PUBLISH

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

_______________

No. 94-9152 _______________

D. C. Docket No. 1:92-cv-2686-RLV

MARGERY A. MORSTEIN,

Plaintiff-Appellant,

versus

NATIONAL INSURANCE SERVICES, INC.;

PAN AMERICAN LIFE INSURANCE COMPANY;

THE SHAW AGENCY;

SCOTT HANKINS,

Defendants-Appellees.

______________________________

Appeal from the United States District Court

for the Northern District of Georgia

______________________________

(August 19, 1996)

Before TJOFLAT, Chief Judge, and KRAVITCH, HATCHETT, ANDERSON,

EDMONDSON, COX, BIRCH, DUBINA, BLACK, CARNES and BARKETT, Circuit

Judges.
 1

 Morstein voluntarily dismissed National and Pan-American

before the commencement of this appeal, although they were

defendants in the original action.

2

BIRCH, Circuit Judge:

This case was taken en banc to clarify the law in our circuit regarding state law

preemption by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29

U.S.C. §§ 1001-1461 (1985). In this appeal, we must decide whether state law claims

asserted against an independent insurance agent and his agency for fraudulent

inducement to purchase and negligence in processing an application for an ERISAgoverned insurance plan sufficiently relate to an employee benefit plan within the

meaning of section 514(a) of ERISA, 29 U.S.C. § 1144(a), so as to be preempted.

Because we find that the state law claims in this case do not sufficiently relate to the

employee benefit plan to be preempted by ERISA, we reverse the district court's grant

of summary judgment in favor of the insurance agent and his agency.

I. FACTS

Plaintiff-appellant, Margery Morstein, is the president, director, and sole

shareholder of Graphic Promotions, Inc. ("Graphic"). At all times relevant to this appeal,

Morstein was one of two employees of Graphic. In 1991, Morstein met with Scott

Hankins, an insurance broker and employee of the Shaw Agency, for the purpose of

obtaining a replacement policy of major medical insurance for herself and Graphic's

other employee. The policy was to be administered by National Insurance Services,

Inc. ("National") and underwritten by Pan-American Life Insurance Company ("PanAmerican").1

 Morstein alleges that during her meeting with Hankins, she advised him

that any policy of major medical insurance that would replace her current policy would

be unacceptable if it excluded from coverage medical treatment related to any
 2

 The Shaw Agency is an independent agency or brokerage that

is authorized to write policies for several insurance companies.

See Hankins Depo. at 11-14. In Georgia, independent insurance

agents are generally considered to be agents of the insured, not

the insurer. European Bakers, Ltd. v. Holman, 338 S.E.2d 702, 704

(Ga. App. 1985), cert. denied (Jan. 17, 1986). 

3

preexisting medical condition. Morstein asserts that Hankins assured her that the policy

that he proposed would provide the same coverage for preexisting conditions as her

current policy. The policy offered by Hankins was issued to Graphic, and Graphic paid

the initial premium.

Over one year after the policy was issued, Morstein underwent total hip

replacement surgery. When she submitted a claim for payment for this procedure,

National refused payment because it asserted that Morstein's surgery treated a

preexisting condition, which she failed to disclose during the application process.

National then rescinded the policy and refunded to Graphic the premium payments that

were made on behalf of Morstein. Morstein claims that Hankins and the Shaw Agency

fraudulently induced her to purchase a policy of major medical insurance and that she

therefore allowed a separate full-coverage insurance policy to lapse. She further

alleges that Hankins and the Shaw Agency were negligent in processing her application

for insurance and that she has state law claims against them for negligence and fraud.2

Morstein filed an action in state court, alleging negligence, malfeasance,

misrepresentations, and breach of contract. Defendants removed the action to federal

court on the basis that Morstein's claims were governed by ERISA. The district court

denied Morstein's motion to remand and found that defendants were entitled to

summary judgment as to the state law claims against them. The district court

concluded that Morstein's claims "clearly relate to the employee benefit plan

established by Graphic Promotions; therefore, those claims are preempted by ERISA."

R2-29-3. Morstein appealed the district court's grant of summary judgment, and the
 3

 In Farlow, plaintiff was a shareholder, president, and

member of the board of directors of Pace-Plus, Inc. Farlow and his

wife were designated beneficiaries under Pace-Plus's employee

benefit plan. The Farlows alleged that an insurance agent induced

them to purchase a new group health life insurance plan, and that

the insurance agent fraudulently misrepresented that, among other

things, the new policy would provide the same coverage as the

company's old policy. Farlow, 874 F.2d at 792. After switching to

the new policy, Farlow's wife became pregnant. The Farlows then

discovered that, unlike Pace-Plus's old policy, the new policy did

not provide maternity or pregnancy coverage. Id.

 4 Our court found the conduct alleged by the Farlows to be

"intertwined" with the refusal to pay benefits:

[T]he conduct alleged in these claims is not only

contemporaneous with [the insurer's] refusal to pay

benefits, but the alleged conduct is intertwined with the

refusal to pay benefits. Finding the Farlows' state law

claims not wholly remote in content from the [insurer's]

plan, we reject the Farlows' contention that simply

because their claims invoke misconduct in the sale and

implementation of the [insurer's] plan, their claims do

not relate to the plan.

Consequently, we hold that ERISA preempts the

Farlows' misrepresentation and negligence claims.

Farlow, 874 F.2d at 794. 

4

original appellate panel in this case reluctantly affirmed the district court's grant of

summary judgment and held that it was bound by our decision in Farlow v. Union Cent.

Life Ins. Co., 874 F.2d 791 (11th Cir. 1989). Morstein v. National Ins. Servs., Inc., 74

F.3d 1135, 1138-39 (11th Cir.), vacated and reh'g en banc granted, 81 F.3d 1031 (11th

Cir. 1996). 

The original panel found the facts in this case to be duplicative of the facts in

Farlow.

3

 Id. at 1137. The panel, therefore, was bound to adhere to the holding of

Farlow that ERISA preempted a designated beneficiary's state law misrepresentation

and negligence claims against an insurance company and its agent.4 Following our

decision in Farlow, several district courts in our circuit, faced with similar state law

claims, have attempted to distinguish their cases from Farlow. See Wiesenberg v. Paul
5

Revere Life Ins. Co., 887 F. Supp. 1529, 1532-33 (S.D. Fla. 1995) (reasoning that the

decision in Farlow was ambiguous with regard to whether or not its holding applied to

independent insurance agent as well as the insurance company, and turning to law in

other circuits to support its holding that Wiesenberg's state law fraud claims against the

insurance agency and its agent were not preempted by ERISA); Barnet v. Wainman,

830 F. Supp. 610, 611-12 (S.D. Fla. 1993) (finding no preemption of plaintiff's claims

against insurance agent for fraudulent misrepresentation because, unlike Farlow, the

scope of coverage of plaintiff's claim would not be the focus of the litigation); Martin v.

Pate, 749 F. Supp. 242, 246-47 (S.D. Ala. 1990) (finding "the applicability of Farlow to

the facts of this case" to be "questionable" and holding that plaintiff's state law claim of

fraudulent misrepresentation of coverage of policy was not preempted), aff'd sub nom.

Martin v. Continental Investors, 934 F. 2d 1265 (11th Cir. 1991) (table).

Our decisions in the ERISA preemption area have been neither consistent nor

clear. Since Farlow was decided, the Supreme Court and several other circuit courts

have issued opinions that clarify the purpose and intent of the ERISA state law

preemption doctrine. Furthermore, the conflict among the district courts in our circuit

demands that we revisit this issue and attempt to provide some clear guidance in the

morass of ERISA preemption law. We find it helpful, therefore, to trace the

development of the preemption doctrine before applying the words of the statute to the

case at bar.

II. ANALYSIS

Morstein alleges that the district court erred in applying the preemption doctrine

under ERISA to bar her state law claims and thus erred in granting summary judgment

in favor of Hankins and the Shaw Agency. We review a grant of summary judgment de
 5

 Section 1003(a) provides that ERISA applies to all employee

benefit plans established or maintained "by any employer engaged in

commerce or in any industry or activity affecting commerce." 28

U.S.C. § 1003(a) (1985). The exemptions described in section

1003(b) are not applicable in this case. Id. at § 1003(b).

An "employee benefit plan" is defined under ERISA as "an

employee welfare benefit plan or an employee pension benefit plan

or a plan which is both an employee welfare benefit plan and an

employee pension benefit plan." Id. at § 1002(3) (1985).

The medical insurance policies involved in this case qualify

as "employee welfare benefit plans", which, together with the term

"welfare plan," are defined in ERISA section 3(1) as: 

any plan, fund, or program which was heretofore or is

hereafter established or maintained by an employer or by

an employee organization, or by both, to the extent that

such plan, fund, or program was established or is

maintained for the purpose of providing 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, .

. . .

6

novo. Forbus v. Sears Roebuck & Co., 30 F.3d 1402, 1404 (11th Cir. 1994), cert.

denied, __ U.S. __, 115 S. Ct. 906, 130 L. Ed. 2d 788 (1995).

A. ERISA Legislative History

The Supreme Court has described the overall intent of ERISA as follows:

"ERISA is a comprehensive statute designed to promote the interests of employees and

their beneficiaries in employee benefit plans." Shaw v. Delta Air Lines, Inc., 463 U.S.

85, 90, 103 S. Ct. 2890, 2896, 77 L. Ed. 2d 490 (1983); see also Lordmann Enters.,

Inc. v. Equicor, Inc., 32 F.3d 1529, 1533 (11th Cir. 1994), cert. denied, __ U.S. __, 116

S. Ct. 335, 133 L. Ed. 2d 234 (1995). Section 514(a) of ERISA provides that its

provisions "shall supersede 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 are not

exempt under section 1003(b) of this title." 29 U.S.C. § 1144(a) (1985).5

 Unfortunately,
Id. at § 1002(1).

 6 Senator Javits made the following comments:

Both House and Senate bills provided for preemption

of State law, but--with one major exception appearing in

the House bill--defined the perimeters of preemption in

relation to the areas regulated by the bill. Such a

formulation raised the possibility of endless litigation

over the validity of State action that might impinge on

Federal regulation, as well as opening the door to

multiple and potentially conflicting State laws hastily

contrived to deal with some particular aspect of private

welfare or pension benefit plans not clearly connected to

the Federal regulatory scheme.

Although the desirability of further regulation--at

7

the statute does not define the term "relate to," and it has fallen to the courts to deduce

Congress's intent and apply this interpretation to the facts of each case that arises. A

search through the volumes of legislative history of ERISA provides very little

information regarding federal preemption of state law. 

The Supreme Court in Shaw relied heavily on the statements of Representative

Dent and Senators Williams and Javits in support of its conclusion that the intent of

Congress was to preempt broadly. Shaw, 463 U.S. at 99-100, 103 S. Ct. at 2901. Both

Representative Dent and Senator Williams emphasized the intent of Congress to

broadly preempt state and local regulation of employee benefit plans. Representative

Dent called the preemption doctrine "the crowning achievement of this legislation," and

promised that it would "eliminat[e] the threat of conflicting and inconsistent State and

local regulation." 120 Cong. Rec. 29,197 (1974). Senator Williams stated that

preemption was "intended to apply in its broadest sense to all actions of State or local

governments, or any instrumentality thereof, which have the force or effect of law." Id.

at 29,933. Only Senator Javits remarked that the final language of the preemption

clause was a product of compromise between the House and Senate versions of the

bill and that further evaluation of preemption policy was necessary.6 
either the State or Federal level--undoubtedly warrants

further attention, on balance, the emergence of a

comprehensive and pervasive Federal interest and the

interests of uniformity with respect to interstate plans

required--but for certain exceptions--the displacement of

State action in the field of private employee benefit

programs. The conferees--recognizing the dimensions of

such a policy--also agreed to assign the Congressional

Pension Task Force the responsibility of studying and

evaluating preemption in connection with State

authorities and reporting its findings to Congress. If

it is determined that the preemption policy devised has

the effect of precluding essential legislation at either

the State or Federal level, appropriate modifications can

be made.

120 Cong. Rec. 29,942 (1974).

The ERISA Oversight Report of the Pension Task Force of the

Subcommittee on Labor Standards was issued in 1977. Pension Task

Force of Subcomm. on Labor Standards of House Comm. on Educ. and

Labor, ERISA Oversight Report, H.R. Rep. No. 365, 94th Cong., 2d

Sess. (1977). The Task Force concluded that, "[b]ased on our

examination of the effects of section 514, it is our judgment that

the legislative scheme of ERISA is sufficiently broad to leave no

room for effective state regulation within the field preempted.

Similarly it is our finding that the Federal interest and the need

for national uniformity are so great that enforcement of state

regulation should be precluded." Id. at 9.

 7 According to Prof. Catherine L. Fisk:

In the twenty-one years since ERISA was enacted, the

Court has rendered decisions with written opinions in

twelve ERISA preemption cases, and has decided a number

of others without opinion. Preemption cases constitute

roughly half of all the ERISA cases the Court has

considered. The relatively large number of ERISA

preemption opinions has not, however, led to clarity in

the law. The lower courts have decided thousands of

preemption cases, yet remain mired in confusion about

8

B. Supreme Court Case Law

Because the legislative history is sparse, it has fallen to the courts to interpret the

phrase "relate to" and give it meaning in the context of the facts that arise in each

particular case.7

 The Supreme Court noted as early as 1981 that defining boundaries
basic points. ERISA preemption offers proof that plain

language textualism leads to uncertainty and incoherence

in the law.

Catherine L. Fisk, The Last Article About the Language of ERISA

Preemption? A Case Study of the Failure of Textualism, 33 Harv. J.

on Legis. 35, 58-59 (1996)(footnotes omitted).

The Supreme Court apparently has not uttered its final word on

the issue of preemption either. The Court recently granted

certiorari in Dillingham Construction N.A., Inc. v. Sonoma County,

57 F.3d 712 (9th Cir. 1995), and requested briefing on the issue of

whether Congress intended, in enacting ERISA, to preempt states'

traditional regulation of wages, apprenticeship, and state-funded

public works construction through a state prevailing wage law that

restricts a contractor's payment of lower apprentice-specific wages

to apprentices who are registered in programs approved as meeting

federal standards. California Div. of Labor Standards Enforcement

v. Dillingham Constr. N.A., Inc., __ U.S. __, 116 S. Ct. 1415, 134

L. Ed. 2d 541 (1996).

9

of the preemption doctrine would not be an easy task. Alessi v. Raybestos-Manhattan,

Inc., 451 U.S. 504, 525, 101 S. Ct. 1895, 1907, 68 L. Ed. 2d 402 (1981). In Alessi,

retired employees challenged a provision in their employer-provided pension plan,

which provided that an employee's retirement benefits are offset by any worker's

compensation awards for which the employee is eligible, as violating a New Jersey

statute that prohibited these offsets. Id. at 507-08, 101 S. Ct. at 1898. The Court

remarked that it "need not determine the outer bounds of ERISA's pre-emptive

language to find this New Jersey provision an impermissible intrusion on the federal

regulatory scheme." Id. at 525, 101 S. Ct. at 1907. The Court noted that, "[o]ther

courts have reached varying conclusions as to the meaning of ERISA's pre-emptive

language in other contexts. . . . We express no views on the merits of any of those

decisions." Id. at n.21 (citations omitted). Nevertheless, the Court indicated that it

leaned towards a broad interpretation: "ERISA makes clear that even indirect state

action bearing on private pensions may encroach upon the area of exclusive federal
10

concern. . . . ERISA's authors clearly meant to preclude the States from avoiding

through form the substance of the pre-emption provision." Id.

The Court next addressed the preemption issue in Shaw v. Delta Air Lines, Inc.,

463 U.S. 85, 103 S. Ct. 2890, 77 L. Ed. 2d 490 (1983). The issue before the Court in

Shaw was whether two New York human rights and disability statutes that prohibited

discrimination on the basis of pregnancy were preempted by ERISA. Id. at 88, 103 S.

Ct. at 2895. The Supreme Court in a prior unrelated case had determined that

discrimination based on pregnancy was not actionable under Title VII of the Civil Rights

Act of 1964. Id.; General Elec. Co. v. Gilbert, 429 U.S. 125, 97 S. Ct. 401, 50 L. Ed.

2d 343 (1976). The Court held that even though ERISA does not contain any

provisions proscribing discrimination in the provision of employee benefits, the New

York laws were "relat[ed] to" employee benefit plans and, therefore, fell under section

514(a). Shaw at 96, 103 S. Ct. at 2899. Citing Black's Law Dictionary in support

thereof, the Court made the following attempt to define "relates to":

A law "relates to" an employee benefit plan, in the normal sense of the

phrase, if it has a connection with or reference to such a plan. Employing

this definition, the Human Rights Law, which prohibits employers from

structuring their employee benefit plans in a manner that discriminates on

the basis of pregnancy, and the Disability Benefits Law, which requires

employers to pay employees specific benefits, clearly "relate to" benefit

plans. We must give effect to this plain language unless there is good

reason to believe Congress intended the language to have some more

restrictive meaning.

In fact, however, Congress used the words "relate to" in § 514(a)

in their broad sense. To interpret § 514(a) to preempt only state laws

specifically designed to affect employee benefit plans would be to ignore

the remainder of § 514. It would have been unnecessary to exempt

generally applicable state criminal statutes from preemption in § 514(b),

for example, if § 514(a) applied only to state laws dealing specifically with

ERISA plans.

Id. at 96-98, 103 S. Ct. at 2900 (footnote & citations omitted). Once again, however,

the Supreme Court declined to remark on how broad the preemption language of

ERISA sweeps, except to note that there is some boundary:
 8

 The sticking-point for the Court came in its determination

of whether the causes of action should be saved under the insurance

savings clause. Pilot Life, 482 U.S. at 48-50, 107 S. Ct. at 1553-

4; 29 U.S.C. § 1144(b)(2)(A). The Court determined that the

savings clause should be interpreted narrowly and that Dedeaux's

claims could not be saved because his common law claims could not

be viewed as laws that "regulate[d] insurance" as they were not

specifically directed toward the insurance industry. Pilot Life,

482 U.S. at 50, 107 S. Ct. at 1554. The Court also looked to the

intent of Congress that the civil enforcement provisions of ERISA

be the exclusive vehicle for actions brought by ERISA plan

participants and beneficiaries, who assert claims for improper

processing of benefits. Id. at 52-54, 107 S. Ct. at 1555-57.

11

Some state actions may affect employee benefit plans in too tenuous,

remote, or peripheral a manner to warrant a finding that the law "relates

to" the plan. . . . The present litigation plainly does not present a

borderline question, and we express no views about where it would be

appropriate to draw the line.

Id. at 100 n.21, 103 S. Ct. at 2901 n.21. 

The Supreme Court first addressed the issue of whether ERISA preempts state

common law tort and contract claims in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107

S. Ct. 1549, 95 L. Ed. 2d 39 (1987). Dedeaux was injured in an employment-related

accident and filed a disability claim with Pilot Life Insurance Company ("Pilot Life"), the

provider of Dedeaux's employer's long term disability employee benefit plan. Id. at 43,

107 S. Ct. at 1551. When Dedeaux's benefits were terminated by Pilot Life, he

instituted a diversity suit against the company alleging tortious breach of contract,

breach of fiduciary duties, and fraud in the inducement. Id. Pilot Life argued that

Dedeaux's state law claims were preempted by ERISA. After discussing the legislative

history of ERISA and emphasizing its broad preemptive intent, the Supreme Court held

that Dedeaux's state law claims were preempted and that the insurance savings clause

did not apply to the claims. The Court did not hesitate in its conclusion that Dedeaux's

common law causes of action, "each based on alleged improper processing of a claim

for benefits under an employee benefit plan, undoubtedly meet the criteria for preemption under § 514(a)." Id. at 48, 107 S. Ct. at 1553.8
12

In Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111 S. Ct. 478, 112 L. Ed.

2d 474 (1990), an employee brought a state law action against his employer alleging

that the employer had wrongfully terminated him in order to avoid contributing to, or

paying benefits under, the employee's pension plan. The Court found that the

employee's claim was preempted under ERISA. Id. at 142, 111 S. Ct. at 484. In

discussing whether the claim "relates to" an employee benefit plan covered by ERISA,

the Court stated that:

[I]n order to prevail, a plaintiff must plead, and the court must find, that an

ERISA plan exists and the employer has a pension-defeating motive in

terminating the employment. Because the court's inquiry must be directed

to the plan, this judicially created cause of action "relate[s] to" an ERISA

plan.

Id. at 140, 111 S. Ct. at 483. 

In 1995, the Supreme Court issued its opinion in New York Conference of Blue

Cross & Blue Shield Plans v. Travelers Ins. Co., __ U.S. __, 115 S. Ct. 1671, 131 L. Ed.

2d 695 (1995) (hereinafter "New York Blues"). The issue in New York Blues was

whether ERISA "pre-empts the state provisions for surcharges on bills of patients

whose commercial insurance coverage is purchased by employee health-care plans

governed by ERISA, and for surcharges on [health maintenance organizations (HMOs)]

insofar as their membership fees are paid by an ERISA plan." Id. at __, 115 S. Ct. at

1673-74. The district court in the case had determined that the New York surcharge

law was preempted by ERISA because the surcharges would affect commercial

insurers and HMOs, and, therefore, indirectly affect ERISA plans by increasing plan

costs. Id. at __, 115 S. Ct. at 1675. The Second Circuit affirmed the decision of the

district court and cited Shaw v. Delta Air Lines and Ingersoll-Rand v. McClendon in

support of its finding of broad preemption. See Travelers Ins. Co. v. Cuomo, 14 F.3d

708, 717-19 (2d Cir. 1993), rev'd, __ U.S. __, 115 S. Ct. 1671, 131 L. Ed. 2d 695

(1995).
13

The Supreme Court rejected the conclusions of the Second Circuit and

essentially turned the tide on the expansion of the preemption doctrine:

The governing text of ERISA is clearly expansive. . . . If "relate to" were

taken to extend to the furthest stretch of its indeterminacy, then for all

practical purposes pre-emption would never run its course, for "[r]eally,

universally, relations stop nowhere," H. James, Roderick Hudson xli (New

York ed., World's Classics 1980). But that, of course, would be to read

Congress's words of limitation as a mere sham, and to read the

presumption against pre-emption out of the law whenever Congress

speaks to the matter with generality. That said, we have to recognize that

our prior attempt to construe the phrase "relate to" does not give us much

help drawing the line here.

Id. at __, 115 S. Ct. 1677. The Court next cited the often-quoted language in Shaw that

defined a law "relat[ing] to" an employee benefit plan as one that "'has a connection

with or reference to such a plan.'" Id. at __, 115 S. Ct. 1677 (quoting Shaw, 463 U.S.

at 96-97, 103 S. Ct. at 2900). After acknowledging that the statute in question made

no reference to an employee benefit plan, the Court hinged its analysis on interpreting

the phrase "connection with" from Shaw. The Court then stated:

But this still leaves us to question whether the surcharge laws have a

"connection with" the ERISA plans, and here an uncritical literalism is no

more help than in trying to construe "relate to." For the same reasons that

infinite relations cannot be the measure of pre-emption, neither can infinite

connections. We simply must go beyond the unhelpful text and the

frustrating difficulty of defining its key term, and look instead to the

objectives of the ERISA statute as a guide to the scope of the state law

that Congress understood would survive.

Id. at __, 115 S. Ct. at 1677. The Court went on to reason that a reading of the

preemption provision that is so broad as to displace "all state laws affecting costs and

charges on the theory that they indirectly relate to ERISA plans . . . would effectively

read the limiting language in § 514(a) out of the statute . . . ." Id. at __, 115 S. Ct. at

1679. This conclusion, the Court stated, would contradict the "basic principles of

statutory interpretation" and would go against the Court's prior determination that a

state law is not preempted when the law has too tenuous a connection with the ERISA

plan. Id. at __, 115 S. Ct. at 1679-80. The Court concluded:
 9

 We recognize that the factual circumstance now before us is

not the only one in which a state law claim will not be preempted

14

While Congress's extension of pre-emption to all "state laws relating to

benefit plans" was meant to sweep more broadly than "state laws dealing

with the subject matters covered by ERISA[,] reporting, disclosure,

fiduciary responsibility, and the like," Shaw, 463 U.S., at 98, and n. 19,

103 S. Ct. at 2900, and n. 19, nothing in the language of the Act 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. . . .

Id. at __, 115 S. Ct. at 1679-80 (citations omitted). 

C. Application to Morstein's Claims

While the narrow holding in New York Blues, i.e., state laws that govern general

health care regulation and affect ERISA plans only by means of indirect economic

effects are not preempted, is not particularly relevant to the instant case, the broad

guidance that the Court gave in analyzing a state law is helpful. Using the analysis

outlined by the Supreme Court in New York Blues, we look to see whether the state law

claims brought by Morstein have a "connection with" the ERISA plan. To determine

that, we examine whether the claims brought fit within the scope of state law that

Congress understood would survive ERISA. 

The Fifth Circuit has found that Congress did not intend for ERISA preemption

to extend to state law tort claims brought against an insurance agent. Perkins v. Time

Ins. Co., 898 F.2d 470, 473 (5th Cir. 1990). Such preemption, reasoned the Fifth

Circuit, would "immunize agents from personal liability for their solicitation of potential

participants in an ERISA plan prior to its formation." Id. We now adopt the rationale

of the Fifth Circuit as stated in Perkins and hold that when a state law claim brought

against a non-ERISA entity does not affect relations among principal ERISA entities as

such, then it is not preempted by ERISA. To the extent that any of our prior opinions

differ from this holding, they should be deemed overruled.9
by ERISA. 

 10 Our conclusion contradicts the reasoning offered by this

court in Belasco v. W.K.P. Wilson & Sons, Inc., 833 F.2d 277 (11th

Cir. 1987). There we reasoned that because the preemption doctrine

extended to claims brought by an employee against an employer, it

must extend to claims against insurance agents as well. "This

indicates that the 'broad common-sense meaning' of the term 'relate

to,' . . . is quite broad indeed." Id. at 281 (citation omitted).

Subsequent cases have made clear, however, that employers, unlike

independent insurance agents, are ERISA entities and thus much more

closely "related to" the plan.

15

Morstein is a plan beneficiary who is bringing a suit against the insurance agency

and agent who allegedly fraudulently induced her to change benefit plans. The

insurance agent and agency are not ERISA entities. ERISA entities are the employer,

the plan, the plan fiduciaries, and the beneficiaries under the plan. See Travitz v.

Northeast Dept. ILGWU Health & Welfare Fund, 13 F.3d 704, 709 (3d Cir.), cert.

denied, __ U.S. __, 114 S. Ct. 2165, 128 L. Ed. 2d 888 (1994); Sommers Drug Stores

v. Corrigan Enters., Inc., 793 F.2d 1456, 1467 (5th Cir. 1986), cert. denied, 479 U.S.

1034, 107 S. Ct. 884, 93 L. Ed. 2d 837 (1987). Hankins and the Shaw Agency had no

control over the payment of benefits or a determination of Morstein's rights under the

plan.10

In Variety Children's Hosp., Inc. v. Century Medical Health Plan, Inc., 57 F.3d

1040 (11th Cir. 1995), we held that state law fraud claims can be intertwined with

benefit plans "where state law claims of fraud and misrepresentation are based upon

the failure of a covered plan to pay benefits, the state law claims have a nexus with the

ERISA plan and its benefits system." Id. at 1042. In Variety, the action was brought

by a hospital, via an assignment of the claims of the parents of the beneficiary, against

the plan itself and alleged that the plan had engaged in fraud and misrepresentation by

allegedly denying coverage of an experimental bone marrow transplant performed at

the hospital. Id. These claims involved ERISA entities, the beneficiary (before
 11 This type of claim can be contrasted with an action brought

by a beneficiary against an insurance company regarding the scope

of the coverage of the plan. The claim brought by Morstein against

Pan-American and National was of the latter type and would be

preempted, but Morstein's claims against Pan-American and National

are not at issue on appeal.

16

assignment), and the plan, and the state law claims were based on an interpretation of

the plan's terms. When a state law claim involves the reliance on an insurer's promise

that a particular treatment is fully covered under a policy, however, a claim of

promissory estoppel is not "related to" the benefits plan. See Variety at 1043 & n.5.11

Although the remedy sought may affect the plan in that Morstein's damages

(should she successfully prevail on her claims) against Hankins and/or the Shaw

Agency may be measured based on what she would have received under her old plan,

such indirect relation between a beneficiary and the plan is not enough for preemption.

Forbus, 30 F.3d at 1406-7 (noting that "the mere fact that the plaintiffs' damages may

be affected by a calculation of pension benefits is not sufficient to warrant preemption");

see also Smith v. Texas Children's Hosp., 84 F.3d 152, 155 (5th Cir. 1996). The

Supreme Court in New York Blues made it clear that economic impact alone is not

necessarily enough to preempt a state law. New York Blues, __ U.S. at __, 115 S. Ct.

at 1683. Therefore, the possibility that insurance premiums will be higher or that

insurance will be more difficult to obtain because independent agents will have less

incentive to sell insurance to employers whose employee benefit plans will be governed

by ERISA, does not provide a reason to preempt state laws that place liability on agents

for fraud. These same agents currently face the threat of state tort claims if they make

fraudulent misrepresentations to individuals and entities not governed by ERISA. To

hold these agents accountable in the same way when making representations about

an ERISA plan merely levels the playing field. 
17

Allowing preemption of a fraud claim against an individual insurance agent will

not serve Congress's purpose for ERISA. As discussed above, Congress enacted

ERISA to protect the interests of employees and other beneficiaries of employee benefit

plans. See Shaw, 463 U.S. at 90, 103 S. Ct. at 2896. To immunize insurance agents

from personal liability for fraudulent misrepresentation regarding ERISA plans would not

promote this objective. If ERISA preempts a beneficiary's potential cause of action for

misrepresentation, employees, beneficiaries, and employers choosing among various

plans will no longer be able to rely on the representations of the insurance agent

regarding the terms of the plan. These employees, whom Congress sought to protect,

will find themselves unable to make informed choices regarding available benefit plans

where state law places the duty on agents to deal honestly with applicants.

III. CONCLUSION

Morstein challenges the district court's conclusion that her state law claims

against an independent insurance agent and his agency for fraudulent inducement to

purchase and negligence in processing her application for an ERISA-governed

insurance plan are preempted by section 514(a) of ERISA. We conclude that these

claims do not fall within ERISA's broad preemptive scope, as they do not have a

sufficient connection with the plan to "relate to" the plan. Accordingly, the district court's

grant of summary judgment in favor of Hankins and the Shaw Agency is REVERSED.