Cathey v. Metropolitan Life Insurance Co.

CATHEY and Bette James C. Petitioners,

Cathey, LIFE

METROPOLITAN INSURANCE

CO., Dow Chemical Co. and Michael Maddolin, Respondents.

H.

No. C-8323. Texas.

Supreme Court of 30, 1991.

Jan. Kincaid, Austin, sclerosis, Longley, multiple and her Joe K. Mark L. condition wors- Patterson, Houston, petition- eventually longer for ened so that could no James W. she In ers. walk without assistance. Bette Cathey’s physicians nursing ordered home Hunt, Wood, Katherine R. D. Judson A.J. expenses paid care for her. These were for II, Jaworski, Houston, Harper, Fulbright & group plan covering under the Pickens, Austin, Toppeta, Ace William J.M. employees. Dow Harman, Lenaghan, City, D.J. New York (“Met”), Company acting Life Insurance as respondents. for plan, the claims administrator for the Dow paying nursing refused to continue for the OPINION Maddolin, Cathey care. contacted Michael GONZALEZ, Justice. Met, group claim consultant with who told involving appeal This is an in a case necessity him that there was no medical “ERISA,” In- Employee Retirement nursing Cathey. care for Bette Security come Act of 1974. 29 U.S.C. Dow, Met, Catheys against The filed suit 1001-1461 An and his §§ alleging and Michael Maddolin common law brought against wife claims his statе law action; statutory and causes of no ERISA employer alleged and its insured for causes of action were stated. The trial wrongful denial of a claim for in-home court found each cause of action to be nursing granted care. The trial court a and, preempted by following the ERISA summary judgment to the defendants. Catheys’ petition to refusal to amend their appeals judg- The affirmed the court of action,1 state an ERISA cause of rendered 286. ment of the trial court. 764 S.W.2d Dow, Met, summary judgment in favor of upon We are called to decide whether appeals af- and Maddolin. court of 1) causes of action stated under: article judgment. firmed that 21.21, section 16 of the Texas Insurance Code; 2) 17.50(a)(4) of the Texas Act; 3)

Deceptive Trade Practices arti- ERISA cle 3.62 of the Texas Insurance Code are Employee Retirement Income Securi- superseded by provisions of ERISA. ty subjects employee Act of preempts We hold that ERISA these regu- regulation. to federal The act therefore causes of action this case. We pension plans lates both welfare ap- judgment affirm the of the court of contingencies provide benefits for peals. death, illness, accident, disability, such as provides unemployment. stan- While FACTS reporting, disclo- governing dards and rules summary judgment Because this is sure, fiduciary responsibility pen- case, Catheys are the facts shown plans, does not and welfare sion Property true. Mr. taken as Nixon v. any particular mandate benefits. Shaw Management 690 S.W.2d 548-49 Lines, Inc., Delta Air (Tex.1985). employed Cathey James was 2890, 2896-97, 77 L.Ed.2d 490 purchasing agent as a for Dow Chemical (“Dow”) to 1983. Dur- Company from 1973 514(a) provides: of ERISA Section Dow, Cathey ing his tenure at was told (b) wife, Except provided subsection representatives that he and his Dow section, sub- of this Cathey, group this Bette were covered chap- subchapter III of this (the plan). chapter In mid- Dow all state laws diagnosed supеrsede ter shall Cathey was 1970’s Bette partial holding Catheys separate were entitled ERISA suit filed a Company Cathey against recovery Chemical Medical claim. v. Dow the Dow on their ERISA Program during pendency of this ac- Program, Care F.2d Co. Medical Care Chemical the Fifth Circuit handed tion. We note that Cir.1990). (5th August in that case on down its decision intended emption provision of may now or hereafter insofar as any employee “reserving] de- effect to Feder relate to tо have the 1003(a) this title. power scribed in section authority al the sole plans.” 481 employee field of benefit U.S. informally is as the This section known (quoting Represent at 107 S.Ct. It provision of is “preemption” ERISA. (1974)). Dent, Cong.Rec. ative by scope subsection narrowed 514(b)(2)(A),commonly known as the “sav- THE DISPUTE

ing” clause: (B), provided subparagraph Except as misrepre Catheys The contend that con- subchapter in this shall be nothing representatives of both by sentations made person exemрt any or relieve strued to are the Tex Dow and Met actionable under regu- any any from of state which Deceptive and Trade as Insurance Code insurance, banking, lates or securities. (“DTPA”). argue They Act Practices employee “relate to” 514(b)(2)(B), their claims do not an Subparagraph the “deemer” clause, saving by pro- plan preempted. and thus are modifies the clause benefit viding plan: alternative, employee Catheys that no benefit In the assert that employ relate an even if their claims do to deemed an com-

shall be to be plan meaning of the ee benefit within purposes pany or other insurer ... of they regu- preemption provision, preserved are any purporting to law of state saving regulating companies. late clause as laws insurance. operation of has been these explained by the succinctly United States Dow, Met, and Maddolin assert that sec- Supreme Court: and 3.62 of tion of article 21.21 article To pure summarize the mechanics Code, section 17.- the Texas Insurance and provisions quoted If above: a state law 50(a)(4) laws that of the DTPA state employee to ... benefit ‍​​‌​​​‌‌‌​​​​​​‌​​​​‌​​​‌​‌‌​​​‌​​​‌‌‌‌​​​​​‌​​‌‍“relate[s] an and are there- “relate to” ERISA plan[s],” preempted. it is preempted. They fore further contend excepts pre-emption from the clause alleged by the causes of action “regulat[e] clause insurance.” preemption the sav- are not saved The deemer clause makes clear that a with the ing because conflict that “purport[s] state law to provided in scheme civil enforcement employee insurance” cannot deem an displaced. Both ERISA and are therefore company, benefit be an insurance pleaded Dow Met (citations omitted). answers; Maddolin did not. their Dedeaux, Ins. Co. v. 95 L.Ed.2d 39 107 S.Ct. “RELATE TO” (1987). 1144(c)(1) law, A defined 1001(b) Section of Title declares that it decisions, rules, laws, regula- to include all protect: policy is the of ERISA to tions, having effect of action or other participants employee interests law, only if “re- preempted by beneficiaries, by benefit and their 1144(a) plan. 29 lates U.S.C. to” reporting requiring the disclosure and begin (1988). must therefore We participants and of financial beneficiaries inquiry: does a state When fundamental respect information with there- other plan? employee to an benefit law relate to, conduct, establishing standards of responsibility, obligation for fiduciar- Supreme Court The United States plans, employee ies parameters loosely has defined remedies, sanc- providing appropriate requirement. “A law ‘relates to” “relate tions, Federal ready access to the normal plan, in the to’ courts. if it a connection phrase, has sense of the Shaw, plan.” or reference such 1001(b) Life, In Pilot U.S.C. § 96-97, Also at 2899-2900. pre U.S. at explained that phrase (Tex.App. denied);

the Court declared that ‘re- Giles writ “[t]he — Dallas Texas given late to’ was its broad common-sense Employees Instruments Pension Plan, meaning.” (Tex.App. 715 S.W.2d 58 - Dallas Massachusetts, 724, 739, Graphic n.r.e.); Felts v. writ ref’d Trust, Employee Arts 85 L.Ed.2d 728 680 S.W.2d Benefits repeatedly (Tex.App. Court has stated that the words [1st Dist.] — Houston writ). expansive- “relate to” should be construed no “Because of the breadth of the Shaw, 96-97, See ly. clause and the broad remedial 2899-2900; Life, ERISA, purpose ‘state laws found to be 1552-53; Fort beyond scope preеmption provi Pack- [the Halifax ” ing Coyne, v. B.F. Goodrich 482 U.S. 107 S.Ct. are few.’ sion] Cefalu Co., 2211, 2215-16, 1290, (5th Cir.1989). 96 L.Ed.2d 1 871 F.2d 1294 preemption applies only not state Pilot The common claim in law was Life to all forms dealing but of state action alleged against employee not the benefit subject matters covered this federal plan, against company but 1144(c)(1) (1988); see statute. Nevertheless, plan. that administered the Shaw, also 98, 463 U.S. at 103 at S.Ct. noted that the cause of action Court keeping interpre- 2900. In with this broad clearly plan related to a and was thus tation, the Court held that a cause of action preempted. 481 U.S. at wrongful termination related to an Ramirez, ‍​​‌​​​‌‌‌​​​​​​‌​​​​‌​​​‌​‌‌​​​‌​​​‌‌‌‌​​​​​‌​​‌‍1553; 760, see also 890 F.2d at where it was based on (suit brought against 762-63 former em- allegation employer em- fired the ployer and its insurance carrier held to be ployee paying to avoid benefits under preempted); Cefalu, 871 F.2d at 1292-93 Ingersoll-Rand v. pension plan. Co. (suit though related to an ERISA even — McClendon, -, 478, U.S. 111 S.Ct. against alleged employer it was the former (1990).2 112 L.Ed.2d 474 plan). Catheys’ and not the claim for Supreme

Given these declarations nursing pursu- and denied care was made Court, courts have not find terms, hesitated to plan’s ant to the Dow having employ that state laws an effect on appealed this denial under the internal re- ee benefit relate to such plan. view We hold that See, preempted by are therefore ERISA. against Catheys’ claims Dow and Met Hotels, e.g., Ramirez v. Inter-Continental employee plan; relate to an (5th Cir.1989); Boren v. N.L. 890 F.2d 760 preempted claims are thus unless a con- Indus., (5th Cir.1989), cert. 889 F.2d 1463 trary saving result mandated — denied, U.S. -, 3283, 111 110 S.Ct. clause. Drug (1990); Sommers Stores L.Ed.2d 792 REMEDY ERISA’S EXCLUSIVE Employee Sharing Co. Trust v. Profit THE SCHEME v. SAVING Enters., Corrigan (5th 793 F.2d 1456 Cir. CLAUSE denied, 1986), 1034, cert. 479 U.S. 107 S.Ct. 884, (1987); if Kanne v. Con assert that even 93 L.Ed.2d 837 Co., 489, necticut Gen. Ins. to an 867 F.2d their claims relate Life 906, 3216, plan, they cert. denied 492 U.S. preemption by saved from 109 S.Ct. Building v. (1989); 1144(b)(2)(A), saving Misic 106 L.Ed.2d clause. 566 Trust, Employees Health saving from Serv. & Welfare clause saves insurance. Met ‍​​‌​​​‌‌‌​​​​​​‌​​​​‌​​​‌​‌‌​​​‌​​​‌‌‌‌​​​​​‌​​‌‍(9th Cir.1986); Juckett v. laws which 789 F.2d 1374 state Prods., 737,105 ropolitan Life, at Improvement Beecham Home S.Ct. 47, Inc., Life, 481 (N.D.Tex.1988); 2388; E- Pilot at 107 S.Ct. F.Supp. 684 448 U.S. However, saving Systems, Taylor, 744 S.W.2d 956 Inc. v. at 1553. even Also, Holliday, Supreme the Court considered we note that the Court handed this case. In subrogation prohibiting Corporation Holliday contempora- down FMC v. whether - -, neously with McClendon. 111 claims fell within ERISA’s 403, However, not conflict with 112 L.Ed.2d clause. The state law did 356 remedy opinion impact scheme. does not our decision in ERISA’s exclusive 3092, 3085, 87 L.Ed.2d 96 105 S.Ct. a state law cannot save Ramirez, Kelley v. 764; (1985); F.2d provides provided remedies Co., Seаrs, Life, In n. Roebuck & F.2d ERISA. v. (10th Cir.1989); Kanne Connecticut that ERISA’s civil enforcement announced to be exclusive. remedies were intended Ins. 867 F.2d 493-94 Gen. Life cert, 1556. denied, Cir.1988), (9th pro- allegations improper involved (1989); In 106 L.Ed.2d 566 Life holding cessing claim of a for benefits. Am., Co. N. F.2d re Ins. for breach of the plaintiffs that the claim Anschultz Connect (8th Cir.1988); duty good faith Mississippi common-law Co., 850 F.2d 1467,1469 icut Gen. ERISA, dealing preempted by fair v. Beecham Home Cir.1988); (11th Juckett stated, policy choices re- the Court “[t]he Prods., F.Supp. Improvement of certain remedies flected in the inclusion (N.D.Tex.1988); McManus v. Travelers the fed- and the exclusion of others under Network, (W.D. Health F.Supp. completely under- scheme would be eral Ins. Co. v. Tex.1990); Commercial Life ERISA-plan participants if and bene- mined Court, 253 Cal. Superior 47 Cal.3d cert, free to obtain remedies under ficiaries were de (1988), Rptr. P.2d Congress rejected in that nom. v. Commercial nied sub Juliano McClendon, Id.; see also ERISA.” 1075, 109 S.Ct. Ins. 490 U.S. Life 484-85; Ins. Co. v. Mutual Life S.Ct. (1989). Accordingly, we L.Ed.2d Yampol, (7th Cir.1988). F.2d hold that Texas Insurance Code section 21.21 article 3.62 as well as provisions of article and Even if these insurance code 17.50(a)(4) provisions subject preempted the DTPA were to DTPA section are and clause, opinions provisions in ERISA in the context of the Court’s of McClendon prop held that Con- Met of this case. Dow and facts Life gress alleging improper all erly preemption intended suits their pleaded ERISA only processing governed answers; agree claims be not. Maddolin did We with McClendon, 485; Pi- however, ERISA. S.Ct. at that appeals, of court 52-54, Life, lot 107 S.Ct. at Catheys’ against claims 21.21 and 1555-56. Section 16 of article Met to Maddolin because Dow and extends of the Insurance Code and sec- article 3.62 of employee in the course he acted as Met’s 17.50(a)(4) provide tion of the DTPA recov- therefore affirm the its business. We ery that not included under ERISA. of appeals. of the court judgment that The Court has decided ERISA’s civil supple-

enforcement scheme could nоt be DOGGETT, J., Concurring opinion Therefore, mented state law remedies. GAMMAGE, JJ. joined by MAUZY and improper statutory remedy claims against not processing is available an DOGGETT, Justice, concurring. or its administrator. writing today is the court one brief rights CONCLUSION of hundreds forced to eliminate protect families to of of Texas thousands reme seek recover false, misleading, de- themselves civil under ERISA’s en dies available handling of health ceptive practices in Therefore, even if provisions. forcement disability These are insurance claims. provisions question could be said to by consumer rights had been secured that pur of insurance for the business by the properly enacted protection statutes preemption ‍​​‌​​​‌‌‌​​​​​​‌​​​​‌​​​‌​‌‌​​​‌​​​‌‌‌‌​​​​​‌​​‌‍analysis, poses of ERISA that remain effect Legislature Texas pro preempted that still be would obtain their today those Texans who with the remedies that are inconsistent vide rather than insurers coverage directly from provided in civil enforсement Unfortunately, employers. their through Life, ERISA. See of I or other member Mutu there is little that Massachusetts 1555-58; de- Russell, deplorable can do about this v. this court Ins. Co. 473 U.S. al despite growth in state-given rights mise of other than to that the enormous passage. lament their plans many employees long such with years employment losing anticipat- of Recognizing v. Ingersoll-Rand owing — ed retirement benefits to the lack -, McClendon, vesting provisions plans; of such (1990), 112 L.Ed.2d 474 and Pilot owing inadequacy to the оf current mini- 41,107 Dedeaux, Co. standards, mum the soundness and sta- case, (1987), 95 L.Ed.2d 39 control this I bility respect adequate with opinion. By concur the court’s must pay promised may funds to benefits be clause, reading its of ERISA’s endangered; owing to the termi- the United Court has re- States requisite nation of funds very rights employees stricted the before —to accumulated, delay employees avoid the denial of benefits—that or have been Congress sought protect. Through pe- deprived their beneficiaries have been judicial interpretation, culiar federal a stat- anticipated benefits. utory rights addition to workers’ has been 1001(a) (1974). primary statutory converted into a removal of those legislation objective of the was “to increase rights. reshaped into a The law has been rights employees by imposing strict origi- form that the converse of its achieves fiduciary employers duties on and benefit purpose. nal Identical claims are now by providing administrators and differently depending treated on whether employees with the civil remedies individually the claimant is insured 502(a).” Note, Damages and Punitive through employer. Those insured ERISA n ERISA: An Anomalous Effect

through employers by are denied their Actions, Preemption Law 65 Common of safeguards ERISA the afford- Wash.U.L.Q. 589, (1987). by join to their citizens. I ed Texas fellow goal, growing with the number of courts and In of this several view laudable express commentators who the concern expressed dismay have commentators misconstruction, through continued since paradox the that has arisen “quicksand” ERISA has become that “will intended to the workers ERISA was Life: protect expand preempt every- to and to continue wrongs unad- remedy lack a for thing meandering path.” in v. its Jordan statute, by companies dressed while 822, Co., F.Supp. Reliable targeted by Congress employ ERISA as an (N.D.Ala.1988). million For the over 56 against responsibility for effective shield group Americans who are enrolled in wrongful processing of сlaims. The first plans like the one in which health incongruous result is manifestation of this member,1 Cathey a has James ERISA group by covered benefit that workers quicksand; more than mere it has become plans denied state causes of have been a black hole. become prior to the action that had been available also, Note, passage. Act’s Id. Blind See ERISA, Through Congress sought “to Only Conquers Bad Faith: Con- Faith spent assure that individuals who have Insur- gress Save Us Can socially produc- their careers useful After Dedeaux, Loy.L.A.L.Rev. ance Co. v. adequate incomes to tive work will have Note, (1988)(hereinafter 1343, 1381 n. 303 meet their needs when retire.” Faith) (observing lack of Con- 3, Blind 807, Cong., 2d H.Rep. No. 93d Sess. preempt state causes gressional intent to Cong. Ad- reprinted 1974 U.S.Code & good of a covenant of of action for breach 4639, The measure re- min.News 4670. Second, dealing). persons fair faith and increasing against work- sponded to abuses limited by group plans are benefit management of covered by irresponsible ers caused remedies, in- individual to ERISA’s while funds. In its pension and welfare benefit range the full policyholders retain Congress noted: surance policy,” “declaration of (1990). Bureau, 1990 Statistical Abstract 1. U.S. Census inclined read emption, and we to state remedies. Id. 1347.2 harm of by reality employ- to is exacerbated into federal statutes order limitations selecting their ees seldom have voice in enlarge scope.” pre-emptive their Id. at company’s group taken insurer. Whether 741, presumption 2390. developments separately together, these particularly strong against preemption is disturbing disregard Congress’ evince areas, to those such as insur- respect with overriding protect participants to intent ance, “traditionally regarded properly as group pen- of and beneficiaries benefit superintendence.” scope of state within the plans. Their aim best served sion is Floridа Lime and Avocado Growers reading remedies as a floor rather ERISA’s Paul, 144, 83 S.Ct. ceiling, respecting than a tradi- (1963); v. Rath 10 L.Ed.2d Jones given to state insurance tional deference Packing regulations mandated the McCarran- as 51 L.Ed.2d Act, Ferguson Under Metropolitan Life, while state-man ERISA, provide group insurers who mental policy dated inclusion of health cov promptly have little incentive to deal erage insur was related the business of fairly employee In- participants.3 scоpe pre ance and therefore within deed, preempt all state law emption, clause directed that the loosely may “relating defined as be preempted. not be “counterpro- to" S.Ct. at 2392-93. In so objective furthering, ductive ERISA’s holding, analyzed legislative the Court debilitating, progressive than em- rather ERISA, history and noted that the final ployment Gregory, Scope law.” Preemption A the law included a Law: version of State Federalism, Study broadly 48 U.Pitt. than clause more wordеd those Effective L.Rev. to the Con original versions submitted ference the two houses of Committee Moreover, expansive preemption of state Congress. halting analysis its Rather than regulating common law and statutes point, Ufe, at that did in Pilot industry upsets equilibrium 1552, 46, U.S. at the Court government federal between the the proceeded expansion that this to conclude Congress preserve states that to intended “gave preemption clause the insur clause, by saving enacting thе 29 U.S.C. role, significant much ance clause a more 1144(b)(2)(A),thereby eviscerating this § body provision a that an entire as saved once-important provision. Metropolitan pre sweeping general law the Massachusetts, 471 U.S. of from Life ” emption Metropolitan Life, 471 724, 2380, (1985), clause. 85 S.Ct. L.Ed.2d 728 at n. S.Ct. at 2392 n. initially vitality U.S. given by the clause was added). holding (emphasis acknowledgment of The Court’s the well-established any presumption against pre- “impose that to limitation on rule is thus refused “[t]he pre- Supreme exempt 2. The Court a third state insurance laws from the reinforced curious clause, clause,’ emption or ‘deemer which distinction—that between self-insured the regulated merely today reinjecting that those obtain insurance from in- as the Court reads companies Corp. Holliday, scope pre-emption surance FMC into clause the ERISA’s —in — -, U.S. 112 L.Ed.2d exempted laws as those same state insofar (1990), majority opinion, supra, discussed in the they plans. to self-insured relate — at-, (Ste- at n. This was introduced 1. distinction Holliday, S.Ct. at Metropolitan Court Ins. Co. v. Massa- vens, the J., dissenting). Life chusetts, to L.Ed.2d In his dissent Holli- plan partici- § 3. U.S.C. Under 29 day, the distinction as lengthy Justice Stevens describes pants a de- harmed or beneficiaries illogical,” of, in, may "broad and adds: lay unreasonable denial benefits expensive result, bring time-consuming action Congress Had intended this could due no than the benefits court to recover more simply have that 'all State are stated 1132(a)(1)(B). plan. § under award pre-empted they the relate to self- insofar solely possible, the attorney’s is but within employee plan.’ fees There would then insured 1132(g)(1). ‘saving § of the court. need for clause’ to discretion have been no the pretation rejected by has now been beyond Congress those saving clause at and McClendon imposed in the clause itself.” Id. McClendon. Life ability seize from the states the to 105 S.Ct. at 2392. thus exploit companies “deter[ ] In contrast to financially ing insureds are most when Congress’ in- deference to Court’s careful Note, Faith, supra, Blind vulnerable.” saving tent to balance the 1397. clauses, opinion added a con- the Pilot Life tips that the balance of federal- affirming sideration unfortunate By Pilot Life’s inexorably away from the states Congressional ism in- mischaracterization of saving analysis to an reducing the tent, Court in McClendon interpreted empty exercise. The Court goals step away from the takes another legislative history support to ERISA’s longer the labor- federalism. States are no Congress intended that the notion that had democracy5 when it comes to atories This hold- statute’s remedies be exclusive. have protecting their consumers. States ing from the statements of sev- was drawn in their efforts to fill the been thwarted Congress to the effect eral members of regulation left of insur- federal void “preempt the that ERISA was meant to companies provide ance at 1552. field.” 481 Gregory, supra, at 457. under ERISA. Congress’ providе exclu- intent Ironically, gap initially created this remedies, however, was subordinate to sive McCarran-Perguson Congress in the provide greater protections its effort to Act, entrusts to which by pension and welfare covered workers regulation of “the business the States light, in this plans. When viewed of insurance.” given no preemption clause should be deprivation of state federal court This the sav- equal more than consideration with juxtaposi- protections stands notable clause, preserve remains to ing which professed goal of some tion with the equally is regulation of insurance power to the states. Washington to return of work- safeguard meant to the interests legislature the Texas The Texas courts and asserts, Instead, ers.4 as one commentator rights of powerless preserve gutted “the Pilot Life plans. by group benefit covered workers Note, Faith, meaning.” Blind clause of petition have little recourse but Texans supra, legislators to correct what has their federal Refusing interpretation of Pilot path. The jurisprudential an errant been require that would reconsid- Congress to long past time regulating the bad faith statute California and to resurrect expanse of ERISA er insurers, appropriate one court conduct of provide addi- authority the states to do so “would rewrite ly concluded that to to their citizens. protections tional ‘Nothing in this to read: 1132 shall be subchapter except sеction JJ„ GAMMAGE, ‍​​‌​​​‌‌‌​​​​​​‌​​​​‌​​​‌​‌‌​​​‌​​​‌‌‌‌​​​​​‌​​‌‍join in MAUZY person any exempt or relieve construed opinion. concurring this regulates any law of State which insurance_’ strong this Metropolitan ly indicated in Cross, 688 v. Blue is not the law.” Graves (N.D.Cal.1988)(empha

F.Supp. inter Unfortunately, this original).

sis Liebmann, 285 U.S. See New State Ice correctly observed in 4. The Court occasionally L.Ed. 747 Congress decides to “While Life: J., previously (Brandeis, taken (1932) dissenting). what it has to the States return away, normally at the same do both it does not at 2389. It time.” 471 U.S. at concerned, the Court ERISA is seems that where principle. exception this has created

Case Details

Case Name: Cathey v. Metropolitan Life Insurance Co.

Court Name: Texas Supreme Court

Date Published: Jan 30, 1991

Citation: 805 S.W.2d 387

Docket Number: C-8323

Court Abbreviation: Tex.