Summary
The Ninth Circuit held that the record was insufficient to determine whether the Harpers’ medical insurance policy constituted an ERISA plan and remanded for factual findings. The court further held that, if the policy was an ERISA plan, the Harpers could potentially sue as ERISA beneficiaries to recover benefits under ERISA. The judgment dismissing their state-law claims was reversed and remanded.
Topics
Practice areas
Questions Presented
- Whether the partnership's medical insurance policy was an employee benefit plan governed by ERISA.
- If the policy was an ERISA plan, whether the Harpers could bring ERISA claims as participants or beneficiaries despite being partners or spouses of partners.
- Whether the district court properly dismissed the Harpers' state-law claims without factual findings regarding ERISA-plan status.
Holdings
- Whether the partnership's policy was an ERISA plan was a question of fact requiring consideration of all surrounding facts and circumstances; the existing record did not support deciding the issue as a matter of law.
- If the policy was an ERISA plan, the Harpers were eligible to bring ERISA claims as beneficiaries under 29 U.S.C. § 1132(a)(1)(B), although they could not sue as ERISA participants because partners and spouses of partners are not employees.
- Dismissal was improper. If the policy was not an ERISA plan, the Harpers could proceed with their state-law claims; if it was an ERISA plan, they could pursue potential ERISA claims as beneficiaries, and amendment rather than dismissal could be appropriate if the complaint did not adequately plead an ERISA claim.
Key quotations
“The existence of an ERISA plan is a question of fact, to be answered in light of all the surrounding facts and circumstances from the point of view of a reasonable person.” (898 F.2d at 1433)
“We therefore conclude that ERISA expressly authorizes the Harpers to sue as ERISA beneficiaries in federal court to “recover benefits due” them if the ACLI policy is an ERISA plan.” (898 F.2d at 1434)
Factual background
Brad Harper and Mark Nelson formed a partnership that purchased health insurance for the partners and their spouses from American Chambers Insured Plans through an agent who assured the Harpers that pregnancy complications would be covered. After the partnership hired Diane Sellers, she was eventually added to the policy. When Mary Harper incurred medical expenses related to a complicated childbirth and Cesarean section, ACLI refused to pay the claims.
Procedural history
The Harpers sued ACLI in Arizona state court for breach of contract, breach of the covenant of good faith and fair dealing, and intentional or reckless infliction of emotional distress. ACLI removed the action to federal court on diversity grounds. The district court held that the partnership's insurance policy was an ERISA plan, concluded that ERISA preempted the state-law claims, and dismissed the case. The Ninth Circuit reversed and remanded for factual findings concerning whether the policy was an ERISA plan and for further proceedings concerning the Harpers' potential ERISA claims.
Remand instructions
The district court must review the relevant facts, evidence, and factors discussed in Kanne and Credit Managers Association to determine whether the policy was an ERISA plan. If it was not, the Harpers may proceed with their state-law claims; if it was, they may pursue ERISA claims as beneficiaries. Further proceedings must be consistent with the opinion.