Court Opinion

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Opinions of the United
1999 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

6-30-1999

Wolk v. UNUM Life Ins Co
Precedential or Non-Precedential:

Docket 98-3542

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Recommended Citation
"Wolk v. UNUM Life Ins Co" (1999). 1999 Decisions. Paper 183.
http://digitalcommons.law.villanova.edu/thirdcircuit_1999/183

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Filed June 30, 1999

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 98-3542

JANICE BOWERS WOLK,
       Appellant,

v.

UNUM LIFE INSURANCE OF AMERICA

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

(D.C. Civil No. 96-cv-00356)
(District Judge: Honorable Robert J. Cindrich)

ARGUED FEBRUARY 19, 1999

BEFORE: GREENBERG, LEWIS, and BRIGHT,*
Circuit Judges.

(Filed June 30, 1999)

       DEBRA S. TODD (ARGUED)
       Todd & Associates
       112 Washington Place
       Chatham Towers Professional Suites,
        Suite 1-C
       Pittsburgh, PA 15219

        Attorney for Appellant

_________________________________________________________________

* Honorable Myron H. Bright, Senior Circuit Judge for the United States
Court of Appeals for the Eighth Circuit, sitting by designation.
       WILLIAM J. ROGERS (ARGUED)
       Thomson, Rhodes & Cowie
       Two Chatham Center, Suite 1010
       Pittsburgh, PA 15219-3499

        Attorney for UNUM Life Insurance
        of America

OPINION OF THE COURT

LEWIS, Circuit Judge.

In this appeal, we must determine whether the term
"beneficiary," as defined under the Employee Retirement
Income Security Act ("ERISA"), 29 U.S.C. S 1002(8),
includes partner-employers who are designated to receive
benefits under an "employee welfare benefit plan."1 We
conclude that it does. Accordingly, we will affirm the
judgment of the District Court.

I.

Janice Bowers Wolk is an attorney and former corporate
tax partner at the Pittsburgh law firm of Eckert, Seamans,
Cherin & Mellot ("Eckert Seamans" or "thefirm"). Since
1978, Eckert Seamans has provided its employees with
disability insurance coverage under a group long term
insurance policy issued by UNUM Life Insurance Company
of America ("UNUM"). Originally, the policy did not provide
disability coverage for the firm's partners. However, on
December 21, 1990, Eckert Seamans replaced the existing
policy with a new policy that continued disability coverage
_________________________________________________________________

1. ERISA defines an "employee welfare benefit plan" as:

       any plan, fund, or program which was . . . or is . .. established
or
       maintained by an employer . . . 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 . . . .

29 U.S.C. S 1002(1).

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for the firm's employees and added coverage for the firm's
partners (the "1990 Policy").2

In May 1990, Wolk was diagnosed with chronic fatigue
syndrome -- a debilitating illness that causes extreme
fatigue, general flu-like symptoms and difficulty with
concentration. Through 1992, Wolk's condition deteriorated
to the point where she could no longer function as a
partner at the firm. As a result, Wolk terminated her
partnership effective March 31, 1993.

Shortly thereafter, Wolk applied to UNUM for disability
benefits pursuant to the 1990 Policy. UNUM approved
Wolk's application and commenced disability payments
effective April 1, 1993. The payments continued without
incident until March 23, 1995, at which time, UNUM
informed Wolk that it had determined that she was no
longer disabled and that it would terminate her benefits
effective March 27, 1995.

On February 27, 1996, Wolk filed suit against UNUM in
the United States District Court for the Western District of
Pennsylvania. The complaint alleged a variety state-law
claims, including breach of contract, bad faith, and breach
of good faith and fair dealing.3 That same day, UNUM
notified Wolk that it was reversing its decision to deny her
_________________________________________________________________

2. Under the 1990 Policy, partners and the executive director of the firm
were designated as Class One of the defined eligible classes. Associates
and certain other professional employees were designated as Class Two.
All other employees were designated as Class Three. Partners paid the
entire cost of their disability insurance coverage. No contribution was
required from the firm's Class Two and Class Three employees.

3. More specifically, Wolk alleges that UNUM terminated her benefits
without providing any prior indication of its intention, or of a need for
additional information or testing concerning her condition. Wolk also
maintains that despite her repeated requests, UNUM failed to adequately
explain the reason for the termination of benefits. Further, she asserts
that UNUM engaged in a consistent pattern of bad faith, which included
its failure to conduct a good faith investigation into the facts of her
claim. Finally, Wolk contends that UNUM "unnecessarily dragged out the
`investigation' of her claim causing her to go without the disability
benefits to which she was entitled for fourteen months, and to incur
substantial attorneys' fees in her struggle to compel UNUM to reinstate
her benefits." Appellant's Brief at 12.

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benefits. On May 22, 1996, UNUM resumed Wolk's
disability payments and issued her a check for back benefits.4
Presently, Wolk receives all monthly benefits from UNUM,
as well as disability benefits from the Social Security
Administration.

On December 6, 1996, UNUM filed a motion for summary
judgment on the grounds that ERISA preempted Wolk's
state-law claims. On March 31, 1998, the District Court
granted UNUM's motion for summary judgment, finding
that partner-employers who share coverage under a
common disability insurance policy with employees are
"beneficiaries" as defined in ERISA. Thus, the District Court
held that Wolk's state-law claims against UNUM were
subject to ERISA's preemptive provisions. In so holding, the
District Court granted Wolk leave to amend her complaint
to assert an ERISA cause of action. On June 22, 1998, the
District Court granted Wolk's motion to certify its March
31, 1998 order for interlocutory appeal pursuant to 28
U.S.C. S 1292(b), and we granted leave to appeal.

We have jurisdiction over this appeal pursuant to 28
U.S.C. S 1292(b). We review a District Court's grant of
summary judgment de novo. See Antol v. Perry, 82 F.3d
1291, 1294-95 (3d Cir. 1996).

II.

Before we turn to the dispute, it is important to note the
areas of agreement between Wolk and UNUM. First, the
parties agree that the 1990 Policy is an "employee welfare
benefit plan" as defined in ERISA, 29 U.S.C.S 1002(1).
Second, it is undisputed that Wolk, in her complaint,
alleges that UNUM unlawfully deprived her of benefits to
which she was entitled under the 1990 Policy. Third, the
parties acknowledge that ERISA provides the exclusive
remedy for those covered by an ERISA plan who seek to
_________________________________________________________________

4. UNUM delivered a check to Wolk in the amount of $59,374.39,
representing benefits from March 27, 1995 through May 27, 1996, less
offsetting Social Security disability benefits. On June 20, 1996, UNUM
issued Wolk a check in the amount of $3,197.50, representing interest
on her back benefits at the rate of six percent.

                               4
enforce their rights under such a plan. See 29 U.S.C.
S 1144(a).

However, the parties diverge on the question of whether
Wolk, as a partner-employer of Eckert Seamans, is
authorized to bring a civil action under ERISA. Wolk argues
that because a law firm partner is an employer, not an
employee, she cannot be a "participant" or"beneficiary" of
an ERISA plan, and thus is not eligible to file suit under
ERISA. Therefore, she maintains that she is entitled to
pursue her common law remedies without reference to, or
reliance on, ERISA.

In opposition, UNUM contends that Wolk's partnership
status, though relevant to the question of whether she is a
"participant" under the 1990 Policy, does not affect her
status as a "beneficiary" under the plan. Thus, because
Wolk receives benefits under the 1990 Policy, UNUM
asserts that she must be subject to ERISA when pursing
claims against the insurer.

We have not ruled on the limited question of whether a
partner-employer who shares coverage with employees
under an "employee welfare benefit plan" qualifies as a
"beneficiary" with standing to bring suit under ERISA.
However, we believe ERISA's plain statutory language
provides a clear answer.

A.

We must begin our analysis with an examination of
ERISA's statutory language because " `absent a clearly
expressed legislative intention to the contrary, that
language must ordinarily be regarded as conclusive.' "
Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S.
827, 835 (1990) (quoting Consumer Product Safety Comm'n
v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980)); see also
Idahoan Fresh v. Advantage Produce, Inc., 157 F.3d 197,
202 (3d Cir. 1998) ("[w]here the statutory language is plain
and unambiguous, further inquiry is not required, except in
the extraordinary case where a literal reading of the
language produces an absurd result.").

Under ERISA, "[a] civil action may be brought-- (1) by a
participant or beneficiary -- (B) to recover benefits due to

                               5
him under the terms of his plan, to enforce his rights under
the terms of the plan, or to clarify his rights to future
benefits under the terms of the plan." 29 U.S.C.
S 1132(a)(1)(B). ERISA defines the term "participant" as "any
employee or former employee of an employer . . . who is or
may become eligible to receive a benefit of any type from an
employee benefit plan." 29 U.S.C. S 1002(7). A "beneficiary"
is a "person designated by a participant, or by the terms of
an employee benefit plan, who is or may become entitled to
a benefit thereunder." 29 U.S.C. S 1002(8) (emphasis
added).

To reiterate, it is undisputed that the 1990 Policy
qualifies as an employee benefit plan under ERISA. It also
is undisputed that partners of Eckert Seamans are
designated to receive benefits under the 1990 Policy --
indeed, Wolk applied for, and is currently receiving, benefits
from UNUM pursuant to the 1990 Policy. Applying the plain
language of the statue to these facts, Wolk fits squarely
within the second category of ERISA's definition of a plan
"beneficiary." Thus, we conclude that Wolk is a
"beneficiary" under the 1990 Policy.

We also find it significant that all of the Courts of Appeal
that have analyzed the term "beneficiary" in a similar
context have adopted this plain language interpretation.
See, e.g., Engelhardt v. Paul Revere Life Ins. Co., 139 F.3d
1346, 1351 (11th Cir. 1998) ("[physician's] claim for
benefits under the policy confirms his status as a plan
beneficiary."); Prudential Ins. Co. v Doe, 76 F.3d 206, 208
(8th Cir. 1996) (shareholders of corporation were
"beneficiaries" of ERISA plan because they were designated
to receive benefits by the terms of the employee benefit
plan); Peterson v. American Life & Health Ins. Co., 48 F.3d
404, 409 (9th Cir. 1995) (partner was "beneficiary" under
ERISA because "any person designated to receive benefits
from a policy that is part of an ERISA plan may bring a civil
suit to enforce ERISA"); Harper v. American Chambers Life
Ins. Co., 898 F.2d 1432, 1434 (9th Cir. 1990) (partner
insured by policy that is part of an ERISA plan has
standing to sue under ERISA as a "beneficiary").5
_________________________________________________________________

5. Although Wolk cites to a number of Court of Appeals decisions where
the court held that an employer did not have standing to sue under

                               6
Wolk contends that it would be contrary to the "clearly
expressed legislative intention" of Congress for us to apply
a plain language interpretation to section 1002(8). In
particular, Wolk argues that such an interpretation is: (1)
inconsistent with the use of the term "beneficiary" in the
other provisions of ERISA; and (2) conflicts with ERISA's
fundamental requirement that no plan asset may inure to
the benefit of an employer. We disagree.

With respect to her first argument, Wolk maintains that
the term "beneficiary" is used throughout ERISA to refer to
persons who are designated by participants to receive
benefits. See, e.g., 29 U.S.C. S 1001(b) (declaring it the
policy of ERISA to protect "the interests of participants in
employee benefit plans and their beneficiaries"); 29 U.S.C.
S 1002(1) (defining "employee welfare benefit plan" as a plan
that is established or maintained "for the purpose of
providing for its participants or their beneficiaries")
(emphasis added in all). According to Wolk:

       [i]f UNUM's interpretation were correct, the language
       would read that an ERISA plan must provide for "its
       participants or its beneficiaries." The only logical
       reconciliation of these provisions is that the language
       of the statute (referring to those designated to receive
_________________________________________________________________

ERISA, we believe these cases are distinguishable. More specifically,
unlike the cases cited above, none of the decisions cited by Wolk
engaged in an in-depth analysis of the term "beneficiary," nor did they
address the same factual situation at issue here. See, e.g., Meredith v.
Time Ins. Co., 980 F.2d 352, 358 (5th Cir. 1993) (insurance plan
purchased by sole proprietor, covering only herself and her spouse, did
not constitute "employee welfare benefit plan"); Fugarino v. Hartford Life
and Accident Ins. Co., 969 F.2d 178, 185-86 (6th Cir. 1992) (health
insurance plan whose sole beneficiaries were company's owners cannot
qualify as an "employee benefit plan" under ERISA; nor can employers
qualify as "participants" of an ERISA plan); Kwatcher v. Massachusetts
Service Employees Pension Fund, 879 F.2d 957, 959-60 (1st Cir. 1989)
(ERISA's anti-inurement provision prohibits payments to employer from
qualified pension plan); Giardono v. Jones , 867 F.2d 409, 411-12 (7th
Cir. 1989) (sole proprietor cannot be "participant" of ERISA plan);
Peckham v. Board of Trustees of the Int'l Brotherhood of Painters, 653
F.2d 424, 426-27 (10th Cir. 1981) (ERISA's anti-inurement provision
prohibits employers from participating in employee pension benefit
plans).

                               7
       benefits "by the terms of an employee benefit plan") is
       meant to encompass nothing more than a designation
       supplied by the terms of the employee benefit plan in
       lieu of a designation by the employee/participant. .. .
       Therefore, the plain reading of the statute would
       indicate that Congress understood "beneficiaries" to be
       individuals designated by participants, or supplied by
       operation of law in the absence of such designation.

Appellant's Reply Brief at 5.

We fail to see how Wolk's interpretation is the"only
logical reconciliation" of ERISA's use of the term
"beneficiary." At most, it is just another way that ERISA's
definition of a plan "beneficiary" might be satisfied -- since
persons designated by operation of law are, by definition,
"designated by the terms of the plan." The fact that
"beneficiary" is used in other provisions of ERISA to refer to
the beneficiaries of a participant does not necessarily mean
that the term was only intended to refer to such persons.
In defining the term, Congress was careful to include a
category for the designees of a participant as well as a
category for those designated by the terms of an ERISA
plan. See 29 U.S.C. S 1002(8). Were we to limit the second
category to those designated by operation of law, we would
be overstepping our bounds as a court of law. See Mohasco
Corp. v. Silver, 447 U.S. 807, 826 (1980) (stating that
courts must "respect the compromise embodied in the
words chosen by Congress. It is not our place simply to
alter the balance struck by Congress in procedural statutes
by favoring one side or the other in matters of statutory
construction."). If Congress did not intend the phrase "by
the terms of an employee benefit plan" to mean what it
says, it is for Congress alone to correct. See Connecticut
Nat'l Bank v. Germain, 503 U.S. 249, 253-54 (1992) ("We
have stated time and again that courts must presume that
a legislature says in a statute what it means and means in
a statute what it says there.").

Moreover, there is second compelling reason for adopting
a plain language interpretation of section 1002(8). As
several courts of appeals have noted, "[t]o hold otherwise
would create the anomaly of requiring some insureds to
pursue benefit claims under state law while requiring

                                8
others covered by the identical policy to proceed under
ERISA. Such a scenario would frustrate Congress's intent
of achieving uniformity in the law governing employment
benefits." Peterson, 48 F.3d at 409; see also Prudential, 76
F.3d at 210; Madonia v. Blue Cross & Blue Shield of
Virginia, 11 F.3d 444, 450 (4th Cir. 1993). We believe this
rationale provides a logical explanation for why Congress
chose to include persons designated "by the terms of an
employee benefit plan" in the definition of"beneficiary."
Accordingly, Wolk's argument is inadequate to overcome
the statute's plain language. See Mertens v. Hewitt Assoc.,
508 U.S. 248, 261-62 (1993) ("vague notions of a statute's
`basic purpose' are . . . inadequate to overcome the words
of its text. . . . This is especially true with legislation such
as ERISA, an enormously complex and detailed statute that
resolved innumerable disputes between powerful competing
interests . . . ." (citations omitted)).

We also do not believe that the 1990 Policy invokes the
concerns of ERISA's anti-inurement provision. See 29
U.S.C. S 1103(c)(1). ERISA's anti-inurement provision is
directed at plan assets -- i.e., "assets accumulating in trust
and pension funds." Engelhardt, 139 F.3d at 1351. In
Prudential, the court described the purpose of the anti-
inurement provision as follows:

       the legislative history involving the [anti-inurement
       provision] indicates congressional concern over the
       wrongful diversion of trust assets and the
       administrative integrity of benefit plans. Section
       1103(c)(1) and 29 U.S.C. S 1104(a) deal withfiduciary
       duties for plan administrators and employers. Congress
       included these provisions in order to make the law of
       trusts applicable to the plans and to eliminate such
       abuses as self-dealing imprudent investing, and
       misappropriation of plan funds.

Prudential, 76 F.3d at 209 (internal citations omitted).
However, the present case does not implicate these
concerns. The 1990 Policy was administered exclusively by
UNUM. The extent of Eckert Seamans involvement was the
processing of paperwork and the payment of premiums for
its employees. UNUM made all of the substantive decisions
regarding the eligibility or ineligibility of beneficiaries for

                               9
disability benefits, and paid all of the recovery benefits out
of its own funds. In short, Eckert Seamans did not exercise
the type of control over the funds used to pay out disability
benefits under the 1990 Policy that gives rise to the
concerns of the anti-inurement provision. Accordingly, we
do not believe ERISA's anti-inurement provision is an
appropriate basis for deviating from the plain language of
the statute.

III.

Because there is nothing in ERISA to advise against
applying the plain language of section 1002(8) to Wolk's
claims, we hold that Wolk is a "beneficiary" with standing
to bring suit under ERISA. As a result, Wolk's state-law
claims against UNUM, which derive from the 1990 Policy,
are preempted by section 1144(a). Accordingly, the District
Court's order granting summary judgment in favor of
UNUM and allowing Wolk to amend her complaint to assert
a cause of action under ERISA will be affirmed.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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