Opinion
Case No. 2:03-CV-01137 PGC
June 1, 2004
In this ERISA action, defendant Regence Bluecross Blueshield ("Regence") seeks dismissal of plaintiff Joan Owen's 2nd and 5th state law causes of action and part of the 3rd and 4th causes of action on grounds of preemption. The court agrees these claims are preempted and GRANTS the motion to dismiss.
ANALYSIS
1. 2nd cause of action: Negligence in Drafting the Insurance Policy.
Regence argues that Owen's negligence claim is foreclosed by the doctrine of express preemption and conflicts with the enforcement scheme established for benefit plans by the Employee Retirement Income Security Act ("ERISA"). Essentially, Regence argues that a beneficiary in an ERISA-governed plan whose claim for plan benefits has been denied cannot bring a tort action under state law to contest and remedy that denial. A participant denied benefits under ERISA has only the specific causes of action and remedies Congress recognized and expressly provided in the statute. ERISA, in other words, is meant to be the exclusive vehicle for ERISA-plan actions.
Pilot Life Ins. Co. v. Dedweaux, 481 U.S. 41, 52 (1987).
Id.
Owen responds by arguing that the state law negligence claim is not preempted because the negligence claim doesn't relate to the employee welfare plan in a way that brings it within the scope of ERISA, Owen cites to Tenth Circuit precedent in Woodworkers Supply Inc. v. Principal Mutual Life Insurance Co. to show that where an insurer is sued with respect to its "preplan" activity, rather than its role as administrator of an employee benefits plan, there is no preemption because the state law claim does not relate to the employee welfare benefit plan. Owen also cites to Pacificare of Oklahoma v. Burrage, where ERISA did not preempt a malpractice claim againstan HMO even though the acts complained of occurred after the formation of the ERISA plan, because the acts were not sufficiently connected to the activities of the plan to trigger preemption.
170 F.3d 985 (10th Cir. 1999).
59 F.3d 151 (10th Cir. 1995)
Regence distinguishes Woodworkers from the present case because in that case the claim for fraudulent inducement against an insurer stemmed from "inducing" which occurred before the date the ERISA plan was adopted by the employer. The court agrees Woodworkers is distinguishable. Here the plaintiff's involvement with the ERISA plan occurred only after it was adopted by the employer. Owen argues Pacificare refutes such a finding, but that case can be distinguished since a malpractice claim against an HMO does not concern the denial of benefits. In the present case, the plaintiff lacks the pre-plan activity of Woodworkers as well as the unrelatedness of Pacificare. For Owen to argue that a negligence claim may arise through the drafting of the plan is indeed a creative argument. However, the state law negligence cause of action is nevertheless preempted by ERISA.
2. 3rd and 4th Causes of Action to Extent They Assert Claim Under State Law.
Regence argues that the only remedies available in connection with ERISA claims are those specifically authorized by Congress. As such, they argue that Owen's claims invoking state law are preempted.
Owen counters that violations of both ERISA and Utah state law are enforceable under § 502(a)(1)(b). Other Circuits have held that sponsors of ERISA plans and their insurers may incorporate into their plan documents the requirements of both ERISA and the state law in that jurisdiction. Here, the language of the subscriber certificate for Owen specifically provided that ERISA and Utah state law shall govern the relationship between the parties. By virtue of such language, Owen argues, the provisions of ERISA and the laws of the state of Utah are part of the terms of the insurance policy. Consequently, violations of either are enforceable as a term of the plan under § 502(a)(1)(b). Alternatively, Owen argues under § 514(b)(2)(a) that all state laws regulating insurance are saved from preemption.
Conley v. Pitney Bowes, 34 F.3d 714 (8th Cir. 1994).
See Exhibit A, p. 45.
Regence argues that while such remedies may be available under ERISA, they cannot be brought under state law that is preempted by ERISA. Regence Bluecross further asserts that the policy language Owen refers to — "governed by and construed in accordance with the law of the United States of America and the State of Utah" — does not operate as a waiver of the right to argue preemption of state law. Rather, the cited language is found in the policy under the subheading "interpretation." ERISA still governs the policy. None of the cases Owen refers to held that a reference to the applicable law can magically transform all state common law claims into causes of action that survive ERISA preemption.
Exhibit A, p. 45.
Regence asserts that the Savings Clause invoked by Owen cannot save the claims from preemption because common law negligence claims do not fall within the scope of the Savings Clause. For a law to fall within that scope, it must 1) be specifically directed towards entities engaged in insurance, and 2) it must substantially effect that risk pooling arrangement between the insurer and insured. As such, the Savings Clause could not prevent the preemption of the negligence claim. Here, similarly, the causes of action for "declaratory injunctive relief and "imposition of a constructive trust" do not qualify for the Savings Clause protection because they are based on general law, rather than arising from state law specifically directed at insurers. As such, they are preempted to the extent they arise under state law.
Kentucky Ass'n of Health Plans, Inc. v. Miller, 538 U.S. 329, at 337 (2003).
3. 5th Cause of Action: Equitable Estoppel.
Regence asserts that Owen's claim for equitable estoppel is preempted by ERISA if raised under state law and that Owen has no alternate claim for equitable estoppel under ERISA, Such a claim under state law, Bluecross argues, plainly relates to the subject ERISA plan. As such, they contend, the claim is preempted by ERISA for the same reasons as the state law negligence claim. Further, Regence stresses the Tenth Circuit's hesitancy to recognize estoppel claims under ERISA. In opposition, Owen argues that equitable estoppel is well recognized as a principle of Utah state law. Acceptance of this argument necessitates that the court also accept owen's contention that Utah law applies by virtue of the contract terms, which it does not. If Utah law does not apply, Owen argues that the equitable estoppel claim is protected from preemption because it falls under § 514(b)(2)(a), ERISA's savings clause.
Cannon v. Group Health Service of Oklahoma, Inc. 77 F.3d 1270 (10th Cir.).
Gen. Motors Acceptance Corp. v. Martinez, 668 P.2d 498, 501 (Utah 1983).
Next, Owen argues that the equitable estoppel claim is based on Regence's failure to draft the policy in way that complies with applicable law. This argument returns to the argument for the negligence claim: it is not preempted because it does not relate to the plan (it is "pre-plan activity"). This argument fails for the same reasons as the 2nd cause of action: it is creative but not persuasive.
Owen also asserts that she is not actually requesting damages other than those specifically allowed by ERISA and that Regence is reading too much into the claim. Owen only requests the contractual amount of health benefits under policy, prejudgment interest, and attorney fees.
For reasons given in the other causes of action contested, equitable estoppel under state law is preempted by ERISA. Further, it does not appear that ERISA provides for equitable estoppel independently.
4. Motion for More Definite Statement.
Rule eight of the Federal Rules of Civil Procedure requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." Here, defendants argue that Owen has not specified whether she is asserting claims under § 502(a)(1)(b) or 502(a)(3), or both. Though presenting alternate arguments, Owen satisfied the FRCP 8 requirement and further specified her claims in the memo in opposition to the motion and in the subsequent hearing. Simply put, there is enough information provided.
CONCLUSION
The court GRANTS Regence's motion to dismiss (#10-1) the 2nd and 5th causes of action and to dismiss the 3rd and 4th causes of action to the extent they assert a claim under state law. The motion for a more definite statement (#10-1) is DENIED.
SO ORDERED.