Mаlan F. Johnston, Appellant, v. Paul Revere Life Insurance Company, now known as Provident Insurance Company, Appellee.
No. 00-1611
United States Court of Appeals FOR THE EIGHTH CIRCUIT
Submitted: October 24, 2000; Filed: February 20, 2001
McMILLIAN, LAY and ROSS, Circuit Judges.
Malan F. Johnston (“Johnston“) appeals from a final judgment entered in the United States District Court for the District of Nebraska in favor of Paul Revere Life Insurance Company (“Paul Revere“).1 See Johnston v. Paul Revere Life Insurance Co., No. 8:96CV305 (D. Neb. Jan. 21, 2000) (Judgment). For reversal, Johnston argues that: (1) the district court erred in holding that his state law claim for equitable relief pursuant to
The district court had jurisdiction pursuant to
Background
The undisputed facts establish that Johnston was a professional pilot employed by Western Pathology Consultants, P.C. (“Western Pathology“). In 1991, Western Pathology decided to update its long term disability policy for its professional and supervisory employees and contacted Richard Mead, an insurance agent for Paul Revere, who had provided insurance services to Western Pathology for over twenty-five years.
The updated plan was designed to provide “own occupation” coverage to assure income during an еmployee‘s earning lifetime if the employee became disabled from performing his or her professional occupation. It was determined that benefits for plan participants would be provided through individual policies purchased by the employee and issued by Paul Revere.2 Eligible employees of Western Pathology met with Mead, who explained plan benefits and completed the necessary enrollment forms provided by Paul Revere. Employees were given the choice of paying the premiums themselves or having Western Pathology make their payments. To facilitate payment, Western Pathology was billed for monthly premiums, would pay the premiums in a lump sum, and then add the amount of each employee‘s individual premium to the employee‘s W-2 form at the end of the tax year. Also, Mead delivered policy forms to Western Pathology.
Prior to issuing a policy for Johnston, Paul Revere issued twelve policies for employees of Western Pathology, all of which included “own occupation” coverage. In 1991, Johnston met with Mead who explained the plan benefits and “own occupation” coverage. Mead also completed for Johnson a Paul Revere disability policy application, which Johnston signed. This application stated that “[a]cceptance by the Proposed Insured/Owner of any policy
After the policy was issued, Mead received a message from a Paul Revere representative stating that the policy was issued as submitted. However, on the policy as issued, a handwritten note in the comments portion of the application stated “delete own occ.” Mead did not read the policy before delivering it to Western Pathology, nor did he communicate to Johnston that there was a change in the policy. Mead did, however, inform both Johnston and Western Pathology that the policy was issuеd as “applied for.” In 1993, Johnston became disabled and submitted a claim to Paul Revere, which claim was honored, although own occupation coverage was denied. At this time he first learned that the policy application had been changed to delete own occupation coverage.3
Procedural History
Johnston initially filed a claim in Nebraska state court seeking declaratory relief and alleging that Paul Revere wrongfully altered his application for disability insurance in violation of
In May 1998, the district court ruled that the matter was preempted by ERISA § 514,
Paul Revere filed an answer to the amended complaint, and Johnston filed a third amended complaint, alleging a breach of fiduciary duty under ERISA § 409,
On August 23, 1999, Johnston renewed his motion to re-open discovery. This latter motion was denied, and the matter was set for a pre-trial conference, during which the magistrate judge struck four of Johnston‘s non-expert witnesses because their names had not been disclosed during discovery and also struck two of Johnston‘s exhibits. Johnston sought review of this ruling to the district court. In November 1999, Paul Revere filed a motion for summary judgment on Johnston‘s only remaining claim, a breach of fiduciary duty under ERISA, which motion the district court granted. See Johnston v. Paul Revere Life Insurance Company, No. 8:96CV305 (D. Neb. Jan. 21, 2000) (Memorandum and Order). The district court held that neither the language of the application or the policy required Paul Revere to notify Johnston directly that it declined to provide own occupation coverage and that Paul Revere did not have a past policy of communicating directly with applicants about decisions denying requested coverage. The court further rejected Johnston‘s position that Paul Revere handled “virtually every aspect of plan administration” and, therefore, became a de facto plan administrator. The court concluded that Paul Revere and Mead performed traditional roles of insurer and agent and that neither exercised the degree of discretion that would make them ERISA fiduciaries. See id., slip op. at 9-10. The district court also denied Johnston‘s appeal of the order striking experts and exhibits. See id. This appeal followed.
Discussion
On appeal, Johnston first arguеs that the district court erred in dismissing his state law claim as preempted by ERISA. “We review the district court‘s decision on ERISA preemption de novo because it is a question of federal law involving statutory interpretation.” Wilson v. Zoellner, 114 F.3d 713, 715 (8th Cir. 1997) (Wilson). ERISA seeks to comprehensively regulate certain employee welfare benefits and pension plans and to protect the interests of participants in these plans by establishing standards of conduct, responsibility, and obligations for fiduciaries, and contains a preemption clause. See Wilson, 114 F.3d at 715; Kuhl v. Lincoln Nationаl Health Plan of Kansas City, Inc., 999 F.2d 298, 301 (8th Cir. 1993). ERISA‘s preemption provision states: “[e]xcept as provided in subsection (b) of this section, the provisions of this subchapter shall supercede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section
However, not all state law claims that somehow affect a plan as defined by ERISA are preempted. (See discussion below regarding the definition of an ERISA plan pursuant to
ERISA Plan
As a preliminary matter, we must determine if the disability insurance policy at issue was a “plan” within the meaning of ERISA because the existence of a “plan” is a prerequisite to the jurisdiсtion of ERISA. See Bannister v. Sorenson, 103 F.3d 632, 636 (8th Cir. 1996) (Bannister); Harris v. Arkansas Book Co., 794 F.2d 358, 360 (8th Cir. 1986) (Harris). ERISA defines a “plan” as “an employee welfare benefit plan.”
Upon review of the undisputed facts in this matter, we hold that a reasonable person could conclude that Western Pathology did establish a plan within the meaning of ERISA that offered disability benefits to its employees. Also, a reasonable person could further ascertain the intended bеnefits, beneficiaries, the source of financing, and procedures for receiving benefits of the disability plan at issue. Because Western Pathology engaged in the ongoing administration of the plan by assisting in the application process, by maintaining the policy forms, by processing paperwork in conjunction with Mead, and by facilitating the payment of premiums, the plan embodied a set of administrative practices. We, therefore, hold, in agreement with the district court, that “a reasonable person [could] conclude thаt Western Pathology did establish a plan that offered benefits to its employees, as evidenced by the offering of retirement and disability insurance policies to employees” and “by the administrative processing required of Western Pathology to provide such benefits.” Memorandum and Order of May 4, 1998, slip op. at 6. We, therefore, hold that the disability policy at issue was part of a “plan” within the meaning of ERISA.
ERISA Preemption
We next consider whether Johnston‘s state law claim is preempted by ERISA. Johnston‘s state claim is preempted if the Nebraska statute upоn which Johnston relies “relate[s] to” an employee benefit plan within the meaning of ERISA § 514(a),
This court has held that a variety of tests are helpful when determining the effect of state law on an ERISA plan. See Bannister, 103 F.3d at 635, citing Arkansas Blue Cross & Blue Shield v. St. Mary‘s Hosp., Inc., 947 F.2d 1341, 1344-45 (8th Cir. 1992) (Arkansas Blue Cross). Factors which are instructive in this regard include: (1) whether the state law negates a plan provision; (2) the effect on primary ERISA entities and impact on plan structure; (3) the impact on plan administration; (4) the economic impact on the plan; (5) whether preemption is consistent with other provisions of ERISA; and (6) whether the state law at issue is an exercise of traditiоnal state power. Id., citing Arkansas Blue Cross, 947 F.2d at 1345-50.
We hold that Johnston‘s claim against Paul Revere arose from the administration of an ERISA plan, including the application for and subsequent issuance of a disability policy. Thus, pursuant to the analysis in Bannister, the state law has an impact on plan administration. We further find, in agreement with the district court, that Johnston‘s state law claim has a connection with and relates to an employee benefit plan and that, therefore, ERISA operates to preempt his state claim unless the ERISA savings clause is applicable. Seе Memorandum and Order of May 4, 1998, slip op. at 10.
ERISA Savings Clause
We must now determine whether Johnston‘s claim pursuant to
We first conclude that the Nebraska statute at issue does not clearly regulate insurance as a matter of common sense. As the district court noted, and we
Considering the second and third McCarran-Ferguson factors, we further hold, in agreement with the district court, that the “Nebraska statute does not dictate terms that must be included in an insurance policy, nor does it add anything substantive to the insurer-insured relationship or alter the bargain between them. Instead, the statute merely prohibits conduct that predates formation of the insurer-insured relationship.” Memorandum and Order of Aug. 5, 1999, slip op. at 7. The Nebraska statute merely establishes a pre-contract prohibition governing the application procedure and does not govern or dictate the actual content of insurance policies.9 Because none of the McCarran-Ferguson factors are met, we hold, in agreement with the well-reasoned analysis of the district court, that Johnston‘s claim is not saved from ERISA preemption pursuant to
ERISA Fiduciary
We next consider Johnston‘s argument on appeal that, contrary to the conclusion of the distriсt court in its summary judgment, Paul Revere was acting as a fiduciary within the meaning of ERISA § 3(21)(A),
i) he exercises any discretionary authority or discretionary control respecting management of such plan or . . . disposition of its assets, (ii) he renders investment advice for a fee or other compensation . . . or
(iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.
ERISA § 3(21)(A),
“Discretion” is the “benсhmark for fiduciary status under ERISA” pursuant to the explicit wording of ERISA § 3(21)(A),
This court held in Kerns v. Benefit Life Insurance Co., 992 F.2d 214, 216 (8th Cir. 1993) (Kerns), that an insurance company does not become an ERISA fiduciary merely by handling claims under an employer‘s group policy and that insurers “have not traditionally stood in a fiduciary relationship with claimants and beneficiaries.” Id. Although an insurer has a contractual obligation to pay valid claims, an insurer does not necessarily perform this function for “the exclusive purpose of providing benefits” as described in ERISA § 404. See id. Fiduciary status under ERISA is not an “all or nothing concept. . . . [A] court must ask whether a person is a fiduciary with respect to the particular activity in question.” Id. at 217, citing Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 61 (4th Cir. 1992) (“[а] court must ask whether a person is a fiduciary with respect to the particular activity in question“). See American Fed‘n of Unions Local 102 v. Equitable Life Assurance Society, 841 F.2d 658, 662 (5th Cir. 1988) (“[a] person is a fiduciary only with respect to those portions of a plan over which he [or she] exercises discretionary authority or control“).
These principles, which guide the court in making a determination as to whether an insurance company is an ERISA fiduciary, apply equally to an independent insurance broker such as Mead. See Kerns, 992 F.2d at 217-18. In particular, a person who provides professional services to the plan administrator, such as preparing “employee communications material . . . within a framework of policies, interpretations, rules, practices and procedures made by other persons is not a fiduciary.” Id. at 218, citing
Johnston relies on Olson v. E. F. Hutton & Co., 957 F.2d 622 (8th Cir. 1992) (Olson), in support of his position that Mead, as an insurance agent, becamе a fiduciary. However, Olson, in which trustees of a pension plan brought an action against an account broker who rendered investment advice, is factually distinguishable from the present case. The broker in Olson rendered investment advice to an employee benefit plan. Olson held that the account broker was a fiduciary under ERISA because he exercised discretionary authority over a pension plan; the broker and the trustees “had an understanding that [the broker‘s] investment advice would serve as the primary basis for investment decisions” for the plan. Id. at 627. Pursuant to the court‘s analysis of ERISA § 3(21)(A),
Under circumstances similar to those presented here, this court held in Molasky v. Principal Mutual Life Insurance Co., 149 F.3d 881, 884-85 (8th Cir. 1998) (Molasky),
that the district court did not err in granting summary judgment in favor of Paul Revere. See McCormack v. Citibank, N.A., 100 F.3d. 532, 534 (8th Cir. 1996).
Conclusion
We affirm the decision of the district court holding that Johnston‘s stаte claim is preempted by ERISA and that this claim is not saved from preemption by the ERISA savings clause. Additionally, we affirm the decision of the district court holding that Paul Revere and Mead were not ERISA fiduciaries and that they did not breach the duties imposed by ERISA upon fiduciaries. Therefore, we need not decide whether the district court abused its discretion by striking four of Johnston‘s witnesses from his witness list. Accordingly, the judgment of the district court is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
Notes
No alteration of any written application for any policy of sickness and accident insurance shall be made by any person other than the applicant without his or her written consent, except that insertions may be made by the insurer, for administrative purposes, only, in such a manner as to indicate clearly that such are not to be ascribed to the applicant.