Case Title: Munda v. Summerlin Life & Health Ins. Co.

Citation: 127 Nev. Adv. Op. No. 83

Docket Number: 

State: nevada

Court: Nevada Supreme Court

Date: 2011-12-29T00:00:00Z

Document:
427 Nev., Advance Opinion 83
IN THE SUPREME COURT OF THE STATE OF NEVADA

      
     
     
    
  
  
   
    
   
  
   
 
 
  

JANISE MUNDA AND GIBB MUNDA, No, 55308
Appellants,
= FILED
SUMMERLIN LIFE & HEALTH
INSURANCE COMPANY, vet 29 2011
Respondent.
ov

Appeal from a district court order granting a motion to dismiss
a tort action, Eighth Judicial District Court, Clark County; Valorie Vega,
Judge.

Reversed and remanded,
Matthew L. Sharp Ltd. and Matthew L. Sharp, Reno; Friedman Rubin and

William S. Cummings, Anchorage, Alaska,
for Appellants.

Pisanelli Bice, PLLC, and Todd L. Bice, Debra L. Spinelli, and Jarrod L.
Rickard, Las Vegas,
for Respondent.

 

BEFORE THE COURT EN BANC.

OPINION
By the Court, DOUGLAS, J.:
In this appeal, we consider whether state law claims of

negligence and negligence per se are preempted by the Employee

'The Honorable Kristina Pickering, Justice, voluntarily recused
herself from participation in the decision of this matter.

  

 
Retirement Income Security Act (ERISA). In a recent opinion, Cervantes
v. Health Plan of Nevada, 127 Nev. _, __ P.8d __ (Adv. Op. No. 70,
October 27, 2011), we conchided that these same claims were preempted;
however, this is a fact-intensive inquiry because ERISA preemption is
dependent on the actual operation of a state statute. We conclude that
under the set of facts alleged before us, there is no preemption because
respondent Summerlin Life & Health Insurance Company's alleged
actions were independent of the administration of the ERISA plan;
therefore, the district court erred in granting Summerlin’s motion to

dismi

 

FACTS

Respondent Summerlin is an  insurer/managed care
organization (MCO) doing business in the State of Nevada. As such,
Summerlin contracts with medical providers to provide health care
services to its insureds. As an MCO, Summerlin is required to have in
place a quality assurance program pursuant to NRS 695G.180.
Summerlin contracted with the Endoscopy Center of Southern Nevada,
the Gastroenterology Center of Nevada, and the doctors employed by or
associated with the Gastroenterology Center of Nevada (collectively, the
Clinic) to provide health care services to its insureds. Appellants Janise
and Gibb Munda allege that from at least 2002 on, Summerlin encouraged
its insureds to seck treatment from the Clinic.

Between March 2004 and February 2008, the Clinic engaged

in a number of unsafe medical practices, which were ultimately brought to
light in early 2008 through an investigation conducted by the Southern
Nevada Health District (Health District) and the Centers for Disease

 

 
Control and Prevention, Summerlin subsequently terminated its contract,
with the Clinic based on the Health District’s findings.

Janise Munda was insured by Summerlin through her
employer's health plan, which was governed by ERISA. She sought
treatment at the Clinic on February 16, 2007, and March 2, 2007, because

it was a Summerlin provider. Janiso w:

 

later diagnosed with hepatitis C,
which the Health District determined she contracted as a result of being
treated at the Clinic.

Janise and her husband, Gibb Munda, sued Summerlin for

failure to comply with quality assurance standards, with causes of action

 

for negligence, negligence per se, breach of implied covenant of good faith
and fair dealing/bad faith, and loss of consortium. ‘The Mundas alleged in
their complaint that Summerlin failed to identify the unsafe practices of or
terminate its contract with the Clinic sooner because Summerlin failed to
evaluate, audit, monitor, and supervise its providers as required by NRS
695G.180.? The Mundas’ claims were based on Summerlin’s role as an
MCO, not on its role as an administrator of an ERISA plan. Summerlin
filed a motion to dismiss, arguing that the Mundas’ claims were
preempted by ERISA. The district court granted Summerlin’s motion
pursuant to ERISA and NRCP 12(b)(5). ‘The Mundas now appeal that
decision.

2NRS 695G.180(1) provides in part that “[elach managed care
organization shall establish a quality assurance program designed to
direct, evaluate and monitor the effectiveness of health care services
provided to its insureds.”

 

 
DISCUSSION

On appeal, the Mundas argue that the district court erred in
dismissing their complaint as preempted by ERISA because their claims’
do not fall under ERISA’s preemption provisions, sections 502(a) and
514(a) (codified at 29 U.S.C. §§ 1132(a) and 1144(a), respectively), which
generally preclude state law claims relating to an employee benefit plan.
Specifically, the Mundas argue that their claims are unrelated to the
administration of the ERISA plan and, as such, their claims cannot be
preempted by ERISA sections 502(a) or 514(a) because Congress did not

“In their complaint, the Mundas pleaded negligence per se as a
separate cause of action from negligence; however, it is not a separate
cause of action, but rather a method of establishing the duty and breach
elements of a negligence claim. See Cervantes v, Health Plan of Nevada,
127 Nev. __, _n.4, __P.8d__, __ 4 (Adv. Op. No. 70, October 27,
2011), Because the Mundas’ general negligence and negligence per se
theories are both based on their claim that Summerlin breached its duty
to evaluate, audit, monitor, and supervise its providers, the question of
whether the theories are preempted by ERISA is answered through the
same analysis. Therefore, we do not consider the Mundas’ theories of
negligence separately.

 

 

‘The Mundas also pleaded breach of implied covenant of good faith
and fair dealing/bad faith based on their claim that Summerlin injured
their rights under their insurance contract for unreasonably failing to
evaluate, audit, monitor, and supervise its providers. This is a
restatement of their negligence claim in the guise of a bad faith claim.
‘The Mundas have pleaded no facts which if true indicate that Summerlin
intended to deprive them of the fruits of the contract. See Insco v. Aetna
Health & Life Ins. Co., 673 F. Supp. 2d 1180, 1194 (D, Nev. 2009).
Therefore, we affirm the district court’s dismissal of this claim only.

 

 
nee

 

intend to use ERISA to preempt health and safety matters traditionally
left to state regulation. We agree as to ERISA section 514(a).*

Standard of review
A district court order granting an NRCP 12(b)(65)
motion to dismiss is subject to rigorous appellate
review. Similar to the trial court, this court
accepts the plaintiffs’ factual allegations as true,
but the allegations must be legally sufficient to
constitute the elements of the claim asserted. In
reviewing the district court's dismissal order,
every reasonable inference is drawn in the
plaintiffs’ favor.

‘Sanchez v, Wal-Mart Stores, 125 Nev._, _, 221 P.3d 1276, 1280 (2009)
(internal citations omitted). ‘This court reviews de novo a district court’

 

 

order granting a motion to dismiss, and such an order will not be upheld
“unless it appears beyond a doubt that the plaintiff could prove no set of
facts . .. [that] would entitle him [or her] to relief.” Vacation Village v.
Hitachi America, 110 Nev. 481, 484, 874 P.2d 744, 746 (1994) (quoting
Edgar v, Wagner, 101 Nev. 226, 228, 699 P.2d 110, 112 (1985); see
Sanchez, 125 Nev. at __, 221 P.3d at 1280,
Preemption under ERISA section 514(a)

enacted ERISA to ‘protect... the interests of

 

“Congres

 

participants in employee benefit plans and their beneficiaries,’ by setting

out substantive regulatory requirements for employee benefit plans, and

4ERISA section 502(a) is not applicable in this case because the
‘Mundas do not seek to enforce ERISA plan benefits, and this opinion only
addresses the relevant section 514(a) preemption. See Insco, 673 F. Supp.
2d at 1185 (ERISA section 502(a) “contains a comprehensive scheme of
civil remedies to enforce ERISA’s provisions” and is the second strand of
“ERISA's powerful preemptive force” (internal quotations omitted)).

 
to ‘provide for appropriate remedies, sanctions, and ready access to federal
Insco v. Aetna Health & Life Ins. Co., 673 F. Supp. 24 1180, 1185
(2009) (quoting Aetna Health Inc, v, Davila, 542 U.S. 200, 208 (2004)). As
part of the enactment, ERISA has “expansive preemption provisions that

courts

 

are intended to ensure that employee benefit plan regulation is
‘exclusively a federal concern.” Id, (quoting Aetna Health, 542 U.S. at
208). “[The United States] Supreme Court has repeatedly held that the
question of whether federal law preompts state law is one of congressional
intent, and that Congress’ purpose is the ‘ultimate touchstone.” Brandner
UNUM Life Ins. Co. of America, 152 F. Supp. 2d 1219, 1223 (D. Nev.
2001),

However, the Supreme Court has also “instructed that there is
a presumption against holding that ERISA preempts state or local laws
regulating matters that fall within the traditional police powers of the
State.” Golden Gate Restaurant v. City and County of S.F,, 512 F.3d 1112,
1120 (®th Cir. 2008). Traditionally, such powers include the regulation of
health and safety matters. De Buono v, NYSA-ILA Medical and Clinical
Service Fund, 520 U.S. 806, 814 (1997). “[NJothing in the language of
[ERISA] or the context of its passage indicates that Congress chose to
displace general health care regulation, which historically has been a
‘matter of local concern.” New York State Conference of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 661 (1995).

ERISA section 514(a) expressly “preempts all state laws that
‘relate to’ any employee benefit plan”; however, laws regulating insurance,
banking, or securities are exempt. 29 U.S.C. § 1144(a); Cervantes v,
Health Plan of Nevada, 127 Nev.__, _, __P.d_, _ (Adv. Op. No.
70, October 27, 2011). A law “relates to” a covered employee benefit plan if

   

 

 
it has a “reference to” or “connection with” it. California Div, of Labor
Standards Enforcement v. Dillingham Constr. N.A. Ine,, 519 U.S. 316, 324
(1997), We conclude that NRS Chapter 695G does not have a reference to
or (under the set of facts alleged before us) a connection with an ERISA
plan,

A law has a reference to an employee benefit plan for purpos

 

of ERISA preemption analysis when it “acts immediately and exclusively
upon ERISA plans... . or where the existence of ERISA plans is essential
to the law's operation.” Id. at 326. This “reference to” prong does not
preempt NRS 695G.180 because NRS Chapter 695G’s quality assurance
requirements apply to all MCOs, regardless of their ERISA status or
relationship with any ERISA plan. Cervantes, 127 Nev. at__, _ P.3d at

A law without a reference to an employee benefit plan may
still be preempted if it has a prohibited “connection with” an ERISA plan,
Dillingham, 519 U.S. at 325. To determine if a law has such a connection,
courts consider the following factors:

(1) whether the state law regulates the types of
benefits of ERISA employee welfare benefits
plans; (2) whether the state law requires the
establishment of a separate employee benefit plan
to comply with the law; (3) whether the state law
imposes reporting, disclosure, funding, or vesting
requirements for ERISA plans; and (4) whether
the state law regulates certain ERISA
relationships, including the relationships between,
an ERISA plan and employer and, to the extent an
employee benefit plan is involved, between the
‘employer and employee.

Insco, 673 F. Supp. 2d at 1187 (quoting Oper. Eng, Health & Welfare v.
DWI Contracting Co,, 136 F.3d 671, 678 (9th Cir. 1998)). “In evaluating

 
these factors, courts are also to consider the purpose of ERISA, which is to
provide a uniform regulatory regime over employee benefit plans.” Insco,
673 F. Supp. 2d at 1187 (internal citations omitted).

Administrative

In Cervantes v. Health Plan of Nevada, this court joined the
‘Third, Fifth, Ninth, and Tenth Circuits in holding that ERISA preempts
suits that are predicated on administrative decisions made in
administering an ERISA plan. 127 Nev.__, _, __ P.8d__, __ (Adv.
‘Op. No. 70, October 27, 2011); see Bui v, American Telephone & Telegraph
Co, Ine,, 310 F.3d 1143, 1147-48 & n.11 (9th Cir. 2002), However, when
the conduct at issue “is not performed in the capacity of the ERISA plan,
plan administrator, or plan agent, these claims are not preempted by
ERISA section 514(a) because the relationship with the ERISA plan is too
tangential.” Cervantes, 127 Nev. at__, _ P.3d at__.

Claims predicated upon NRS Chapter 695G are preempted
when an MCO is acting solely as an administrator or agent of an ERISA
plan. Id, at _, __ P.3d at __. In these situations, applying NRS
Chapter 695G would effectively be a direct regulation on an ERISA plan's
benefit structure, as the statute imposes a duty on the ERISA plan to
monitor its service providers. Id, at __, __ P.8d at__. This imposition
of duty would clearly constitute a prohibited “connection with” an ERISA
plan. Id, at __, __ P.3d at __. In Cervantes, because we determined
that the MCO was acting solely as an agent of an ERISA plan, we held
that its selection and retention of a service provider was an administrative
decision by an ERISA plan subject to section 514(a) preemption. Id, at
__P.Bd at__.

However, if an MCO is acting independently of an ERISA
plan, section 514(a) does not preempt NRS Chapter 695G’s application.

 

8

 
Id, at__, __P.3d at__. While NRS Chapter 695G may affect an ERISA
plan if the plan elects to purchase an insurance plan or lease access to a
provider network from an MCO, these would only be “indirect economic
effects.” Id, NRS Chapter 695G would not bind an ERISA plan to any
particular choice; therefore, section 514(a)'s preemptive effect is not
triggered. Id, at _, __ P.3d at __, In this situation, NRS Chapter 6950,
only affects an ERISA plan to the extent that it voluntarily chooses to
utilize the products of an MCO that is regulated by the statute. Id,

‘The United States District Court for the District of Nevada
recently dealt with an MCO acting independently of an ERISA plan in a
case with facts similar to those alleged here. Insco, 673 F. Supp. 2d at
1180. In Insco, the plaintiff, who was insured by Aetna in a plan paid for
by his employer, alleged that he had been exposed to blood-borne diseases
due to the malpractice of one of Actna’s providers. Id. at 1183, The
plaintiff asserted the same claims (negligence, negligence per se, and
breach of implied covenant of good faith and fair dealing) against Aetna as
the Mundas now assert against Summerlin.* [d, at 1183-84,

‘The court found that NRS Chapter 695G was not preempted
based on the “reference to” prong of ERISA section 514(a) preemption
analysis because the relevant provisions applied regardless of the
existence of an ERISA plan. Id, at 1187. In evaluating the “connection
with” prong, the Insco court noted that under Bui, a claim based on

°The Insco court dismissed the plaintiff's breach-of-implied-
covenant-of-good-faith-and-fair-dealing claim because it found that it was
actually a restatement of his negligence claim as he had pleaded no facts
which if true indicated that the insurer intended to deprive him of the
“fruits of the contract.” Id, at 1194.

 

 
negligence in selection or retention of a provider is an administrative
decision, and therefore preempted by ERISA section 514(a). Id. at 1188.
‘As such, if Aetna had been purely an administrator of the plan, it could
not have been subject to negligence liability for selection and retention of

providers. Id, However, the court distinguished Aetna’s role as the

 

administrator of an ERISA plan from its role as an MCO (with ite own
duties under Nevada law). Id, at 1189. Because Aetna’s selection and
an MCO,
independent from its administration of the ERISA plan, the state law

retention choices were made in conjunction with its role

 

claims based upon its allegedly negligent selection and retention of
healthcare providers were not preempted by ERISA section 514(a). Id.
‘The court noted that “Aetna's choice to grant access to its Network as it
exists, or its direct selection of providers for [Insco] under the contract, are
not subject to suit under state law, but Aetna’s choice of providers within
Id.

In the present case, the Mundas alleged facts to support a

 

its own preexisting healthcare Network

finding that preemption does not apply. Specifically, the Mundas alleged
that they were insured by Summerlin and that it was not merely an
administrator of the ERISA plan. Thus, there is a question as to whether
Summerlin’s selection and retention choices regarding the Clinic were
made in conjunction with its status as an MCO or its status as the
administrator of an ERISA plan. ERISA section 514(a) does not preempt
claims that are brought against Summerlin in its capacity as an MCO,
instead of in its capacity as an ERISA plan administrator. As there is no
preemption under the set of facts alleged before us, we conclude that the
district court's order cannot be upheld because it does not appear beyond a
doubt that the Mundas could not prove a set of facts that would entitle

10

 
   
     
  
   
   
  

them to relief and the allegations were legally sufficient to constitute the
elements of the claims asserted. Accordingly, we reverse the district
court's order granting Summerlin's motion to dismiss and remand this

matter to the district court for further proceedings consistent with this

aus / \< a
Douglas

 

opinions

Hardesty

f ana ags (J
Parraguirre

Because the Mundas’ claim for loss of consortium is derivative of
their claim for negligence, we also reverse and remand on this claim for
further proceedings consistent with this opinion. See
Sports Entm't, 124 Nev. 213, 221-22, 180 P.3d 1172, 1178 (2008).

u