Opinion
As Modified on Denial of Rehearing Oct. 21, 1987.
Review Granted Dec. 23, 1987.
Previously published at 208 Cal.App.3d 505
McAlpin, Doonan & Seese and Daniel G. McMeekin, Covina, for plaintiff and appellant.
H. Ralph Snyder, Jr., Richard E. Potter, Thousand Oaks, Lawrence A. Valdivieso, Ventura, Robert H. Wyman, Thousand Oaks, Roberto N. Herrera, Oxnard, and Mark F. Sullivan, Westlake Village, for defendants and respondents.
JOHNSON, Associate Justice.
The question presented is whether ERISA precludes the courts of this state from awarding damages to a disabled employee for his employer's bad faith delay in processing his claim for benefits under the employer's long term disability insurance plan. In summary we hold:
I. There is no cause of action under ERISA that could be brought in state court for damages to Mr. Goodrich for the delay in processing his claims for benefits.
II. The common law causes of action against General Telephone for breach of the covenant of good faith and fair dealing and intentional interference with a protected property interest "relate to" an employee benefit plan but are not laws which "regulate insurance" and, therefore, are preempted by ERISA.
III. Mr. Goodrich may be able to amend his complaint to state a cause of action under Insurance Code section 790.03 subdivision (h)--a law which does "regulate insurance"--therefore the trial court erred in granting judgment on the pleadings without leave to amend.
Although the order granting judgment on the pleadings does not order the action dismissed, in the interests of justice and to prevent unnecessary delay we will deem this order to incorporate a judgment of dismissal and treat appellant's notice of appeal as applying to the dismissal. (Munoz v. Davis (1983) 141 Cal.App.3d 420, 431, 190 Cal.Rptr. 400.)
FACTS AND PROCEEDINGS BELOW
James C. Goodrich filed an action in superior court against The Travelers Insurance Company and his employer, General Telephone Company, for damages resulting from delays in processing his claim for disability benefits under a policy issued by Travelers to employees of General Telephone. The parties agree the disability insurance program is an employee benefit plan covered by Title I of the Employee Retirement Income Security Act of 1974, (ERISA), 29 U.S.C. 1001, et seq.
The complaint alleged causes of action against Travelers and General Telephone for breach of the covenant of good faith and fair dealing and intentional interference with a protected property interest. The claim against General Telephone was based on allegations it was Travelers' agent for purposes of processing and submitting the proper claim forms for disability benefits and, despite its knowledge Goodrich had a valid claim, General Telephone failed to submit the proper forms or take other necessary steps to obtain the benefits for which Goodrich was eligible.
Goodrich concedes he eventually received his benefits. Thus, his claim is not for benefits due under an employee benefit plan but for damages suffered from a delay in processing his claim.
The trial court granted General Telephone's motion for judgment on the pleadings on the ground Goodrich's causes of action were preempted by ERISA. As we explain more fully below, the trial court correctly determined the complaint failed to DISCUSSION
I. THERE IS NO CAUSE OF ACTION UNDER ERISA THAT COULD BE BROUGHT IN STATE COURT FOR DAMAGES CAUSED BY THE DELAY IN PROCESSING A CLAIM FOR BENEFITS
The role of state courts in enforcement of ERISA is a limited one. Although ERISA provides employees numerous grounds for civil actions, the only ones cognizable in state courts are actions to recover benefits due, enforce rights or clarify rights "under the terms of the plan." (29 U.S.C. 1132(a)(1)(B), 1132(e)(1).) (Johnson v. Trans World Airlines, Inc. (1983) 149 Cal.App.3d 518, 530, 196 Cal.Rptr. 896.) The complaint in this case cannot be construed as an action to recover benefits due because it is admitted Mr. Goodrich has received the benefits to which he was entitled. Nor can the action be characterized as one to "enforce ... rights under the terms of the plan." (Sec. 1132(a)(1)(B).) The duty to avoid unreasonable delay in paying benefits does not, generally speaking, arise under the terms of the plan. It arises from the common law obligation to deal fairly and in good faith and from Insurance Code section 790.03 subdivision (h). (See Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658, 328 P.2d 198; Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 884, 153 Cal. Rptr. 842, 592 P.2d 329.)
The complaint before us does not allege any such duty arose under the General Telephone disability plan.
While ERISA may provide a cause of action for improper processing of a claim for benefits, that claim does not arise under 29 U.S.C. 1132(a)(1)(B) and, therefore, cannot be brought in a state court.
See Pilot Life Ins. Co. v. Dedeaux (1987) 481 U.S. 41, 107 S.Ct. 1549, 1551, 1555-1556, 95 L.Ed.2d 39 Note, Participant and Beneficiary Remedies Under ERISA [etc.] (1986) 71 Cornell L.Rev. 1014; but see Powell v. Chesapeak & Potomac Tel. Co. of Virginia (4th Cir.1985) 780 F.2d 419 ; Hancock v. Montgomery Ward Long Term Disability Trust (9th Cir.1986) 787 F.2d 1302.
II. CALIFORNIA COMMON LAW CAUSES OF ACTION FOR BAD FAITH AND INTERFERENCE WITH PROTECTED PROPERTY INTERESTS ARE NOT LAWS WHICH "REGULATE INSURANCE" AND, THEREFORE, ARE PREEMPTED BY ERISA
The scope of ERISA's preemption of state law is delineated in three subsections of the statute. ERISA begins with the broad statement 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).) This sweeping language is modified by a "savings clause" which provides ERISA shall not be "construed to exempt or relieve any person from any law of any State which regulates insurance...." (29 U.S.C. § 1144(b)(2)(A).) The "savings clause" is in turn limited by the so-called "deemer clause." It provides no employee benefit plan "shall be deemed to be an insurance company or other insurer ... or to be engaged in the business of insurance ... for purposes of any law of any State purporting to regulate insurance companies...." (29 U.S.C. § 1144(b)(2)(B).)
To summarize: a state law is preempted if it "relate[s] to" an employee benefit plan unless it is a state law which "regulates insurance." However, a state cannot "deem" an employee benefit plan to be an insurer in order to regulate the plan under state laws regulating insurance companies.
The United States Supreme Court has interpreted the preemption provision and the exceptions quoted above. The Court has described the ERISA preemption provision as "deliberately expansive" (Pilot Life Ins. Co. v. Dedeaux, supra, 107 S.Ct. at p. 1552) and "intended to displace all state The Court has taken what it describes as a "common sense view" of the exception for laws which regulate insurance. (Metropolitan Life Ins. Co., supra, 471 U.S. at p. 740, 105 S.Ct. at p. 2390.) In Metropolitan Life Ins. Co., the court held a state law which "obvious[ly] ... regulates the terms of certain insurance contracts ... to be saved from preemption by the savings clause as a law 'which regulates insurance.' " (Ibid.) As we discuss below, the Court expanded on the meaning of laws which regulate insurance in Pilot Life Ins. Co. v. Dedeaux, supra.
Finally, the Court has interpreted the "deemer clause" as aimed solely at preventing states from regulating employee benefit plans, which they are prohibited from doing under section 1144(a), by "deeming" the plans' insurers in order to take advantage of the exception from preemption for laws regulating insurance companies. (Metropolitan Life Ins. Co. v. Massachusetts, supra, 471 U.S. at pp. 740- 741, 105 S.Ct. at pp. 2389-2390; Pilot Life Ins. Co. v. Dedeaux, supra, 107 S.Ct. at p. 1552.)
There is no dispute that the common law causes of action alleged in Goodrich's complaint "relate to" an employee benefit plan and therefore fall within ERISA's broad preemption clause. (Cf. Pilot Life Ins. Co., supra, 107 S.Ct. at p. 1553.)
Goodrich contends his common law causes of action are saved by the exception to preemption which spares laws regulating insurance. (29 U.S.C. 1144(b)(2)(A).) In light of the Supreme Court's decision in Pilot Life Ins. Co. v. Dedeaux, supra, we must reject Goodrich's interpretation of the insurance savings clause.
The facts in Pilot Life are much like those in the case at bar. Dedeaux's employer had a long term disability plan which it established by purchasing a group insurance policy from Pilot Life. The employer provided forms to its employees for processing disability claims and forwarded completed forms to Pilot Life which bore the responsibility of determining who would receive disability benefits. Dedeaux submitted a claim and began receiving disability benefits. However, after two years Pilot Life terminated Dedeaux's benefits and in the ensuing three years reinstated and terminated his benefits several times. (Pilot Life Ins. Co. v. Dedeaux, supra, 107 S.Ct. at p. 1551.)
Dedeaux brought suit against Pilot Life in federal court seeking damages for failure to pay benefits under the insurance policy. The suit was based on tort and breach of contract claims arising under Mississippi common law. (107 S.Ct. at p. 1551.) The district court granted Pilot Life's motion for summary judgment on the ground all of Dedeaux's claims were preempted by ERISA. The Court of Appeals reversed. When the case reached the Supreme Court on certiorari Dedeaux claimed only one of his causes of action-- the cause of action for "bad faith"--was protected from preemption. Dedeaux argued the cause of action for "bad faith," as developed by Mississippi case law, is a law which "regulates insurance" and, therefore, is saved from preemption. (Id., at p. 1553.)
State court decisional law is "State law" for purposes of the ERISA preemption provisions. (29 U.S.C. 1144(c)(1).)
The Supreme Court gave two reasons for rejecting the argument the state common law of bad faith was a law regulating insurance. First, "in order to regulate insurance, a law must not just have an impact on the insurance industry, but be specifically directed toward that industry." (107 S.Ct. at p. 1554.) The court found that even though the bad faith law is often
Goodrich's complaint falls for the same reasons. His claims are not based on laws "specifically directed toward [the insurance] industry." (Pilot Life, supra, 107 S.Ct. at p. 1554.) In California, the law implies in every contract a covenant of good faith and fair dealing. (Universal Sales Corp. v. Cal. etc. Mfg. Co. (1942) 20 Cal.2d 751, 771, 128 P.2d 665.) California courts have recognized the existence of this covenant, and enforced it, in cases involving a wide variety of contracts including contracts to make mutual wills, agreements to sell real property, employee incentive contracts, leases and contracts to provide utility services. (See Seaman's Direct Buying Service Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 768, 206 Cal.Rptr. 354, 686 P.2d 1158 and cases cited.)
We admit unfamiliarity with Goodrich's cause of action for "interference with a protected property interest" (this would seem to be a description of every tort). Assuming Goodrich is pleading interference with economic advantage it is clear this tort, too, is not specifically directed toward the insurance industry. Nor does the tort of interference with economic advantage affect a spreading of policyholder risk, define the relationship between insurer and insured or apply exclusively to entities within the insurance industry. (See Pilot Life Ins. Co., supra, 107 S.Ct. at pp. 1554-1555.)
For the reasons given above we conclude Goodrich's common law claims are not based on laws regulating insurance and, therefore, are preempted by ERISA.
III. ERISA DOES NOT PREEMPT A CLAIM FOR DAMAGES UNDER INSURANCE CODE SECTION 790.03 SUBDIVISION (h).
The California Legislature has decreed certain acts to be "unfair methods of competition and unfair and deceptive acts or practices in the business of insurance." (Ins.Code 790.03, (italics added).) These include, under subdivision (h):
"(2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.
"(3) Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.
"(4) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the insured.
"(5) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear."
We find section 790.03 squarely meets the criteria for a "law ... which regulates insurance" set forth in Pilot Life. (107 S.Ct. at pp. 1554-1555.)
Section 790.03 is part of the Unfair Practices Act within the Insurance Code. (See Ins. Code, Div. 1, part 2, art. 6.5.) The purpose of the Unfair Practices Act is "to regulate trade practices in the business of insurance in accordance with the intent of Congress as expressed in the [McCarran-Ferguson Act]...." (Ins.Code § 790, (italics added).) Thus, section 790.03 does not "just have an impact on the insurance industry" it is "specifically directed toward Section 790.03 also comes within the definition of a law relating to the "business of insurance" under the McCarran-Ferguson Act. As we noted briefly above, the Supreme Court has used three criteria to determine whether a practice falls under the "business of insurance" for purposes of the McCarran-Ferguson Act:
" '[F]irst whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry.' "
(Pilot Life, supra, 107 S.Ct. at pp. 1553- 1554 quoting Union Labor Life Insurance Co. v. Pireno (1982) 458 U.S. 119, 129, 102 S.Ct. 3002, 3009, 73 L.Ed.2d 647.)
Section 790.03, subdivision (h) defines the terms of the relationship between the insurer and the insured by specifically regulating the obligations of an insurance company to its policyholders (see e.g. § 790.03, subd. (h)(2), (3), (4), (5); cf. Pilot Life, supra, 107 S.Ct. at p. 1555.) Section 790.03, subdivision (h) applies to no other business than insurance and its provisions are tailored to activities in that business-- promptly replying to communications about claims; promptly investigating and processing claims; promptly, fairly and equitably settling claims. It is true section 790.03 does not affect policyholder risk. However, it is not necessary a state statute meet all three criteria perfectly. The Court has explained these criteria are guidelines and that "[n]one of these criteria is necessarily determinative in itself...." (Union Labor Life Ins. Co., supra, 458 U.S. at p. 129, 102 S.Ct. at p. 3009.) Section 790.03 fits the other two criteria mentioned in Pilot Life so well we have no difficulty concluding it is a law relating to the business of insurance within the meaning of the McCarran-Ferguson Act and, therefore, within the savings clause of ERISA.
We note another provision of McCarran-Ferguson states, "No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted for the purpose of regulating the business of insurance ... unless such Act specifically relates to the business of insurance...." (15 U.S.C., § 1012(b); italics added.) However, ERISA is not an Act of Congress that specifically relates to the business of insurance. Unlike the ERISA preemption provision which preempts state laws that merely "relate" to employee benefit plans, (§ 1144(a)), a federal law may only be construed to supersede state laws regulating insurance if it "specifically" relates to insurance. It follows that the federal law must have more than a mere connection with or reference to insurance. For example, in Hanover Ins. Co. v. C.I.R. (1st Cir.1979) 598 F.2d 1211, 1218 the court held Internal Revenue Code section 832 did not violate McCarran-Ferguson because "it deals exclusively with taxation of insurance companies."
Neither ERISA in general nor the two sections authorizing the Secretary of Labor to adopt rules regulating notice and hearing of claims denied under an employee benefit plan (§§ 1132 and 1133) deal exclusively with insurance companies or their claims processing procedures. ERISA regulates "employee benefit plans" (§§ 1001; 1002(3)) which may or may not involve insurance (§ 1002(1)). The ERISA provisions on claims processing apply to "every employee benefit plan" (§ 1133) and the civil enforcement section applies to the "plan." (§ 1132.) Although sections 1132 and 1133 do not specifically exempt insurance companies from their coverage, this omission does not transform them into affirmative provisions "specifically related" to the business of insurance. Similarly, Congress' consideration of some aspects of the insurance business in the passage of ERISA is insufficient. (Cochran v. Paco, Inc. (5th It is important to note the Secretary of Labor has not interpreted section 1133, relating to claims processing, as preempting state laws regulating the insurance business. The regulations adopted pursuant to section 1133 set out "certain minimum requirements for employee benefit plan procedures." (29 C.F.R., § 2560.503-1(a); italics added.) The federal claims provisions defer throughout to "regulation under the insurance law of one or more States." (See, e.g., 29 C.F.R. § 2560.503-1(c), (d)(3), (g)(2).) Thus, ERISA, as interpreted by the Secretary of Labor, poses no obstacle to California's adoption of more stringent claims processing rules than are provided in the ERISA regulations.
Finally the language of the statute itself makes it apparent the ERISA civil enforcement provision does not supersede a cause of action under section 790.03(h). It is the clear direction of Congress "nothing in this subchapter [including § 1132] shall be construed to ... relieve any person from any law of any State which regulates insurance...." (§ 1144(b)(2)(A); italics added and see discussion, infra, p. 642.)
General Telephone argues there is no meaningful distinction between a cause of action for bad faith in Mississippi and a cause of action for bad faith in California: section 790.03, subdivision (h) is merely a codification of the common law duty of good faith and fair dealing implied in every contract including insurance contracts. (See Richardson v. GAB Business Services, Inc. (1984) 161 Cal.App.3d 519, 524, 207 Cal.Rptr. 519 [dictum].) Granted, section 790.03, subdivision (h) shares certain attributes with the common law duty of good faith and fair dealing but to characterize it as a mere codification underestimates the significance of this legislative enactment in terms of the issue of ERISA preemption. Unlike the law in Mississippi, in California, section 790.03 provides a statutory cause of action for damages resulting from certain insurance company conduct independent from and in addition to any remedy the common law may provide. (Royal Globe Ins. Co. v. Superior Court, supra, 23 Cal.3d at p. 884, 153 Cal.Rptr. 842, 592 P.2d 329.) It is also important to note that unlike Mississippi, the California legislature has adopted a statute specifically aimed at the relationship between the insurance company and the policy holder. Statutes aimed at protecting or regulating this relationship, directly or indirectly, "are laws regulating the 'business of insurance.' " (SEC v. National Securities, Inc. (1969) 393 U.S. 453, 460, 89 S.Ct. 564, 568, 21 L.Ed.2d 668.)
Two federal district court cases have addressed this same issue and concluded Insurance Code section 790.03 is not preempted by ERISA. (Presti v. Connecticut General Life Ins. Co. Inc. (N.D.Cal.1985) 605 F.Supp. 163, 165; Eversole v. Metropolitan Life Ins. Co. Inc. (C.D.Cal.1980) 500 F.Supp. 1162, 1163.) Both cases stressed the laws saved from preemption under ERISA are laws regulating the relationship between the insurance company and the policy holder. (Presti, supra, 605 F.Supp. at p. 167; Eversole, supra, 500 F.Supp. at p. 1168.) As we have previously explained, section 790.03, subdivision (h) regulates an insurance company's conduct with respect to its insureds and third parties by regulating the claims process. Thus, section 790.03 clearly pertains to the relationship between insurer and insured. We recognize upholding a cause of action under section 790.03 is inconsistent with one purpose of ERISA: that the civil enforcement provisions of ERISA be the exclusive vehicle for actions by ERISA-plan beneficiaries asserting improper processing of a claim for benefits. (Pilot Life, supra, 107 S.Ct. at pp. 1555-1558.) This inconsistency is not of our making. Rather it is the inevitable result of inherently inconsistent goals expressed in the ERISA preemption provisions. On one hand Congress expressed the intent to establish a uniform federal common law of rights and obligations under ERISA, (Pilot Life, supra, 107 S.Ct. at p. 1558.) Yet on the other hand Congress recognized the long-standing policy of deference to state regulation of insurance. Congress reaffirmed this deference twice in ERISA: once in the insurance savings clause (sec. 1144(b)) and again in section 1144(d) which prevents ERISA from being construed to "impair or supersede any law of the United States" including the McCarran-Ferguson Act.
Russell v. Mass. Mut. Life Ins. Co. (9th Cir. 1983) 722 F.2d 482 (rev'd on other grounds (1985), 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96) is not authority to the contrary. The court lumped together all of plaintiff's state causes of action including one based on Insurance Code section 790.03 subdivision (h) and held they were preempted by ERISA. (722 F.2d at pp. 484, 487-488.) The opinion did not discuss whether the cause of action under section 790.03 subdivision (h) might be saved by 29 U.S.C. 1144(b)(2)(A). On certiorari, plaintiff did not question the Court of Appeals' holding that her state law causes of action were preempted by ERISA. (Massachusetts Mut. Life Ins. Co. v. Russell, supra, 473 U.S. at p. 138, Fn. 4, 105 S.Ct. at p. 3088, Fn. 4.)
The court in Presti, addressing this conflict, concluded,
"The Court cannot believe that the consumer protections afforded California policyholders were meant to be withdrawn from those persons whose coverage was provided under an employee benefit plan. The interest in ERISA plan uniformity cannot be secured at the expense of the uniform state regulation of those insurers choosing to write policies in California." (605 F.Supp. at p. 168.)
We note a federal district court filed a decision recently (Roberson v. Equitable Life Assur. Soc. of U.S. (C.D.Cal.1987) 661 F.Supp. 416) which rules claims under section 790.03(h) are preempted by ERISA. With all due respect to the learned federal court, we must disagree with its holding in Roberson. (Other "cases" cited to this court as supporting Roberson are nothing but a miscellany of uncitable orders, all but one from trial courts, most of which do not even discuss the issue, and none of which rise to the level of either precedent or persuasive authority.)
In Roberson, as in the case at bar, the court relied principally on Pilot Life v. Dedeaux while acknowledging that decision does not "answer ... directly" the question whether section 790.03(h) is preempted. (661 F.Supp. at p. 419.) "Unlike Pilot Life, which found that state common law was preempted, this case involves a state statutory law which, concededly, is specifically directed toward the insurance industry. (Ibid.) The Roberson opinion is in accord with our view on this point. (See discussion, supra, p. 645.) "[I]t would strain logic to argue that section 790.03(h) is not specifically directed toward the insurance industry." (Id., at p. 422.) The Roberson opinion is also in accord with our view section 790.03(h) has no bearing on spreading policy holder risk. (Ibid.) We part company with the Roberson court on two points: (1) whether the practices regulated by section 790.03(h) are an integral part of the policy relationship between the insurer and the insured (see discussion of McCarran-Ferguson Act factors, supra, p. 645); (2) whether, notwithstanding the savings clause, ERISA preempts all state laws falling within the Act's civil enforcement provisions.
On the first point, the Roberson court held, "Despite its providing for ... specific standards of conduct in processing claims for benefits, section 790.03(h) is not 'integral' to the insurer-insured relationship [because it] does not regulate the terms of the contract itself and hence does not regulate 'the business of insurance' as that term is defined under the McCarran-Ferguson Act." (661 F.Supp. at p. 422.) In other words, section 790.03(h) is not a "content regulation." (Id., at p. 419.) We disagree. In addition to the points we have already made on this subject, ( supra, p. 645) "[i]t is well settled that insurance policies are governed by the statutory and decisional law in force at the time the policy is issued. 'Such provisions are read into each policy issued thereunder, and become a part of the contract with full binding effect upon each party.' " (Interinsurance Exch. v. On the second point, the Roberson court held, "even assuming that section 790.03(h) regulates insurance and is therefore within the scope of the savings clause, it must be pre-empted for infringing on the same exclusive civil remedy provisions that were dispositive in Pilot Life." (661 F.Supp. at p. 414; italics added.) We have great difficulty with the concept section 790.03(h) can be both within and without the scope of the preemption clause. The concept is not only illogical but in direct conflict with the unambiguous language of the statute. Section 1144(b)(2)(A) states, "... nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance...." (Italics added.) The civil enforcement provisions of ERISA are contained in subchapter I, the same subchapter as the savings clause. Thus, even assuming the ERISA civil enforcement provisions could otherwise be construed to be the exclusive remedy for plaintiffs asserting improper processing of claims, Congress has specifically prohibited such a construction when the plaintiffs rely on a state law regulating insurance.
Pilot Life does not support the Roberson court's finding of an unspoken exception to the insurance savings clause. In Pilot Life the Supreme Court found the Mississippi common law of bad faith was not a law regulating insurance. Therefore the Court did not need to decide, and did not decide, whether there were any implied limits to the savings clause.
General Telephone relies on Drummond v. McDonald Corp. (1985) 167 Cal.App.3d 428, 213 Cal.Rptr. 164 and Provience v. Valley Clerks Trust Fund (1984) 163 Cal. App.3d 249, 209 Cal.Rptr. 276 for the proposition an employer administering an employee benefit plan is not an insurer or engaged in the business of insurance for purposes of the insurance law exception to the ERISA preemption clause. Both cases are distinguishable from the case at bar.
In Provience, the plaintiff brought common law causes of action for fraud, bad faith and intentional infliction of emotional distress against the medical benefit plan itself. (163 Cal.App.3d at pp. 253-254, 209 Cal.Rptr. 276.) The court held these causes of action related to an employee benefit plan and were not saved from preemption by the insurance law exception. As we have previously noted, supra, p. 645, laws that relate to an employee benefit plan are not transformed into laws that regulate insurance simply because the benefit plan provides a form of insurance. (29 U.S.C. 1144(b)(2)(B); 163 Cal.App.3d at pp. 260-261, 209 Cal.Rptr. 276.)
Drummond v. McDonald Corp., supra, was a case where the plaintiff used the defendant-employer's claims processing activities as the basis for alleging the common law causes of action for breaching the covenant of good faith and fair dealing, fraud and intentional infliction of emotional distress were laws regulating insurance. (167 Cal.App.3d at pp. 430-432, 213 Cal. Rptr. 164.) The court rejected this analysis saying, "[T]he permissive funding of an ERISA plan through insurance and the resultant claim-processing activity of the plan administrator [the employer] cannot transmute a Big Mac into an insurer subject to state law." (Id. at p. 432, 213 Cal.Rptr. 164.)
Provience and Drummond are cases holding state common law causes of action that a plaintiff seeks to apply to an employee benefit plan are not transformed into laws which regulate insurance, exempt from preemption, merely because they are asserted against a defendant who is performing an insurance function in the context of an employee benefit plan. The so called "deemer clause," 29 U.S.C. 1144(b)(2)(B), precludes this result. Nothing in Provience or Drummond suggests the "deemer clause" works in reverse. A bona fide insurance company does not cease to be engaged in the business of insurance when it sells a policy to an employee In the case before us Travelers is a bona fide insurance company and Insurance Code section 790.03 is a law which regulates insurance--not an employee benefit plan "deemed" to be insurance. General Telephone, which performed claims processing functions for Travelers acted as Travelers' agent and, therefore, is subject to liability for unreasonable delay in processing Goodrich's claim for benefits. (McCormick v. Sentinel Life Ins. Co. (1984) 153 Cal.App.3d 1030, 1040-1041, 200 Cal.Rptr. 732; Elfstrom v. New York Life Ins. Co. (1967) 67 Cal.2d 503, 505, 63 Cal. Rptr. 35, 432 P.2d 731.) Section 790.03 is enforceable in a private civil action against an agent of the insurer. (Greenberg v. Equitable Life Assur. Society (1973) 34 Cal.App.3d 994, 1001, 110 Cal.Rptr. 470; Reasoner v. Aetna Life Ins. Co. (S.D.Cal. 1984) 600 F.Supp. 278, 279; Davis v. Continental Ins. Co. (1986) 178 Cal.App.3d 836, 839-841, 224 Cal.Rptr. 66.)
There is a comment in Drummond, without citation, that "[T]he role in administration of the plan played by McDonald's [sic ] does not ... constitute McDonald's [sic ] an agent of Travelers, the insurance carrier." (167 Cal. App.3d at p. 434, 213 Cal.Rptr. 164.) This comment was in the context of the "deemer clause" discussion and does not express a view on agency for purposes of liability for delay in processing benefits. (See text, supra, p. 268.)
IV. IT WAS ERROR NOT TO ALLOW PLAINTIFF THE OPPORTUNITY TO AMEND HIS COMPLAINT TO STATE A CAUSE OF ACTION UNDER INSURANCE CODE SECTION 790.03
An appeal from a judgment on the pleadings is reviewed as though it were a judgment of dismissal after a general demurrer had been sustained. (Clack v. State of California ex rel. Dept. Publ Wks. (1969) 275 Cal.App.2d 743, 750, 80 Cal.Rptr. 274.) If the plaintiff has not had an opportunity to amend and wishes to do so it is ordinarily an abuse of discretion to deny leave to amend "if there was any reasonable probability that plaintiff might state a good cause of action...." (Ibid; and see MacIsaac v. Pozzo (1945) 26 Cal.2d 809, 815-816, 161 P.2d 449; Galligan v. City of San Bruno (1982) 132 Cal.App.3d 869, 876, 183 Cal.Rptr. 466.) "The granting of the motion without leave to amend would in many cases be an absolute denial of justice, and is directly opposed to the policy of the law that cases should be tried and decided on the merits." (MacIsaac, supra, 26 Cal.2d at p. 816, 161 P.2d 449.)
Goodrich requested the trial court to grant leave to amend but did not state the basis for the amendment. However, it is well established Code of Civil Procedure section 472c does not require a specific request to amend or an indication of its legal basis as a prerequisite for appellate review. (Galligan v. City of San Bruno, supra, 132 Cal.App.3d at p. 876, 183 Cal. Rptr. 466 and cases cited therein.)
The motion for judgment on the pleadings was General Telephone's first challenge to the complaint under the preemption theory. The deficiency in the complaint was primarily an erroneous theory of law and did not foreclose the conceivable availability of adequate facts to state a cause of action under Insurance Code section 970.03, subdivision (h). (Cf. Clack v. State of California (etc.), supra, 275 Cal. App.2d at p. 750, 80 Cal.Rptr. 274.) In a similar situation it was held error to sustain a demurrer without leave to amend a complaint that failed to state a cause of action under Insurance Code section 770 where the complaint did contain "allegations which suggest[ed] a cause of action for restraint of trade prohibited by Insurance Code section 790.03." (Greenberg v. Equitable Life Assur. Society, supra, 34 Cal.App.3d at p. 998, 110 Cal.Rptr. 470.)
DISPOSITION
The order granting judgment on the pleadings and order of dismissal are reversed and the case remanded for further
LILLIE, P.J., and THOMPSON, J., concur.