The appellant, Sally Gahn, was an employee in her husband’s business and was covered by a group health insurance policy purchased from the appellee, Allstate Life Insurance Company (Allstate). After she was diagnosed with liver cancer, Allstate increased the premiums and ultimately can-celled the policy. Mrs. Gahn sued Allstate, arguing that the cancellation violated Louisiana law. The district court granted summary judgment in favor of Allstate. Because we find no evidence in the record to support the court’s conclusion that the policy was an employee benefit plan, as defined by the Employee Retirement Income Security Act of 1974, or that the insurance contract gave Allstate the right to discontinue Mrs. Gahn’s coverage, we REVERSE and REMAND.
I. PACTS AND PROCEDURAL HISTORY
On October 1, 1986, Homer Gahn, owner of Homer Gahn’s Trophies & Gifts, purchased a group health insurance policy from Allstate to cover himself and his employees, who consisted only of his wife, Sally, and their two sons. Allstate provided the insurance through a multiple employer trust, the First Insurance Trust. By naming the multiple employer trust as the policyholder, Allstate was able to provide a group insurance rate for employers like Mr. Gahn with too few employees to qualify for group rates on their own.
Homer Gahn’s initial premium under the 1986 policy was $287.57 per month, and the policy provided unlimited coverage for major medical expenses. In October 1987, Sally Gahn was diagnosed with liver cancer. Previously she had suffered from breast cancer, but it was in remission when her husband purchased the policy from Allstate. One year later, October 1, 1988, *1451 Allstate increased the Gahns’ premiums to $1,189.50 per month and set a ceiling on major medical coverage at $1 million. Homer Gahn paid the higher premiums.
The provisions of the group policy allowed Allstate to terminate coverage “on any premium due date after the first policy anniversary,” provided that the policyholder was notified of the cancellation in writing at least sixty days in advance. See Allstate Group Insurance Benefit Booklet (the “Insurance Plan”), Plaintiffs Exhibit 6, at 6. On March 15, 1989, Allstate notified Mr. Gahn that it was cancelling the policy effective October 1, 1989. The cancellation left Mrs. Gahn without any insurance for medical expenses she incurred for treatment of her liver cancer after that date.
On July 11, 1989, Sally Gahn sued Allstate in Louisiana state court to enforce her rights under the policy. She based her right to recover on two theories: first, that the Louisiana Insurance Code prohibited Allstate from discontinuing her coverage after she was diagnosed with a terminal illness; and second, that even if the Insurance Code allowed Allstate to terminate coverage, Louisiana’s “abuse of rights doctrine,” a civil law concept, prohibited Allstate from exploiting this right. Allstate argued that the group policy was an “employee benefit plan” covered by the Employee Retirement Income Security Act of 1974 (ERISA), codified in 29 U.S.C.A. §§ 1001-1461 (West 1985 & Supp.1990), and removed the case to federal court on the basis of federal question and diversity jurisdiction. There, it maintained that Louisiana law permitted it to terminate Mrs. Gahn’s coverage and that her “abuse of rights” theory was preempted by ERISA. Both sides moved for summary judgment.
The district court granted Allstate’s motion for summary judgment and dismissed the case. First, the court determined that the group policy was an employee benefit plan and, therefore, that Mrs. Gahn’s “abuse of rights” theory was preempted by ERISA. Second, the court held that, under the Louisiana Insurance Code, Allstate was free to cancel Mrs. Gahn’s coverage. Although it cited the relevant statute, see La.Rev.Stat.Ann. § 22:213(B)(7) note (West Supp.1990) (amended 1989), the court gave no reasons for its interpretation of that law, see District Court Ruling at 7, reprinted in Record on Appeal at 72, 78. Mrs. Gahn argues that both determinations by the district court were erroneous.
II. DISCUSSION
A. Standard of Review
We use the same standard that the district court applied to determine whether the evidence supports a summary judgment in Allstate’s favor.
See
Fed.R.Civ.P. 56(c);
Morales v. Pan Am. Life Ins. Co.,
B. ERISA Preemption
Our first task is to determine whether the district court properly concluded that Mr. Gahn’s policy with Allstate was an ERISA plan. Whether an ERISA plan exists is a question of fact.
See Wickman v. Northwestern Nat’l Ins. Co.,
An ERISA plan is any employee welfare benefit plan that is “established or maintained by an employer” engaged in commerce, which “provides] 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, death or unemployment. ...” See ERISA, §§ 3(1), 4(a)(1), 29 U.S.C.A. §§ 1002(1), 1003(a)(1) (West 1985 & Supp.1990). Although the benefits of her husband’s policy are consistent with the definition of an employee benefit plan, Mrs. Gahn contends that her husband did not “establish” or “maintain” the plan.
Mr. Gahn purchased his group insurance policy from Allstate, which named the First Insurance Trust as the policyholder. In explaining why the policy issued to Homer *1452 Gahn’s trophy shop was an employee welfare benefit plan, the district court fo-cussed on the relationship between Allstate and the First Insurance Trust:
[T]he First Insurance Trust engages in no business except that of being policy holder for a group policy issued to it by Allstate to provide coverage to small employers. Neither the First Insurance Trust nor the trustee can choose an insurer or purchase insurance for any participating employer or employee. All applications for coverage under the policy issued to the trust are made by the employer directly to Allstate. All premiums are billed by Allstate and remitted by the employer directly to Allstate and not to the trustee of the First Insurance Trust. Furthermore, the policy itself indicates the group insurance was purchased to cover employees of the company; the fact that the employees are family members does not change the analysis.
District Court Ruling at 6. The judge relied on
Davis v. Time Ins. Co.,
But the district court misdirected its analysis. Even though the First Insurance Trust was the policyholder, the trust itself was not established or maintained by an employer, and, therefore, is not an employee welfare benefit plan.
See Taggart Corp. v. Life and Health Benefits Admin., Inc.,
To decide whether an employer has “established or maintained” an employee benefit plan, covered by ERISA, a court in this circuit must conduct two inquiries. First, it must apply the safe-harbor provision that has been prescribed by the Secretary of Labor.
See
29 C.F.R. § 2510.3—1(j) (1990);
see also
ERISA, § 505, 29 U.S.C.A. § 1135 (West 1985) (authorizing the Secretary to promulgate regulations interpreting ERISA). Under that provision, Mr. Gahn’s policy was
not
a statutory employee welfare benefit plan if (1) Mr. Gahn, as an employer, did not contribute to the plan; (2) participation by his family in the plan was voluntary; (3) Mr. Gahn’s involvement in the plan was limited to collecting premiums and remitting them to Allstate, and to permitting Allstate to advertise the plan;
and
(4) Mr. Gahn received no profit from administering the plan.
See
29 C.F.R. §§ 2510.3—l(j)(1)—(4). The group insurance plan must meet all four criteria in order to be exempt from ERISA.
See Memorial Hosp.,
If a plan does not qualify for exemption from ERISA coverage under the safe-harbor provision of section 2510.3—l(j), the court must decide whether, “ ‘from the surrounding circumstances[,] a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits.’ ”
See id.
at 240 (quoting
Donovan v. Dillingham,
We cannot decide whether Mr. Gahn’s group health plan is an employee welfare benefit plan because the record does not contain the specific findings of fact that we need to apply these two tests. Indeed, the only relevant fact in the record supports *1453 Mrs. Gahn’s assertion that the plan was not an ERISA plan. Mr. Gahn testified
that he did not play any part whatsoever in the formulation of the policy, held no monies in trust, but merely forwarded premium payments to Allstate. He did not own, control, administer nor [sic] assume any responsibility for the policy or its benefits. He merely purchased insurance for his family.
See Affidavit of Homer Gahn, Plaintiffs Exhibit 1. Therefore, we must remand this case to the district court so that it can make the factual findings that are necessary to determine whether Mr. Gahn established and maintained an employee welfare benefit plan.
C. Effect of ERISA Preemption on Sally Gahn’s Theories of Recovery
Sally Gahn seeks to recover from Allstate under two theories. First, she asserts that a Louisiana statute prohibited Allstate from cancelling her coverage after she was diagnosed with liver cancer. See La.Rev.Stat.Ann. § 22:213(B)(7) note (West Supp.1990) (amended 1989). Second, she argues that, even if the statute permitted Allstate to cancel her coverage, Allstate was precluded from exercising that right under the “abuse of rights” doctrine. The district court held that ERISA preempted Mrs. Gahn’s “abuse of rights” theory but that it did not preempt her statutory theory of recovery. If the group policy is an ERISA plan, both rulings were correct. If, on remand, the district court determines that the Gahns’ group policy is not an ERISA plan, then Gahns’ abusive rights action is not preempted.
ERISA preempts “all State laws insofar as they ... relate to any employee benefit plan.”
See
ERISA, § 514(a), 29 U.S.C.A. § 1144(a) (West 1985). The net of section 514(a) is large enough to capture any law that has a connection with such a plan.
See Shaw v. Delta Air
Lines,
However, in what has come to be known as the “savings clause,” Congress stated that ERISA was not intended to supersede State laws which “regulatef] insurance.”
See
ERISA, § 514(b)(2)(A), 29 U.S.C.A. § 1144(b)(2)(A). The savings clause preserves the right of States, given by the McCarran-Ferguson Act, to regulate the “business of insurance.”
See
McCarran-Ferguson Act, § 2(a), 15 U.S.C.A. § 1012(a) (West 1976);
Pilot Life Ins. Co. v. Dedeaux,
Three criteria are used to decide whether a law regulates the “business of insurance”:
“first,
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.”
See Metropolitan Life Ins. Co. v. Massachusetts,
The analysis of Pilot Life demonstrates why the “abuse of rights” doctrine is superseded by ERISA. The “abuse of rights” doctrine is a civil law concept that forbids a party from abusing a right given to it by a contract.
If a party has a legitimate and serious interest in exercising a contractual right, he may do so even if it causes harm to another; however, if a party does not have a legitimate and serious interest in the exercise of the right, and to do so would bring unnecessary harm to another, the doctrine of abuse of rights will bar the exercise of the right.
Breland,
The district court correctly held, however, that ERISA does not preempt Mrs. Gahn’s statutory remedy. ' Mrs. Gahn contends that a provision of the Louisiana Insurance Code, section 22:213(B)(7), prohibited Allstate from terminating her insurance coverage after she was diagnosed with liver cancer. Section 22:213(B)(7) sets out the conditions that an insurer must meet before it may cancel an insurance policy. The statute meets all three criteria relevant to determining whether a law regulates the “business of insurance”: it can transfer the risk of non-coverage from an insured to the insurer; it is “an integral part of the policy relationship between the insurer and the insured”; and it only applies to the insurance industry. Thus, the statute “regulate[s] insurance” and is not superseded by ERISA.
See
ERISA, § 514(b)(2)(A), 29 U.S.C.A. § 1144(b)(2)(A);
Metropolitan IAfe Ins. Co. v. Massachusetts,
D. Did Louisiana’s Statutory Law Prohibit Allstate from Cancelling Sally Gahn’s Policy After She Was Diagnosed with Liver Cancer?
Allstate’s duty to provide coverage after cancelling a group insurance policy is entangled in a web of law spun by Louisiana’s legislature and its courts over the past decade. Until 1985, only one statute prescribed an insurer’s duty following cancellation of a policy.
Cancellation: The insurer may cancel this policy at any time by written notice delivered to the insured, or mailed to his last address as shown by the records of the insurer, and shall refund the pro rata unearned portion of any premium paid. Such cancellation shall be without prejudice to any claim originating prior thereto.
La.Rev.Stat.Ann. § 22:213(B)(7) (West 1959) (emphasis added). Although the Insurance Code indicated that this statute applied only to individual health care policies,
see
La.Rev.Stat.Ann. § 221 (West 1959) (stating that sections 22:212 through 22:214 of the revised statutes “shall not apply to group or blanket health and accident insurance policies”), the Louisiana courts have applied it to group policies as well,
see Soniat,
In 1984, the Louisiana Supreme Court held that section 22:213(B)(7) prohibited Blue Cross from revoking coverage for an insured’s daughter, who had been diagnosed with brain cancer during the policy period.
Cataldie v. Louisiana Health Serv. and Indem. Co.,
In 1985, the legislature amended section 22:213(B)(7) to provide that
[t]he insurer may cancel this policy at any time by written notice, delivered to the insured, or mailed to his last address as shown by the records of the insurer, and shall refund the pro rata unearned portion of any premium paid. Such cancellation shall be without prejudice to any claim for benefits accrued or expenses incurred for services rendered prior to cancellation. Benefits and expenses incurred shall be defined and limited by the terms of the policy.
La.Rev.Stat.Ann. § 22:213(B)(7) note (West Supp.1990) (emphasis added). The legislature did not state whether the 1985 amendment overruled
Cataldie
by limiting an insurer’s obligation to pay medical expenses after cancelling a policy.
See Massachusetts Mut. Life Ins. Co. v. Nails,
In 1985, the legislature also added section 22:215(A)(l)(d), a cancellation statute that applied specifically to group insurance policies. The language of that provision was almost identical to the language of section 22:213(B)(7):
Except as may otherwise be provided in the policy or contract of group health and accident insurance, the policyholder and the insurer may agree to modify, amend, or cancel the group policy, and such agreement shall be binding upon the employee or member insured under the group policy, provided that the modification, amendment, or cancellation shall be without prejudice to any claim for benefits accrued, or for expenses incurred for services rendered, prior to such modification, amendment or cancellation. Benefits and expenses incurred shall be defined and limited by the terms of the policy.
La.Rev.Stat.Ann. § 22:215(A)(l)(d) note (West Supp.1990) (amended 1989) (emphasis added). The parties did not rely on this statute, nor have they called our attention to it. Absent a contrary indication from the Louisiana legislature or its courts, we will assume that section 22:213(B)(7) still applies to group policies, notwithstanding the addition of section 22:215(A)(l)(d).
In 1989, the legislature amended section 22:213(B)(7) again, this time making it clear that an insurer must continue medical coverage for an insured who has been diagnosed with a terminal illness. See La.Rev. Stat.Ann. § 22:213(B)(7) (West Supp.1990). The amended, and current, version of section 22:213(B)(7) states that the insurer’s obligations after cancelling a policy are “subject to the provisions of R.S. 22:228.” Under section 22:228, if an insurer cancels a group health policy after an insured has been diagnosed with a terminal illness, it must offer the insured a converted policy that will pay for all medical expenses incurred as a direct result of the illness. See La.Rev.Stat.Ann. § 22:228(A) (West Supp. 1990). Both statutes became effective on September 3, 1989.
The statute that prescribes Allstate’s duty under the policy is the statute that was in effect when the policy was issued.
See Tusa v. Prudential Ins. Co. of Am.,
The key to Mrs. Gahn’s attempt to use the 1989 amendment is the premise that Allstate issued her husband a new policy on October 1, 1988, when it increased the Gahns’ premiums over 500 percent and set a ceiling on major medical coverage at $1 million. As we noted earlier, Allstate was entitled to end the policy one year after it was issued but also was required to notify Mr. Gahn sixty days in advance. Mrs. Gahn asserts that Allstate could give this notification only after the first anniversary date of the policy, which, in effect, would guarantee her coverage for at least fourteen months. Therefore, she contends that Allstate could not cancel the “new” policy until December 1989, and because Allstate cancelled the group policy on October 1, 1989, twelve months after the “new” policy was issued, Mrs. Gahn maintains that she has not yet been cancelled.
But the modification of the terms of an insurance policy does not create a new policy under Louisiana law.
See Woodmen of the World Life Ins. Society v. Hymel,
Having decided that the 1985 amendment to section 22:213(B)(7) defines Allstate’s duty to Mrs. Gahn, we now must decide what that duty is. Allstate cannot escape liability for “any claim for benefits accrued or expenses incurred for services rendered prior to cancellation.”
See
La.Rev.Stat. Ann. § 22:213(B)(7). Allstate contends that it complied with the requirements of the statute because it paid for all Mrs. Gahn’s “expenses” incurred before cancellation. But we reject this argument because it obviates the phrase “benefits accrued.” Under Louisiana law, we should not assume that two different terms in a statute are synonymous.
See Colwell v. State,
Mrs. Gahn, on the other hand, argues that she “incurred” the expense for the treatment of her liver cancer when she was diagnosed with the disease, and she relies on prior interpretations of coverage provisions in insurance policies to support that position.
See, e.g., Valladares v. Monarch Ins. Co.,
Section 22:213(B)(7) provides that an insurer may define and limit “[bjenefits and expenses incurred ... by the terms of the policy.” Therefore, we should look to the language of the policy to determine whether Allstate defined the benefits that accrued to Mrs. Gahn.
See Waldrip v. Connecticut Nat’l Life Ins. Co.,
In Waldrip, the insured developed terminal liver dysfunction while covered under a group health care policy obtained through his law firm. His insurer cancelled the law firm’s policy because the coverage was no longer profitable, and it refused to pay for any expenses incurred by the insured that arose after the cancellation of the policy, even though they were related to his liver ailment. The court held that Louisiana law permitted the insurer to define “benefits accrued” and “expenses incurred,” but noted that, in this case, the insurer defined only “expenses incurred.” Because the insurer had failed to define or limit the term “benefit” in the policy, the court held that “ ‘ ‘benefits accrued’ under this policy referred] to services related to [Waldrip’s] liver ailment which arose during the policy term.’ ” (quoting Waldrip v. Connecticut Nat’l Life Ins. Co., No. 367-865, at 624, 631 (24th La.Dist.Ct. Feb. 14, 1990) (unpublished opinion)).
The legislative history of the 1985 amendment to section 22:213(B)(7) also indicates that an insurer may cancel coverage for an insured without being liable for continuing treatment of an illness that arose during the policy period if the terms of the policy explicitly state that continued coverage for such an illness is not one of the “benefits” of the policy. See House Bill No. 1805, Minutes of Meeting of Committee on Commerce, May 29, 1985, Exhibit “C” (statement of ¡Raymond Salassi, attorney for Prudential Insurance Company of America). This interpretation is reinforced by the legislative history of section 22:228, which now prohibits an insurer from discontinuing medical coverage for an insured who has been diagnosed as having a terminal illness. Section 22:228 was enacted to change the law in order to
limit the cancellation of a group or blanket health insurance policy after a claim for terminal, incapacitating, or debilitating condition has been diagnosed. Representative Adley [who introduced the Bill] stated that he had witnessed what he did not think any citizen of the state should have to go through. A person’s health insurance was cancelled when he became terminally ill. The bill would require any insurer who has contracted for coverage to cover an insured who becomes terminally ill and the coverage cannot be cancelled; however, the premiums could be adjusted.
House Bill No. 1122, Minutes of Meeting of House Commerce Committee, May 25, 1989, at 20. This indicates that before section 22:228 was passed, the law permitted an insurer to terminate coverage for a terminally ill patient.
See Singelmann v. Connecticut Nat’l Life Ins. Co.,
No. 88-5554,
Thus, the 1985 amendment to section 22:213(B)(7) provides that although an in
*1458
surer may not escape liability for “benefits accrued” or “expenses incurred” prior to cancellation, these terms can be “defined and limited by the terms of the policy.”
See
La.Rev.Stat.Ann. § 22:213(B)(7). If the insurer does not define the term “benefit,” it remains liable for all “services related to a condition of which it was aware before it cancelled the policy.”
See Waldrip
at 1174 (quoting
Soniat v. Travelers Ins. Co.,
Unlike the policy at issue in Waldrip, the group health policy covering Mrs. Gahn does define the term “benefit” and limits it to payment of a medical expense incurred during the policy period. See Insurance Plan, Plaintiff’s Exhibit 6, at 12 (“The Medical Benefit is paid for Eligible Expense incurred for an Injury or Sickness while insured.”). The policy also states that an “ ‘Expense’ is deemed to be incurred on the date the service or supply is furnished.” See id. at 22. However, the policy provides that Allstate “will pay the Medical Benefit after a person’s insurance ends” under certain conditions, one of which is if “the person is Totally Disabled on the day the insurance ends.” See id. at 15. By definition of the policy, Mrs. Gahn is “Totally Disabled” if she has suffered a “Sickness” that has left her “unable to perform ... the main duties of [her] normal occupation or business; or ... unable to engage in the normal activities, duties, or responsibilities of healthy people of the same age and sex.” See id. at 25. The expense, “must be incurred within 12 months after the day insurance ends.” See id.
If Mrs. Gahn was “totally disabled,” continued payment for her cancer treatment for twelve months was a “benefit” of the policy. The record contains no evidence regarding the proper interpretation of the term “totally disabled,” nor do we have any evidence regarding Mrs. Gahn’s condition at the time the policy was cancelled. These questions raise a genuine issue of material fact. Therefore, we reverse the summary judgment that was given in favor of Allstate and remand this issue to the district court so that it can determine whether the terms of the contract gave Allstate the right to cancel Mrs. Gahn’s coverage and avoid liability for her continued cancer treatments.
III. CONCLUSION
The district court considered the wrong factors when it found that the group health insurance contract between Allstate and Homer Gahn was an “employee welfare benefit plan” under ERISA, and the record does not contain the facts we need to make this determination ourselves. The record also does not include facts to support the district court’s conclusion that Allstate was free to cancel the insurance contract after Sally Gahn was diagnosed with liver cancer. Under Louisiana law, Allstate could discontinue coverage only if the terms of the policy explicitly gave it that right. On this record, we are unable to say that it did. We REVERSE and REMAND this case so that the district court can re-evaluate these issues in the light of this opinion.