Opinion
EP-00-CA-313-DB.
March 6, 2001
MEMORANDUM OPINION AND ORDER
On this day, the Court considered two Motions to Remand separately filed in the above-captioned cause, one by Plaintiff Octavio Rojas ("Rojas") on October 23, 2000, the second by Defendant/Third-Party Plaintiff DAJ Enterpise, Inc. ("DAJ") on November 8, 2000. Third-Party Defendant National Accident Insurance Underwriters, Inc. ("NAIU") filed a Response to Plaintiffs motion on November 3, 2000, and another to Third-Party Plaintiffs motion on November 20, 2000. After due consideration, the Court is of the opinion that the Motions should both be denied for the reasons set forth below.
The Court notes that the Parties in the third-party action erroneously refer to themselves as Cross-Plaintiff and Cross-Defendant. The inclusion of NAIU as a defendant in this particular lawsuit results purely from DAYs filing of a Third-Party Complaint pursuant to Federal Rule of Civil Procedure 14. Had Rojas joined NART as a Defendant in the instant suit against DAJ, a cross-claim pursuant to Federal Rule of Civil Procedure 13 would have been appropriate. Instead, Plaintiff Rojas filed a separate lawsuit against NART. Accordingly, the Court construes references to Cross-Plaintiff and Cross-Defendant as references to Third-Party Plaintiff (DAJ) and Third-Party Defendant (NAIU).
BACKGROUND
Rojas was employed by DAJ when he was allegedly injured on December 22, 1997, while in the performance of his employment duties. At the time of the injury, DAJ had in force a policy of insurance administered by NAIU. The policy, which provided accidental insurance coverage, was obtained for DAJ employees in lieu of workers' compensation insurance, pursuant to Texas Transportation Code § 643.106.
The policy is issued by Philadelphia Insurance Company and underwritten by Defendant NAIU, which is an agent for Philadelphia Insurance Company. Philadelphia Insurance Company has the sole responsibility for payment of any policy benefits in this case.
The Transportation Code requires a motor carrier whose primary business is transportation for compensation or hire who operates between two or more incorporated cities, towns, or villages, to protect its employees by obtaining either workers' compensation coverage or accidental insurance coverage from a reliable insurance company authorized to write accidental insurance policies in Texas. See TEX. TRANSP. CODE ANN. § 643.106 (Vernon 1999).
DAJ submitted to NAIU on behalf of Rojas a claim for reimbursement of medical expenses and lost wages. NAIU, however, denied compensation on the ground that the injury alleged by Rojas was a pre-existing condition, not resulting from the alleged December 22, 1997, accident. DAJ renewed the request for reimbursement, submitting the medical opinions of physicians in El Paso County who found that the condition of which Rojas complained was the result of the accident suffered on December 22, 1997. NAIU again denied benefits.
On August 26, 1999, Rojas filed an Original Petition against DAJ in the 210th Judicial District Court of El Paso County, Texas, alleging that injuries which he sustained on December 22, 1997, were proximately caused by the negligence of DAJ, its employees, agents, and representatives. Rojas further alleges that DAJ breached a fiduciary duty and a duty of good faith and fair dealing by failing to provide Plaintiff with proper workers' compensation insurance or alternative insurance coverage, as required under Texas law. On September 8, 2000, DAJ filed a Third-Party Petition in the same court against its insurance carrier, NAIU, alleging that NAIU was negligent in its handling of Rojas's claim, breached its contractual obligations under an insurance contract with DAJ, and violated a duty of good faith and fair dealing. DAJ also alleges that NAIU engaged in unfair practices in the business of insurance as defined by Texas Insurance Code Articles 21.21 et seq.
On October 12, 2000, NAIU timely removed the case to this Court alleging that DAJ's Third-Party Petition relates to an employee welfare benefit program governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § § 1001 et seq. The instant motions followed.
DISCUSSION
NAIU brings this case to federal court based on 29 U.S.C. § 1144(a) which provides that ERISA supersedes state laws to the extent that they relate to an "employee benefit plan." Rojas and DAJ urge that this case be remanded to the 210th Judicial District Court on the ground that the policy at issue is maintained solely for the purpose of complying with Texas workers' compensation laws and, therefore, pursuant to 29 U.S.C. § 1003(b)(3), is exempt from ERISA and its pre-emption provision. Additionally, Rojas and DAJ argue that the matter is not subject to ERISA because Defendant is operating under a certificate of authority to do business in Texas pursuant to the Texas Insurance Code. Finally, Rojas and DAJ aver that damages will not exceed $75,000, thus precluding diversity jurisdiction. NAIU, on the other hand, maintains that the Third-Party Complaint is exclusively governed by ERISA and is therefore properly within this Court's jurisdiction. For the reasons set forth below, the Court agrees with NAIU.
The Insurance code requires an alien insurance corporation to operate under a certificate of authority to do business in Texas. See TEX. INS. CODE ANN. art. 21.07-6, § 3(a) (Vernon Supp. 2000). In addition, any foreign or alien insurance corporation engaged in issuing contracts in Texas "is deemed to have agreed to fully comply with [the provisions of the Texas Insurance Code] as a prerequisite to the right to engage in business in [Texas]." Id. art. 21.43, § 9 (Vernon Supp. 2000).
The doctrine of supplemental jurisdiction confers jurisdiction upon this Court to hear state-law claims that "are so related to claims in the action [with original jurisdiction] . . . that they form part of the same case or controversy under Article III of the United States Constitution." See 28 U.S.C.A. § 1367 (West 1993). This Court's jurisdiction over the supplemental state-law claims between Rojas and DAJ, therefore, is governed by the Court's determination that the Third-Party suit between DAJ and NAIU is properly within its jurisdiction.
A. ERISA Pre-emption
At issue here is the threshold jurisdictional question of whether the policy purchased by DAJ is governed by ERISA pre-emption. Congress enacted ERISA to "protect . . . participants in employee benefit plans . . . by providing for appropriate remedies, sanctions, and ready access to the Federal courts." Pilot Life Ins. v. Dedeaux, 481 U.S. 41, 44, 107 S.Ct. 1549, 1551, 95 L.Ed.2d 39 (1987) (quoting 29 U.S.C. § 1001(b)). ERISA "was intended to ensure that plans and plan sponsors would be subject to a uniform body of benefits law; the goal was to minimize the administrative and financial burden of complying with conflicting directives among States or between States and the Federal Government." Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct. 478, 484, 112 L.Ed.2d 474 (1990). To that end, Congress used strong language to make clear that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C.A. § 1144(a) (West 1999) (emphasis supplied); see also McClendon, 498 U.S. at 138, 111 S.Ct. at 482 (finding that ERISA was created to establish plan regulation as exclusively federal concern).
To the extent a plaintiff seeks to recover benefits allegedly due to him under an ERISA-regulated employee benefits plan, any state law claim "relates to" an ERISA plan and is, therefore, pre-empted under § 1144(a). See Degan v. Ford Motor Co., 869 F.2d 889, 893 (5th Cir. 1989) ("[W]hen beneficiaries bring such claims to recover benefits from a covered plan . . . ERISA's preemptive and civil enforcement provisions operate to `recharacterize' such claims into" ERISA claims.) (citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983)); see also Dowden v. Blue Cross Blue Shield of Tex., Inc., 126 F.3d 641, 643 (5th Cir. 1997) ("`It is clear that ERISA preempts a state law cause of action brought by an ERISA plan participant or beneficiary alleging improper processing of a claim for plan benefits.'"). Here, the Parties do not dispute whether the plan at issue is in fact an employee welfare benefit plan governed by ERISA. NAIU, in its brief, addresses the matter and neither DAJ nor Rojas challenge the argument. As a threshold matter, therefore, the Court finds that DAT's claims against NAIU for negligence, breach of contract, breach of a duty of good faith and fair dealing, and participation in unfair business practices as defined by Texas Insurance Code Article 21.21 are all pre-empted by ERISA's provisions, unless a specific safe harbor provision applies.
The court further finds that DAJ's compliance with state insurance laws does not overcome ERISA pre-emption. Rojas and DAJ aver that their claims are not subject to ERISA because NAIU is operating under a certificate of authority to do business in Texas pursuant to Texas Insurance Code Art. 21.07-6 § 3(a). Rojas and DAJ seem to argue, although the point is not made clear, that the plan purchased from NAIU is exempt from ERISA coverage since NAIU has agreed to comply with the Texas Insurance Code as a prerequisite to doing business in Texas. The argument has no basis in law. The policy in question is subject to ERISA preemption, and hence, by the terms of ERISA, claims founded on state law are pre-empted unless a safe-harbor provision applies to exempt the plan from ERISA pre-emption. The fact that Plaintiffs employer must comply with Texas law in order to do business in Texas does not exempt the employer's employee welfare benefit plan from the broad scope of the federal statute.
B. Exemption from ERISA Pre-emption
Although Rojas and DAJ concede that the plan may qualify as an ERISA plan, they contend that it falls under a safe-harbor provision exempting from ERISA pre-emption "plans maintained solely for the purpose of complying with applicable workmen's compensation laws." 29 U.S.C.A. § 1003(b)(3) (West 1999). Rojas and DAJ aver that because DAJ's purchase of accidental insurance coverage was for the sole purpose of complying with the Texas Transportation Code, the plan is exempt from ERISA pre-emption.
The Texas Transportation Code requires a motor carrier whose primary business is transportation for compensation or hire to protect its employees by obtaining "(1) workers' compensation insurance coverage as defined under Subtitle A, Title 5, Labor Code; or (2) accidental insurance coverage." TEX. TRANSP. CODE ANN. § 643.103 (Vernon 1999).
The averments of Rojas and DAJ, however, defeat their argument. Title 29 U.S.C. § 1003(b)(3) cannot apply on its face since Rojas's employer, DAJ, purchased accidental insurance coverage for the purpose of complying not with the Texas Workers' Compensation Act ("TWCA"), but the Texas Transportation Code. Since the plan at issue was not "maintained solely for the purpose of complying with [Texas] workmen's compensation laws," the safeharbor provision cannot apply.
Nonetheless, even if Plaintiffs employer had purchased the accidental insurance policy solely for the purpose of complying with the TWCA, the safe-harbor provision would not apply to exempt from ERISA pre-emption DAJ's insurance plan. By its own terms, the Texas statute allows an employer to chose not to carry insurance coverage under the TWCA. See TEX. TRANSP. CODE ANN. § 643.106 (Vernon Supp. 2001). Employees of non-subscribing employers are then vested with the right to sue their employer for work-related injuries under common law principles of negligence — a right otherwise restricted if the employer subscribes to workers' compensation insurance. See Brookshire Bros., Inc. v. Lewis, 997 S.W.2d 908, 912 (Tex.App. 1999); see also TEX. LAB. CODE ANN. § 406.031 (Vernon 1996). The Texas statute also provides in relevant part that in an action against a non-subscribing employer, the employer is deprived of certain common law defenses such as comparative fault and assumption of the risk. See TEX. LAB. CODE ANN. § 406.033 (Vernon 1996).
In constructing a workers' compensation scheme that offers employers a choice between choosing to subscribe to workers' compensation insurance and choosing not to do so, the Texas scheme foregoes the standard mandatory workers' compensation system. Rather, compliance with the TWCA requires merely choosing between workers' compensation coverage and accidental insurance coverage. NAIU avers that by adopting its own self-funded plan, DAJ opted-out of the workers' compensation scheme and thereafter, negligence claims arising out of such plans could not then arise under the TWCA. The Court agrees.
In complying with § 643.106 of the Texas Transportation Code, the Court finds that DAJ opted to purchase accidental insurance coverage rather than workers' compensation insurance coverage. Had DAJ opted to obtain a workers' compensation insurance policy, there is no doubt that such a plan would have been exempted from ERISA preemption. DAJ, however, chose to be a non-subscriber and, as such, cannot benefit from the exemption provision of 29 U.S.C. § 1003(b)(3). See Pyle v. Beverly Enters.-Texas, 826 F. Supp. 206, 209 (N.D. Tex. 1993) (holding that § 1003(b)(3) does not exempt a non-subscribing employer's self-funded plan from ERISA pre-emption); Diaz v. Texas Health Enters., 822 F. Supp. 1258, 1259 (W.D. Tex. 1993) (finding non-subscribing employer's employee injury benefit plan was an ERISA plan); Nunez v. Wyatt Cafeterias, Inc., 771 F. Supp. 165, 167 (N.D. Tex. 1991) (assuming a non-subscribing employee injury benefit plan falls under ERISA); but see Walker v. Health Benefit Mgmt. Cost Containment, 860 F. Supp. 1163, 1167 (N.D. Tex. 1994) (holding that a non-subscribing employer, in choosing to insure workers, is complying with the Texas worker's compensation laws and, hence, qualifies for § 1003(b)(3) exemption).
Because 29 U.S.C. § 1003(b)(3) does not apply to exempt the plan, ERISA preemption applies and claims founded on state law are pre-empted by ERISA.
C. Diversity Jurisdiction
Rojas and DAJ finally argue that this Court may not exercise jurisdiction over the matter since the amount of damages — allegedly less than $75,000 — precludes diversity jurisdiction. Since the Court has determined that the insurance plan is an employee welfare benefit plan subject to ERISA pre-emption, the Court may properly exercise federal question jurisdiction. See 28 U.S.C.A. § 1331 (West 1993) ("[T]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.") Because the case arises under the laws of the United States, conferring upon the Court subject-matter jurisdiction, the requirements for diversity jurisdiction need not be considered.
Having disposed of each one of Rojas's and DAJ's arguments in favor of remanding the case to the 210th Judicial District Court of El Paso County, the Court is of the opinion that the motions should be denied.
Accordingly, IT IS HEREBY ORDERED that Plaintiff Octavio Rojas's "Motion to Remand" is DENIED.
IT IS FURTHER ORDERED that Third-Party Plaintiff DAJ Enterprise, Inc.'s "Motion to Remand" is DENIED.