Opinion
01 CIV. 4421(BSJ)
December 9, 2003
OPINION
BACKROUND
At issue before the Court is whether a physician is pre-empted by ERISA from asserting state law claims against an insurance company for non-payment of benefits. For the reasons below, the Court finds that he is.
1. Facts
Plaintiff, Jeffrey L. Adler, DPM, is a podiatric physician practicing in New York. From on or about June 2000 through April 2001, Adler rendered podiatric services to several employees of National Bank of Canada ("NBOC"), Nuforia, Inc. d/b/a/ Red Sky Interactive ("Nuforia"), and MONET Group, Inc. ("Monet"). All of the employees were insured by UNICARE Life and Health Insurance Company ("Unicare"), under policies maintained by their respective employers.
The details of the insurance plans are as follows: All three of the employers maintain a medical insurance plan for its full-time employees working a specified number of hours per week. (Affidavit of John Cecchino, dated April 29, 2002 ("Cecchino Aff.") ¶¶ 3, 23, 31; Affidavit of Randi Knepper, dated July 19, 2001 ("Knepper Aff.") Exs. A-F). Each of the employers negotiated the terms of the plan with Unicare, and each had the power to terminate coverage at will. (Cecchino Aff. ¶¶ 9, 13, 21, 26, 28, Exs. 2, 14; 18, 23, 24). Premiums for NBOC's employees' coverages are paid in part by NBOC and in part by the employees. (Cecchino Aff. ¶¶ 8, 11, Ex. 10; Knepper Aff. ¶¶ 9, 14, 19, Ex. A). Similarly, Nuforia and Monet pay a specified percentage of the premiums for their employee's coverage. (Cecchino Aff. ¶¶ 21, 27, Exs. 17, 23).
Unicare forwarded each of the employers plan brochures for distribution to its employees. (Cecchino Aff. ¶¶ 9, 21, 28, Exs. 2, 18, 24). The brochures set forth the benefits provided, the procedures for obtaining benefit payment and the eligibility requirements. (Knepper Aff. ¶¶ 5, 6, 11, 12, 15, 17, Exs. A, B, E, G). They also identify the employer as both the plan sponsor and the plan administrator. (Knepper Aff. ¶¶ 6, 12, 17). In addition, each booklet states that the plans are governed by ERISA, and provides a "Statement of Rights" under ERISA. (Cecchino Aff. ¶¶ 21, 28, Exs. 18, 24; Knepper Aff. ¶¶ 9, 14, 19).
Unicare also prepared and sent each employer an administrative manual, "as a guide to the administration and claims procedures necessary to administer your group's plan." (Cecchino Aff. ¶ 14, Ex. 15). The manuals provided instructions to the employers on adding, changing and terminating coverage for individuals, as well as billing and claims procedures and COBRA information. (Cecchino Aff. ¶¶ 14-16, Ex. 15).
2. Procedural History
Adler billed Unicare in excess of $250,000 for the services he performed on patients insured by Unicare and employed by NBOC, Nuforia and Monet, but Unicare refused to pay. Adler filed a complaint on May 23, 2001, alleging: (1) breach of contract, (2) unjust enrichment, (3) fraud, (4) breach of duty of good faith and fair dealing, and (5) deceptive trade practices under New York law. Adler sought compensatory and punitive damages, including payments allegedly owed totaling over $250,000, interest and costs of the suit. He also included a jury demand.
Unicare filed a Motion to Dismiss the Complaint, pursuant to Federal Rules of Civil Procedure Rule 12(b)(6) on June 26, 2001, asserting that all of Plaintiff's causes of action were pre-empted by the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. On July 13, 2001, Adler filed an Opposition to the motion, arguing that Defendant had not set forth facts sufficient to support a finding that each of the employers maintained an "employee welfare benefit plan," as required for ERISA application. With this Opposition, Plaintiff also filed an amended complaint, which alleged a sixth count seeking relief under ERISA and sought compensatory damages, attorney's fees and the cost of suit. In its Reply, Defendant requested that the Court strike counts 1 through 5 of the Amended Complaint, the claims for damages other than those permitted under ERISA, and the jury demand. Defendant also submitted an affidavit of counsel, attaching each of the employers' insurance plan brochures.
On January 31, 2002, the Court issued an Order, stating that it was "unable to make a factual determination of whether or not the relevant insurance plans are ERISA plans based solely upon the plan brochures that have been provided by Unicare," and was therefore unable to reach the issue of preemption. The Court ordered that the parties conduct discovery relating the narrow issue of whether ERISA is applicable to the insurance plans.
After the completion of discovery, Defendant submitted a Renewed Motion to Dismiss and/or for Partial Summary Judgment, with an accompanying affidavit, on May 2, 2002. The motion requested the same relief as the original Motion to Dismiss. Plaintiff, in reply, submitted a letter-brief, dated May 24, 2002, arguing that despite the evidentiary submissions, Defendant failed to meet its burden of establishing that the plans at issue were covered by ERISA.
The Court agrees with Defendant, and therefore grants its Motion to Dismiss and/or for Partial Summary Judgment.
DISCUSSION
A. Standard of Review
Because the parties have conducted discovery on the ERISA issue and the Court has reviewed affidavits and exhibits in support of the motion, the Court converts Defendant's Rule 12(b)(6) motion into a motion for partial summary judgment pursuant to Rule 56.
Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party has the burden of showing the absence of a genuine issue of material fact. Once the moving party has met this burden, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e);see also West-Fair Elec. Contractors v. AETNA Cas. Sur. Co., 78 F.3d 61, 63 (2d Cir. 1996). "Speculative and conclusory allegations are insufficient to meet this burden." Hogan v. 50 Sutton Place S. Owners, Inc., 919 F. Supp. 738, 742 (S.D.N.Y. 1996), (citing Allen v. Coughlin, 64 F.3d 77, 80 (2d Cir. 1995)).
B. ERISA Application
The parties agree that Plaintiff has standing to assert ERISA claims against Defendant, although he is not the plans' beneficiary, because Plaintiff's patients assigned their rights to benefits over to Plaintiff. The parties also agree that if the Court finds that the plans at issue qualify as ERISA plans, Plaintiff's first through fifth causes of action and his claim for damages other than those allowed under ERISA are pre-empted. Therefore, the Court will not address these issues.
The Court notes that Plaintiff's claims only address alleged breaches of the contract between the employee-patients and their insurance companies, and not any contract that Plaintiff might have had with the insurance company.
The parties dispute one main issue: whether the plans at bar, while qualifying as "employee welfare benefit plans," nonetheless fall within ERISA's Safe Harbor regulations, and are thereby exempt from ERISA. 1. Employee Welfare Benefit Plans
In their initial papers, the parties disputed (1) whether the plans were "employee welfare benefit plans" as defined by ERISA, see Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12 (1987);Kosakow v. New Rochelle Radiology Assoc., P.C., 274 F.3d 706, 737 (2d Cir. 2001), and (2) whether the employers' participations in the plans at issue rise to the level required to show that a plan was "established," under Grimo v. Blue Cross/Blue Shield, 34 F.3d 148 (2d Cir. 1994) and related cases. However, the more recent papers, including Plaintiff's May 24, 2002 Opposition to Defendant's Renewed Motion, have focused solely on the issue of whether the plans qualify for the Safe Harbor exception. Although the Court assumes the issues regarding the existence and establishment of a "plan" are moot, it is clear from the record that the plans are "employee welfare benefit plans" that are "established" by each of the employers.
ERISA is a comprehensive statute that Congress enacted to regulate exclusively the field of employment benefit plans. See Mertens v. Hewitt Assocs., 508 U.S. 161 (1993). ERISA provides certain protection for:
"[A]ny plan, fund, or program . . . established or 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 participants or their beneficiaries, through the purchase of insurance or otherwise, (A) . . . benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits . . . or (B) any benefit described in section 186(c) of this title. . . ."29 USCA § 1002.
In analyzing whether a plan is covered by ERISA, a court must determine: (1) whether a plan exists, (2) if so, whether it is covered by the "Safe Harbor" established by the Department of Labor Regulations pertaining to group insurance, and (3) whether, if the plan is outside the Safe Harbor, the employer's involvement is sufficient to have established or maintained the plan. Grimo, 34 F.3d at 151-52 (citing Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir. 1982)).
2. Safe Harbor Exception
Pursuant to its authority under 29 U.S.C. § 1135, the Department of Labor promulgated regulations designed to "clarify the definition of the terms `employee welfare benefit plan' and `welfare plan' [in ERISA] . . . by identifying certain practices which do not constitute employee welfare benefit plans." Grimo, 34 F.3d at 152 (quoting 29C.F.R. § 2510.3-1(a)(1) (1993)). For a plan to come within the regulation, commonly referred to as the "Safe Harbor" exception, it must meet the following criteria: (1) no contributions may be made by the employer; (2) participation in the program must be completely voluntary for employees or members; (3) the sole function of the employer must be, without endorsing the program, to; permit the insurer to publicize the program to its employees, to collect premiums through payroll deductions or dues checkoffs and remit them to the insurer; and (4) the employer must receive no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation for administrative services rendered in connection with the collection of premiums.See 29 C.F.R. § 2510.3-1(j); see also Grimo, 34 F.3d at 152. Group health insurance plans that meet all of these criteria are excluded from ERISA coverage. Grimo, 34 F.3d at 152.
It is clear from the record before the Court that the insurance plans at issue fail to meet all of the requirements of the Safe Harbor exception. With regard to the first prong, Nuforia's and Monet's "Key Accounts New Case Summary," which lists important terms of the employers' coverage, clearly specifies that the employer contributes a certain percentage of the employees' premiums. (Cecchino Aff. Exs. 18, 23-24). Likewise, NBOC's manual, while not stating the exact percentage, demonstrates that the employer contributes to the premiums as well. (Knepper Aff. Ex. A); see also Conners v. Connecticut Gen. Life Ins. Co., 1999 WL 1211831, 2 (S.D.N.Y. Dec. 16, 1999) (finding that a plan did not satisfy the first element of the Safe Harbor exception because the plan's documents indicated that the employer paid some of the premiums for the coverage). In fact, Plaintiff concedes that Defendant's documents indicate "[t]hat in certain circumstances, contributions are made by the employer on behalf of the employee." (Letter from Plaintiff's Counsel to the Court, dated March 26, 2002, at 1).
The policies also do not meet the third prong of the test because the employers' involvement was not limited to permitting Unicare to publicize the Policy, to collect premiums through payroll deductions, and to remit the funds to Unicare. First, NBOC and Nuforia solicited bids from insurers, seeking only policies meeting certain specifications. (Id. at Exs. 13, 17). In addition, documents produced by NBOC, Nuforia and Monet indicate that the employers negotiated and altered the terms of the coverage of the insurance policies. (Cecchino Aff. Exs. 3-4 (correspondence from NBOC to Unicare negotiating and accepting terms), 12, 20, 25 (several "Request for Amendment of Group Policy" forms from NBOC, Nuforia and Monet), 18, 24 ("Key Account Case Summary" forms indicating that Nuforia and Monet were the "Decision Maker [s]" on behalf of their employees); (see also Knepper Aff. Exs. E, F (Monet's policy brochure)). In addition, NBOC's plan brochure also states that NBOC reserves the right to "amend or modify the Plan from time to time." (Knepper Aff. Exs. A).
Second, the administrative manuals sent to all three employers provide instructions to the to the employers' benefits department on how to add, change and terminate coverage for individual employees and their beneficiaries, as well as how to maintain coverage upon termination of an individual's employment. (Cecchino Aff. Ex. 15). They also supply directions on how to assist employees in submitting claims, (Id.). These manuals demonstrate that the employers assumed active roles outside of merely collecting and remitting premiums.
Moreover, the manner in which the policies were presented to the employees establishes that the employer "endorsed" the programs.See 29 C.F.R. § 2510.3-1(j); see alsoGrimo 34 F.3d at 152. An employer can be found to have endorsed a policy or plan if it "expresses to its employees or members any positive, normative judgment regarding the program," including any behavior that would "lead an employee or member reasonably to conclude that the program is part of a benefit organization arrangement established or maintained by the employer or employee organization."Connecticut Gen. Life Ins. Co. v. Mitchell, 94 Civ. 4648, 1995 WL 469714, 4 (S.D.N.Y. Aug'. 8, 1995) (quoting DOL Advisory Op. 94-25A, July 11, 1994). In this case, NBOC's and Nuforia's plan booklets bear the employers' logos on the cover, and therefore manifests the companies' endorsement of the policies. (Cecchino Aff. Exs. A (NBOC), C (Nuforia/ Red Sky)); cf. Connecticut Gen. Life Ins, 1995 WL 469714, at *4. In addition, Nuforia's and Monet's plan booklets clearly state that the employer "chose the benefit plan shown in this booklet to replace a previous group insurance plan." (Knepper Aff. Exs. C-D).
Lastly, although outside the framework of the "Safe Harbor" analysis, the Court is also persuaded that the employers intended for the insurance plans to be governed by ERISA. This intent is evidenced by the fact that all three plan brochures provide a list of the plan members' rights under ERISA, indicate that the employer is the "Plan Administrator" and the "Plan Sponsor," and offer a "Summary Plan Description," all of which are required disclosures and designations under ERISA. Cf. Connecticut General Life Ins., 1995 WL 469714, M-5.
Accordingly, the Court finds that the plans at issue are within ERISA's purview and are not exempt under the "Safe Harbor" exception.
CONCLUSION
The Court grants the Defendant's Renewed Motion to Dismiss and/or for Partial Summary Judgment, and strikes (1) counts 1 through 5 of Plaintiff's Amended Complaint, (2)Plaintiff's claims for damages other than those permitted under ERISA in count 6, and (3) Plaintiff's jury demand.The parties are directed to confer and submit to the Court a proposed schedule for discovery on or before December 23, 2003.
SO ORDERED