, employers could escape ERISA's coverage merely by failing to comply with its administrative and reporting requirements. (Scott v. Gulf Oil Corp. (9th Cir.1985) 754 F.2d 1499, 1503.)
8. Although Rizzi v. Blue Cross of So. California (1988) 206 Cal.App.3d 380, 382, 253 Cal.Rptr. 541, erroneously refers to the substantial evidence standard in reviewing a summary judgment, it otherwise contains a helpful application of the Fort Halifax test in determining the existence of a plan. Rizzi determined the health insurance in issue was governed by ERISA, because the employer contributed to the premiums and exercised other controls over its health benefit program. (Id., at p. 391, 253 Cal.Rptr. 541.) “Applying by analogy the Fort Halifax analysis [to the Rizzi fact situation, the Rizzi court reasoned], 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 the program as an ERISA ‘plan.’ ” (Rizzi v. Blue Cross of So. California, supra, 206 Cal.App.3d at p. 389, 253 Cal.Rptr. 541.)
9. Because Swiss American's health insurance benefit was not a plan governed by ERISA, it is unnecessary to address the Saybles' second contention regarding preemption of section 790.03 claims by ERISA, an issue recently decided in Commercial Life Ins. Co. v. Superior Court, supra, 47 Cal.3d at p. 473, 253 Cal.Rptr. 682, 764 P.2d 1059.
10. Because no ERISA plan is involved, Biles & Cook's reliance on Gelardi v. Pertec Computer Corp. (9th Cir.1985) 761 F.2d 1323, is unavailing.
KLEIN, Presiding Justice.
DANIELSON and ARABIAN, JJ., concur.
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Docket No: Civ. No. B030637.
Decided: February 02, 1989
Court: Court of Appeal, Second District, Division 3, California.
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