Opinion ID: 72773
Heading Depth: 2
Heading Rank: 3

Heading: Paul Revere's Preemption Defense

Text: 29 Although Count I of Engelhardt's complaint states only a state law claim for fraudulent inducement, the claim falls within ERISA's preemptive scope. ERISA supersede[s] 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). State law claims that have a connection with [an] ERISA plan are thus preempted. Morstein v. National Ins. Serv. Inc., 93 F.3d 715, 722 (11th Cir.1996) (en banc). 30 We begin our analysis of Paul Revere's preemption defense by closely examining this court's recent en banc decision in Morstein. The plaintiff in Morstein was president, director, and sole shareholder of Graphic Promotions, Inc., and was responsible for selecting a medical insurance policy for Graphic's employees. The Morstein defendants, an independent insurance agent and the insurance agency for which he worked, sold the plaintiff a medical insurance policy to replace Graphic's existing coverage. The policy was administered and underwritten by insurance companies unaffiliated with the agent and his agency. 31 The plaintiff alleged that she informed the agent that any policy she purchased would have to provide coverage for preexisting conditions. She also alleged that the agent assured her that the policy he was recommending provided the same coverage for preexisting conditions as Graphic's existing policy. Based on these assurances, the plaintiff elected to purchase the policy recommended by the agent. 32 More than a year later, the plaintiff underwent hip-replacement surgery and submitted a claim to the ERISA insurer. The insurer denied the claim because it said the surgery was for a preexisting condition that the plaintiff had not disclosed on her application. The insurer rescinded the policy and refunded the premiums paid by Graphic. The plaintiff then sued the independent agent and agency that sold her the policy, alleging a state law claim of fraudulent inducement and seeking compensatory and punitive damages. This court rejected the defendants' contention that the claim was preempted by ERISA, stating: 33 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. 34 Morstein, 93 F.3d. at 722 (emphasis supplied). 6 35 Engelhardt, like the plaintiff in Morstein, has standing to sue under ERISA because he is a plan beneficiary. See 29 U.S.C. § 1132(a). Unlike the independent insurance agent and agency in Morstein, Paul Revere is an ERISA fiduciary, and thus an ERISA entity, because it had the exclusive authority to determine eligibility for benefits under the plan and to review denied claims. See Libbey-Owens-Ford Co. v. Blue Cross & Blue Shield Mut. of Ohio, 982 F.2d 1031, 1035 (6th Cir.1993) (claims administrator was ERISA fiduciary because it retained authority to resolve all disputes regarding coverage); see also Morstein, 93 F.3d at 722 (ERISA entities are the employer, the plan, the plan fiduciaries, and the beneficiaries under the plan.). Therefore, this case involves a dispute between principal ERISA entities. 36 Engelhardt's suit affects the relations among principal ERISA entities as such and relates to an ERISA plan for a number of reasons. First, as noted above, Engelhardt's suit is against an ERISA entity. Second, Paul Revere had assumed its role as an ERISA entity and Montgomery Orthopaedic's ERISA plan had been established before, albeit only shortly before, Paul Revere made its alleged misrepresentations to an individual regarding the scope of coverage under the ERISA plan. 7 Third, the impetus for Engelhardt's suit was Paul Revere's decision in its role as an ERISA entity to deny Engelhardt's claim for benefits under the ERISA plan. Although Engelhardt initially attempted to challenge the denial through Paul Revere's appeals process, Engelhardt ultimately abandoned that approach and filed this lawsuit. Fourth, as a result of documents produced during the discovery process, Paul Revere determined that its denial of benefits was improper and decided to pay Engelhardt the ERISA benefits he had been seeking all along. 37 In light of these facts, we conclude that Engelhardt's fraud claim affects the ongoing ERISA relationship between Engelhardt and Paul Revere. Applying the rationale of this court in Morstein, therefore, we find that Engelhardt's claim against Paul Revere relates to an ERISA plan and is thus preempted. 38