REVISED MARCH 1, 2000
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 98-10585
_____________________
MICHAEL JAY McNEIL, ET AL.,
Plaintiffs,
JIMMY WALLACE McNEIL, as
Independent Executor and
Representative of the
Estate of Michael Jay McNeil,
Plaintiff-Appellant,
versus
TIME INSURANCE COMPANY,
Defendant-Appellee.
_________________________________________________________________
Appeal from the United States District Court for the
Northern District of Texas
_________________________________________________________________
February 24,2000
Before REYNALDO G. GARZA, JOLLY, and DeMOSS, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
In this case, we are presented difficult questions of
statutory interpretation that determine whether the defendant
insurance company is liable for more than $400,000 in hospital
bills, which the insured, now deceased, incurred as a result of his
losing battle with AIDS. In addition to state statutory questions,
we must decide whether the Americans with Disabilities Act’s
(“ADA”) anti-discrimination provisions regulate the terms and
content of an insurance policy. We ultimately decide that the ADA
does not regulate the terms or content of goods and services, of
which this insurance policy is one. We therefore affirm the
district court’s grant of summary judgment dismissing the
complaint.
I
In the spring of 1994, Dr. Michael McNeil, a Texas
optometrist, did not know that he would be dead within the year
because of AIDS. He thus routinely sought to cover himself and his
employee in his optometry practice under a general health insurance
plan.
Dr. McNeil’s optometry practice was a two-person partnership
with Dr. Roy F. Dickey. The partnership had one employee, its
secretary, Jana Jay. The partnership was a member of the Texas
Optometric Association, which operated as a trust, allowing its
members to purchase group insurance. In April, Dr. McNeil received
information about a new life and health insurance policy offered by
Time Insurance Company through the association. The brochure
described the policy’s benefits and costs. The policy contained no
limitation on pre-existing conditions and provided lifetime maximum
benefits of $2 million. There were limitations on coverage for
several specific health problems. One of these was for Acquired
2
Immune Deficiency Syndrome (“AIDS”). The policy limited coverage
for AIDS and AIDS Related Complex (“ARC”) to $10,000 during the
first two years of the policy but provided maximum benefits after
that.
Dr. McNeil decided that the partnership should purchase this
plan. He filled out the employer application, signing a document
indicating that he had “authority to bind the employer,” and then
he and Ms. Jay mailed employee enrollment forms to Time. His form
listed him as an “employee.” Dr. Dickey was covered by Medicare
and did not enroll. The partnership paid the first premium to Time
for Dr. McNeil and Ms. Jay from its operating account, though Dr.
McNeil later reimbursed the partnership for his portion. The plan
became effective on May 1, 1994.
After the plan became effective, Dr. McNeil paid his own
premiums, while the partnership paid for Ms. Jay’s. During the
plan’s operation, the partnership’s administrative duties consisted
of receiving premium notices and paying Ms. Jay’s premiums.
In September 1994, Dr. McNeil was diagnosed with AIDS. He was
admitted to the hospital and treated for pneumonia. Time paid the
first $10,000 of his costs but nothing more. Dr. McNeil
subsequently incurred over $400,000 in medical expenses. He died
on March 1, 1995.
3
Before his death, Dr. McNeil brought suit in Texas state
court. After Dr. McNeil’s death, his father and the executor of
his estate took over the suit. Time later removed the case to
federal court based on ERISA preemption and diversity. Mr. McNeil
then amended the complaint several times. The last version, the
Third Amended Complaint, asserted several common law causes of
action: breach of contract, breach of the duty of good faith and
fair dealing, negligent misrepresentation, common law
discrimination, waiver, estoppel, and ratification. This amended
complaint also charged that Time had violated a host of state and
federal statutes, including the Texas Deceptive Trade Practices Act
(“DTPA”), the Texas Insurance Code, the Texas Commission on Human
Rights Act (“TCHRA”), the Americans with Disabilities Act (“ADA”),
and ERISA.
Mr. McNeil did not have much success in federal district
court. First, the court dismissed the claims that were based on
alleged violation of Texas insurance law. Second, the court held
that Time’s provision of insurance did not constitute a “public
accommodation” under the ADA, and that Title III of that Act only
applied to physical use of the services of a place of public
accommodation. Since Mr. McNeil could point to nothing that
prevented his son from making physical use of Time’s services, the
court dismissed the ADA claim. Third, the court held that ERISA
4
preempted the remaining state law claims. Mr. McNeil now appeals
each of these three determinations.
II
A
We first address the district court’s dismissal of Mr.
McNeil’s claim under Article 21.21-3 of the Texas Insurance Code:1
Art. 21.21-3. Discrimination Against Handicapped
Prohibited
An insurer who delivers or issues for delivery or renews
any insurance in this state may not refuse to insure,
refuse to continue to insure, limit the amount, extent,
or kind of coverage available to an individual, or charge
an individual a different rate for the same coverage
solely because of handicap or partial handicap, except
where the refusal, limitation, or rate differential is
based on sound actuarial principles or is related to
actual or reasonably anticipated experience.
(Emphasis added). The district court first concluded that AIDS was
not a “handicap” for purposes of this statute. The court
1
This provision was repealed in 1993 and was replaced by Tex.
Ins. Code Ann. art. 21.21-6 (Vernon Supp. 1977). When enacting
Article 21.21-6, the Texas legislature provided that “[t]his Act
takes effect September 1, 1995, and applies only to an insurance
policy or an evidence of coverage that is delivered, issued for
delivery, or renewed on or after January 1, 1996. A policy or
evidence of coverage that is delivered, issued for delivery, or
renewed before January 1, 1996 is governed by the law as it existed
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.” Id. (Historical and
Statutory Notes). Because Dr. McNeil obtained his coverage before
January 1, 1996, Article 21.21-3 provides the basis for his claim.
We also note that because the district court dismissed this
particular cause of action, it did not rule on whether ERISA
preempted this claim. Our subsequent discussion of ERISA
preemption, therefore, does not involve Article 21.21-3.
5
acknowledged that although the statute did not define “handicap,”
the Texas Commission on Human Rights Act (“TCHRA”) did,2 and the
two statutes were similar enough to warrant reliance on the TCHRA’s
definition. The district court then cited our holding in Hilton v.
Southwestern Bell Telephone Co., 936 F.2d 823, 828 (5th Cir. 1991),
for the proposition that AIDS was not a handicap under the TCHRA
and thus not a handicap under Article 21.21-3. The court went on
to explain that Time’s actions did not constitute “discrimination”
under Article 21.21-3 because Time inserted the AIDS limitation in
all its policies regardless of whether the insured had AIDS. For
these reasons, the district court dismissed this portion of Mr.
McNeil’s complaint for failure to state a claim.
Our analysis of this Texas law begins with statutory
construction, a process we approach as a Texas court would.
General Electric Capital Corp. v. Southeastern Health Care, Inc.,
950 F.2d 944, 950 (5th Cir. 1991). In Texas, the cardinal rule of
statutory construction is to ascertain the “legislature’s intent,”
and to give effect to that intent. Union Bankers Ins. Co. v.
Shelton, 889 S.W.2d 278, 280 (Tex. 1994). The duty of the court is
2
See Tex.Rev.Civ.Stat.Ann. art. 5221k § 2.01(7)(B) (Vernon
1987)(repealed 1993)(defining “handicap” as “a condition either
mental or physical that includes mental retardation, hardness of
hearing, deafness, speech impairment, visual handicap, being
crippled, or any other health impairment that requires special
ambulatory devices or services.”).
6
to construe a statute as written and ascertain the legislature’s
intent from the language of the act. Morrison v. Chan, 699 S.W.2d
205, 208 (Tex. 1985).
In condensed form and for purposes of the case before us, we
read this statute as follows: An insurer who issues a policy may
not limit the amount or extent of coverage to an individual solely
because of handicap.3 This reading leaves us with these questions.
First, is AIDS a handicap for purposes of this statute, and,
second, if AIDS is a handicap, did Time, the insurer, limit the
amount or extent of the policy’s coverage to the individual, Dr.
McNeil, because of handicap?
We touch on the first question only briefly because the lack
of clarity in Texas law makes us reluctant to say whether AIDS
constitutes a handicap under the law of that state. The statute
itself does not define the term “handicap,” and there are no Texas
administrative regulations we comfortably can rely on. We do note
that the district court’s analysis is not irrefutable. If we are
to read and consider various statutes of a common purpose together,
Calvert v. Fort Worth National Bank, 356 S.W.2d 918, 921 (Tex.
1962); Cadle Co. v. Butler, 951 S.W.2d 901, 907 (Tex. App. 1997),
3
We have omitted the possible defense, an actuarial basis or
past experience, from this reformulation of the provision because
Time has apparently conceded that it has no such defense in this
case.
7
we cannot stop, as the district court did, with the TCHRA.
Administrative regulations interpreting Articles 21.20 and 21.21 do
suggest that AIDS is a handicap and must also be considered.4 For
the sake of this appeal only, however, we will assume that AIDS is
a handicap for purposes of Article 21.21-3.
Even so, Time did not violate Article 21.21-3, either at the
time that it issued the policy or when it refused to pay more than
$10,000 in health care costs.
We begin with the issuance of the policy to Dr. McNeil. It is
true that the policy limited its coverage for AIDS to $10,000
during the first two years of the policy. The statute, however,
focuses on the conduct of the insurer. The phrase “because of
handicap” indicates that the insurer must know that the applicant
is handicapped and that the insurer limits coverage to that
individual for that reason.5 Dr. McNeil was not handicapped when
4
The Texas Board of Insurance promulgated these regulations
pursuant to Article 21.21 § 13(a). But the applicability of the
Board’s regulations was statutorily limited to interpretations of
Articles 21.20 and 21.21, which are different articles than Article
21.21-3. See Tex.Rev.Civ.Stat.Ann. art. 2226 (treating 21.21 and
21.21-2 as separate articles); Vail v. Texas Farm Bureau Mutual
Ins. Co., 754 S.W.2d 129, 134 (Tex. 1988)(same).
5
We cannot read “limit the amount or extent of coverage
because of handicap” as “limit the amount or extent of coverage for
handicap.” First, “because of” and “for” clearly have different
meanings. Second, that interpretation would raise vexatious
questions for courts whenever they faced any limitation in a
policy. Such a construction would require insurers to have an
actuarial basis or past experience in support of every limitation
8
Time issued this policy to him, or, at the least, Time did not know
that he was. Thus, the limitation by the insurer could not have
been “because of handicap.”
But even if Time had known this when it sold Dr. McNeil the
policy, we do not believe it would change our result. The statute
specifies that the insurer may not limit the amount or extent of
coverage available “to an individual.” In short, the statute
prevents an insurer from discriminating against an individual
applicant because of handicap. Time offered this general policy
without distinguishing between individual applicants based on
whether they had AIDS. As long as Time offered Dr. McNeil the same
policy it offered everyone else, Time has not violated Article
21.21-3, even assuming it knew that he had AIDS.
After Dr. McNeil was diagnosed with AIDS, Time refused to pay
for anything above the $10,000 limit. But this refusal does not
mean that the insurer limited the amount of coverage available
solely because of handicap. Under the policy, $10,000 was all that
was available for AIDS; the insurer simply applied the terms of the
policy. The insurance policy itself controlled and determined the
on coverage for anything that could be construed as a handicap.
Had the legislature intended such a drastic change in the legal
requirements on the way insurers do business, we assume that it
would have made that intent clearer.
9
benefits.6 But under the plain language of the statute, the
violation must be committed by the insurer, not by a term of the
policy. We thus conclude that Time did not violate Article
21.21-3, that is, limit the amount of coverage solely because of
handicap, because it was merely applying a term of the policy.
We think this result, closely tied as it is to the actual
words in Article 21.21-3, best accords with the legislature’s
intent. The title of Article 21.21-3 refers to “discrimination.”
But there was no discrimination here. Time offered Dr. McNeil the
same policy on the same terms that it offered everyone else. It
did not treat him differently because he was handicapped, which is
what we understand “discrimination” to mean. We conclude,
therefore, that Time’s policy did not violate Article 21.21-3.
6
This policy specified:
Covered Charges Incurred for treatment of AIDS, AIDS
Related Complex (ARC), Human Immunodeficiency Virus (HIV)
associated diseases and related immunodeficiency
disorders as follows:
a. Benefits will not be paid for Covered Charges
Incurred during the first 12-month period after the
Covered Person’s Effective Date;
b. The maximum amount We will pay for Covered Charges
Incurred during the second 12-month period after
the Covered Person’s Effective Date is limited to
$10,000; and
c. Thereafter, benefits will be paid on the same basis
as any other illness.
10
B
Mr. McNeil also charged Time with violation of Article 21.21,
specifically, § 4(7)(b), in his summary judgment motion. Although
the district court failed to address this claim, we will resolve it
on appeal for the sake of efficiency, rather than remanding. See
NL Industries, Inc. v. GHR Energy Corp., 940 F.2d 957, 967 (5th
Cir. 1991)(reviewing claim not addressed in district court because
it would “undoubtedly reappear following remand”).
It is quickly apparent that Mr. McNeil does not have a claim
under this provision either. Article 21.21 § 1(a) prohibits all
unfair and deceptive practices and acts by insurers. Subsequent
sections of that article then define what constitutes such an act
or practice. In 1994, Article 21.21 § 4(7)(b)7 defined “unfair
discrimination” as:
Making or permitting any unfair discrimination between
individuals of the same class and of essentially the same
hazard in the amount of premium, policy fees, or rates
charged for any policy or contract of accident or health
insurance or in the benefits payable thereunder, or in
any of the terms or conditions of such contract, or in
any other manner whatever.
(Emphasis added). Mr. McNeil does not attempt to define the class
to which his son belonged at the time the insurer issued the
policy. He has not alleged that other individuals of any defined
7
This provision was repealed in 1995. See Acts 1995, 74th
Leg., ch. 414 § 11, eff. Sept. 1, 1995.
11
class were charged rates or provided benefits different from those
charged and provided to Dr. McNeil. Indeed, he does not even
mention other insureds or potential insureds. Thus, Mr. McNeil has
failed to state a claim under this section of Article 21.21.
III
A
We next turn to Mr. McNeil’s claim that Time’s policy violated
Title III of the ADA. The relevant portion of Title III reads:
No individual shall be discriminated against on the basis
of disability in the full and equal enjoyment of the
goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by
any person who owns, leases (or leases to), or operates
a place of public accommodation.
42 U.S.C. § 12182. The district court construed this statute to
prohibit limitations on physical access to places of public
accommodation, and dismissed the claim on summary judgment because
Mr. McNeil had not been denied physical access to such a place.
On appeal, Mr. McNeil argues that any limitation on enjoyment
of the goods and services of a place of public accommodation
violates the statute. He urges us to read the statute expansively
in the light of the purpose of the statute and administrative
regulations interpreting it. Time, on the other hand, pushes for
a narrower reading based on Congress’ deference to state insurance
law and on the impact of a broad reading on the insurance industry.
Specifically, Time proposes that the statute merely regulates
12
access to--not the content of--goods and services. Time also
argues that its policy is not discriminatory under the statute.
Both parties acknowledge, as they must, that AIDS is a “handicap”
for Title III purposes. See Bragdon v. Abbott, 524 U.S. 624, 188
S.Ct. 2196, 2204, 1141 L.Ed.2d 540 (1998).
B
We read the statute to say: No owner, operator, lessee, or
lessor of a place of public accommodation shall discriminate
against an individual by denying him or her, because of handicap,
the full and equal enjoyment of the goods and services that the
place of public accommodation offers. We think, therefore, that
the question to answer in determining the scope of Title III in
this case is concise: What does it mean to be discriminated against
in the full and equal enjoyment of the goods and services of a
place of public accommodation? We believe that Title III prohibits
the owner, operator, lessee, or lessor from denying the disabled
access to, or interfering with their enjoyment of, the goods and
services of a place of public accommodation. Title III does not,
however, regulate the content of goods and services that are
offered. We reach this conclusion based on the language in the
statute and on a practical application of that language.8
8
Because we reach our conclusion based on the plain language
of the statute, we need not consider the administrative regulations
interpreting the ADA. Any attempt to rely on those regulations,
13
To be sure, we think that the plain language of the statute
demonstrates that a business is not required to alter or modify the
goods or services it offers to satisfy Title III.9 The prohibition
of the statute is directed against owners, etc., of places of
public accommodation. It prohibits them from discriminating
against the disabled. The discrimination prohibited is that the
owner, etc., may not deny the disabled the full and equal enjoyment
of the business’s goods and services. Practically speaking, how
can an owner, etc., deny the full and equal enjoyment of the goods
or services that he offers? By denying access to, or otherwise
interfering with, the use of the goods or services that the
moreover, would be fruitless because they are internally
contradictory on this specific issue. Compare DOJ Technical
Assistance Manual, § III-3.11000, reprinted in Americans with
Disabilities Act Manual (BNA) at 90:0917 (interpreting Title III to
regulate the content of insurance policies); with 28 C.F.R. pt. 36,
app. B, at 640 (1997)(limiting Title III to access, not the makeup
of goods and services offered).
9
Mr. McNeil contends that our reading renders other portions
of Title III superfluous, including §§ 12182(b)(1)(A)(i)-(iii),
12182(b)(2)(A)(ii), and 12188(a)(2). We disagree. The provisions
in §§ 12182(b)(1)(A)(i)-(iii) concerning the opportunity to benefit
from or to participate in a good or service do not imply that the
goods or services must be modified to ensure that opportunity or
benefit. Rather, this section only refers to impediments that
stand in the way of a person’s ability to enjoy that good or
service in the form that the establishment normally provides it.
Similarly, in § 12182(b)(2)(A)(ii), eligibility criteria have
nothing to do with the content of a good or service, only to non-
physical access to those goods and services. Finally,
§ 12188(a)(2) concerns modification of policies by a place of
public accommodation, not the modification of insurance policies.
14
business offers. The goods and services that the business offers
exist a priori and independently from any discrimination. Stated
differently, the goods and services referred to in the statute are
simply those that the business normally offers.10
We acknowledge that it is literally possible, though strained,
to construe “full and equal enjoyment” to suggest that the disabled
must be able to enjoy every good and service offered to the same
and identical extent as those who are not disabled. Construed in
this manner, the statute would regulate the content and type of
goods and services. That would be necessary to ensure that the
disabled’s enjoyment of goods and services offered by the place of
public accommodation would be no less than, or different from, that
10
Mr. McNeil has argued that Title III regulates the content
of goods and services based on the safe harbor provision for the
insurance industry. See 42 U.S.C. § 12201(c). That provision
prohibits us from construing Title III to regulate the way
insurance companies underwrite, classify, or administer risks when
the companies do so consistently with state law. According to Mr.
McNeil, this provision that excludes regulation of the content of
such policies demonstrates that Title III otherwise applies to the
content of insurance policies. We cannot agree, however, that the
existence of the “safe harbor” counsels a construction different
from the one we reach. We would then have to read Title III as
regulating the content of all goods and services, which would lead
to the absurd results that we discuss in the main body of our
decision. The presence of this provision merely suggests that
insurers saw the potential for the construction that Mr. McNeil
proposes and obtained special wording from Congress that partially
exempted them. Moreover, it would be oxymoronic to interpret the
“safe harbor” for the insurance industry as ensuring more
regulation of that same industry.
15
of the non-disabled. But such a reading is plainly unrealistic,
and surely unintended, because it makes an unattainable demand.
The unvarnished and sober truth is that in many, if not most,
cases, the disabled simply will not have the capacity or ability to
enjoy the goods and services of an establishment “fully” and
“equally” compared to the non-disabled. The blind may surely enjoy
attending a movie or even a tennis match. But it seems
indisputable that the blind will not fully and equally enjoy the
“good” or “service” of those places of public accommodation when
visual elements of that experience are, by circumstance, denied
them. Similarly, the deaf sometimes enjoy symphonies because they
can sense the vibrations of the music. But their enjoyment cannot
be full or equal compared to one with hearing, because they are not
privy to the full range of sounds that one with hearing is. It is
a flawed and unreasonable construction of any statute to read it in
a manner that demands the impossible.
Furthermore, were we to try to construe the statute in this
manner, its application would force impracticable results. If the
blind must be able to enjoy all goods and services to the same
extent as the sighted, bookstores would be forced to limit the
selection of books they carried because they would need to stock
braille versions of every book. Shoe stores would reduce the
styles available to their general customers, because they would
16
need to offer special shoes for people with disabling foot
deformities in every style sold to the non-disabled. Sporting
goods stores might have to close altogether. Restaurants would
have to limit their menus to avoid discriminating against
diabetics. After all, to offer food to the public that a diabetic
could not eat would, in the literal words of the statute, deny the
diabetic the full and equal enjoyment of the goods of the
restaurant compared to those with no limitation on their diets.
By citing such examples, we do not mean to make the statute
sound ridiculous. We do this to illustrate that the language of
the statute can only reasonably be interpreted to have some
practical, common sense boundaries. And if we construe Title III
to regulate the content of goods and services, there seem to be no
statutory boundaries. Based on the language of the statute, we
simply see no non-arbitrary way to distinguish regulating the
content of some goods from regulating the content of all goods.
In sum, we read Title III to prohibit an owner, etc., of a
place of public accommodation from denying the disabled access to
the good or service and from interfering with the disableds’ full
and equal enjoyment of the goods and services offered. But the
owner, etc., need not modify or alter the goods and services that
it offers in order to avoid violating Title III.
17
We believe our construction gives Title III a broad sweep
without overreaching congressional intent and with due regard to
the practicalities of applying this mutable statute.11 This
construction assures that the disabled have access to all goods and
services offered by the business and the opportunity to use and
enjoy that good or service without interference by the owner, etc.
Our opinion merely declines to dictate to every business in the
country what types of goods and services must be offered.
We note that our construction accords with those given the
statute by most of our sister circuits that have considered the
question. The Third and Sixth Circuits thought that limiting Title
III to access as opposed to content was too obvious to warrant
additional analysis.12 The Seventh Circuit also reached the same
conclusion, albeit after a more detailed explanation of the
practical difficulties of implementing a contrary reading.13 On the
11
42 U.S.C. § 12101(b), from Title III, reads: “It is the
purpose of this chapter . . . to invoke the sweep of congressional
authority . . . in order to address the major areas of
discrimination faced day-to-day by people with disabilities.”
12
See Ford v. Schering-Plough Corp., 145 F.3d 601, 613 (3d Cir.
1998)(insurance policy limiting coverage for mental disabilities
did not violate Title III); Parker v. Metropolitan Life Ins. Co.,
121 F.3d 1006, 1012 (6th Cir. 1997)(concluding that Title III does
not regulate the content of goods and services).
13
See Doe v. Mutual of Omaha Ins. Co., 179 F.3d 557, 559-63
(7th Cir. 1999), cert. denied, 120 S.Ct. 845 (2000)(insurance
policy with cap on AIDS coverage did not violate Title III).
18
other hand, the Second Circuit read Title III to regulate content
as well as access,14 a reading that we ultimately find unpersuasive
for the reasons noted above.15
C
It follows from our construction of the statute that Time has
not violated Title III by offering a policy that limits the amount
of coverage for AIDS to $10,000 over the first two years of the
policy. The “good” in this case is the insurance policy that Time
offered to the members of the Texas Optometric Association. To
establish a Title III violation, Mr. McNeil is required to
demonstrate that Time denied his son access to that good or
interfered with his son’s enjoyment of it. Mr. McNeil concedes
that Time offered the policy to his son on the same terms as it
offered the policy to other members of the association; that is,
his son had non-discriminatory access to the good. Mr. McNeil has
not alleged that Time interfered with his son’s ability to enjoy
14
See Pallozzi v. Allstate Life Ins. Co., 1999 WL 1079973 at
*3-6 (2d Cir. 1999)(refusal to sell life insurance to one with a
mental disorder violated Title III).
15
The Second Circuit reasoned that the content of goods and
services would need to be altered to allow the disabled the
opportunity to fully and equally enjoy those goods and services
along with the non-disabled. As already noted, we think such full
and equal enjoyment is neither possible nor practicable. In
addition, the court relied on the presence of the “safe harbor”
provision in Title III for insurers. We address this argument in
footnote 11, supra.
19
that policy as it was written and offered to the non-disabled
public.16 Instead, Mr. McNeil’s Title III challenge is to a
particular provision of the policy--the AIDS limitation. He is, in
effect, challenging the content of the good that Time offered.
Because Title III does not reach so far as to regulate the content
of goods and services, and because it is undisputed this limitation
for AIDS is part of the content of the good that Time offered, Mr.
McNeil’s Title III claim must fail.
We therefore affirm the district court’s dismissal of Mr.
McNeil’s Title III claim.
IV
The district court held that ERISA preempted Mr. McNeil’s
remaining state law claims and dismissed them. In doing so, the
court first determined that Time’s policy constituted an ERISA
plan, and that the state law claims did not fall within ERISA’s
safe harbor for the operation of laws regulating insurance. Mr.
McNeil takes issue with each of these determinations on appeal.
It is well established that state law claims are preempted if
they “relate to” an ERISA plan. ERISA’s preemption clause states
that ERISA “shall supersede any and all State laws insofar as they
16
Although Mr. McNeil may argue that his son was denied access
to a service when Time failed to pay the claims beyond $10,000,
this is still an attack on the content of the good. The policy did
not provide for payment of claims beyond $10,000, so their payment
was not a service that Dr. McNeil was entitled to.
20
may now or hereafter relate to any employer benefit plan.” 29
U.S.C. § 1144(a) (expressly excepting two situations not applicable
here).
In reviewing the district court’s decision, we must make two
separate determinations. First, we need to establish that Time’s
insurance policy constituted an ERISA plan. This is an issue of
fact that we review for clear error. Zavora v. Paul Revere Life
Ins. Co., 145 F.3d 1118, 1120 (9th Cir. 1998); Belanger v. Wyman-
Gordon Co., 71 F.3d 451, 454 (1st Cir. 1995). Second, if there is
such a plan, we must establish that ERISA does preempt Mr. McNeil’s
state law claims. This is an issue of law that we review de novo.
Robin v. Metropolitan Life Insurance Co., 147 F.3d 440, 444 (5th
Cir. 1998).
A
Under ERISA, an “employee welfare benefit plan” is defined, in
part, as “any plan, fund, or program . . . 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.” 29 U.S.C. § 1002(1). To determine whether a particular
plan qualifies as an ERISA plan, we ask whether the plan (1)
exists; (2) falls within the safe harbor exclusion established by
the Department of Labor; and (3) meets the ERISA requirement of
21
establishment or maintenance by an employer for the purpose of
benefitting the plan participants. Meredith v. Time Ins. Co., 980
F.2d 352, 355 (5th Cir. 1993).
(1)
We agree with the district court that a plan existed. The
district court held that a reasonable person could ascertain the
intended benefits, beneficiaries, source of financing, and
procedures for receiving benefits. See id. (setting out the rule
for determining the existence of a plan). This information was
clearly available in the brochures Dr. McNeil received.
The plan that existed, moreover, was a single plan covering
both Ms. Jay and Dr. McNeil. Before either obtained coverage, Dr.
McNeil filled out an employer application. Then, both he and Ms.
Jay sent in their individual employee enrollment forms. The
partnership then paid the first premium for both of them. After
that, premium bills were sent to the partnership and referred to
both Ms. Jay and Dr. McNeil. All these factors indicate that the
plan, at least as established, included Dr. McNeil. Any concerns
we have about the fact that Dr. McNeil usually paid his own premium
are not enough to overcome the deference due the district court
concerning an issue of fact such as this one. The court held that
22
there was a single plan that included both Ms. Jay and Dr. McNeil,
and we cannot say that determination was clear error.17
(2)
To qualify as an ERISA plan, the plan cannot fall within the
Department of Labor’s “safe harbor” exclusion. ERISA’s § 505
granted the Secretary of Labor the authority to promulgate
regulations for implementation of ERISA, 29 U.S.C. § 1135,18 and the
Secretary has created an exemption for certain group or group-type
insurance programs from the scope of ERISA. 29 C.F.R.
§ 2510.3-1(j)(1999).19 We have adopted this “safe harbor” for
17
It is true that a plan in which the only participants are the
owners or partners does not constitute an ERISA benefit plan.
Meredith v. Time Ins. Co., 980 F.2d 352, 357-58 (5th Cir. 1993).
But that is not the case here, because the plan covered both Dr.
McNeil and Ms. Jay. See Vega v. Nat. Life Ins. Services, Inc., 188
F.3d 287, 291 (5th Cir. 1999)(en banc)(plan covering owners and
employees constituted ERISA plan); Peterson v. American Life &
Health Ins. Co., 48 F.3d 404, 408 (9th Cir. 1995)(the involvement
of at least one employee is sufficient to establish the existence
of an ERISA plan).
18
29 U.S.C. § 1135 reads:
Subject to subchapter II of this chapter and section 1029
of this title, the Secretary may prescribe such
regulations as he finds necessary or appropriate to carry
out the provisions of this subchapter. Among other
things, such regulations may define accounting, technical
and trade terms used in such provisions; may prescribe
forms; and may provide for the keeping of books and
records, and for the inspection of such books and records
(subject to section 1134(a) and (b) of this title).
19
29 C.F.R. § 2510.3-1(j) reads:
23
certain types of claims, and have held that an insurance policy is
not governed by ERISA if (1) the employer does not contribute to
the plan; (2) participation is voluntary; (3) the employer’s role
is limited to collecting premiums and remitting them to the
insurer; and (4) the employer received no profit from the plan.
Meredith, 980 F.2d at 355. The plan must meet all four criteria to
be exempt. Id.
Time’s plan does not fall within the ERISA safe harbor. As
the district court noted, the evidence clearly establishes that the
partnership contributed to the plan. Though the partnership’s
(j) Certain group or group-type insurance programs. For
purposes of Title I of the Act and this chapter, the
terms "employee welfare benefit plan" and "welfare plan"
shall not include a group or group-type insurance program
offered by an insurer to employees or members of an
employee organization, under which
(1) No contributions are made by an employer
or employee organization;
(2) Participation in the program is completely
voluntary for employees or members;
(3) The sole functions of the employer or
employee organization with respect to the
program are, without endorsing the program, to
permit the insurer to publicize the program to
employees or members, to collect premiums
through payroll deductions or dues checkoffs
and to remit them to the insurer; and
(4) The employer or employee organization
receives no consideration in the form of cash
or otherwise in connection with the program,
other than reasonable compensation, excluding
any profit, for administrative services
actually rendered in connection with payroll
deductions or dues checkoffs.
24
contributions were for Ms. Jay, not Dr. McNeil, all the documents
filed with Time indicated that the two were members of the same
plan.
(3)
Finally, the plan met the requirements of 29 U.S.C. § 1002(1).
First, the single plan was established by the partnership. Dr.
McNeil filed an employer application for the partnership and signed
a document purporting to bind the partnership. In addition, the
partnership paid the initial premium establishing the policy. The
bills that Time sent to the partnership, as opposed to each
individual, support this conclusion that the partnership
established a single plan. The partnership also maintained that
plan by paying Ms. Jay’s premiums throughout the life of the
partnership. Second, the purpose of the plan was to provide the
participants, Ms. Jay and Dr. McNeil, with medical care.
Mr. McNeil raises one other argument for the proposition that
this plan did not constitute an ERISA plan. He contends that the
partnership’s involvement in interstate commerce was not sufficient
to implicate ERISA under 29 U.S.C. § 1003(a)(1). We cannot agree.
Mr. McNeil concedes that the partnership purchased glasses from
other states that were then shipped to the office in Texas.
Moreover, because Time was not in Texas, even setting up the
insurance policy constituted interstate commerce. There is no
25
doubt, therefore, that the partnership was involved in interstate
commerce, and the extent of that involvement, at least for ERISA
purposes, is not a matter of degree.
B
ERISA’s preemption of state law claims is extensive. We have
held that § 1144(a) preempts a state law claim if that claim
addresses an area of exclusive federal concern, such as the right
to receive benefits under the terms of an ERISA plan, and if that
claim directly affects the relationship between traditional ERISA
entities. Dial v. NFL Player Supplemental Disability Plan, 174
F.3d 606, 611 (5th Cir. 1999).20
Mr. McNeil makes the following state common law claims that
have not been addressed on the merits: breach of contract, breach
of the duty of good faith and fair dealing, negligent
misrepresentation, common law discrimination, waiver, estoppel and
ratification. He also argues that various provisions of the Texas
20
We disagree with Mr. McNeil’s argument that our inquiry on
this issue has been fundamentally altered by the Supreme Court’s
decision in New York State Conference of Blue Cross & Blue Shield
Plans v. Travelers Insurance Co., 514 U.S. 645, 115 S.Ct. 1671, 131
L.Ed.2d 695 (1995). The method of analysis we use today was well
established before that decision, and it continues to be used
today. Compare Weaver v. Employers Underwriters, Inc., 13 F.3d
172, 176 (5th Cir. 1994)(before Travelers); Memorial Hosp. System
v. Northbrook Life Ins. Co., 904 F.2d 236, 245 (5th Cir.
1990)(same); with Cypress Fairbanks Medical Center Inc. v. Pan-
American Life Ins. Co., 110 F.3d 280, 283 (5th Cir. 1997)(post-
Travelers); Smith v. Texas Children’s Hospital, 84 F.3d 152, 155
(5th Cir. 1996)(same).
26
Insurance Code requiring sound actuarial principles have been
incorporated into state contract law and tort law (under the duty
of good faith and fair dealing) when insurance is involved.21
We hold that all of these claims are preempted by ERISA.22
Each claim addresses Mr. McNeil’s right to receive benefits under
the terms of an ERISA plan. Moreover, these claims directly affect
the relationship between Dr. McNeil’s estate and Time. A finding
for either party will affect the obligations owed to the other
under the provisions of the plan. For these reasons, we hold that
the district court’s determination of ERISA preemption over the
state claims was correct.23
There is one exception to ERISA preemption, but it does not
apply in this case. Mr. McNeil argues that the laws on which he
bases his claims fall within ERISA’s “savings clause,” 29 U.S.C.
§ 1144(b)(2)(A). That provision states: “Except as provided in
21
Mr. McNeil also cites to 26 T.A.C. § 26.20(e), 26 T.A.C. §
26.27, and 28 T.A.C. § 21.702, but these are agency regulations and
do not provide the foundation for a claim.
22
Because we have federal diversity and federal question
jurisdiction, we do not consider the question of complete
preemption. See McClelland v. Gronwaldt, 155 F.3d 507 (5th Cir.
1998).
23
Mr. McNeil’s contentions concerning the incorporation of
Texas insurance law’s requirement of sound actuarial principles are
inherently part of these state law claims. While that requirement
might affect resolution of those claims because of incorporation,
that does not alter the nature of those claims, and therefore our
determination concerning preemption.
27
subparagraph (B), nothing in this subchapter shall be construed to
exempt or relieve any person from any law of any State which
regulates insurance, banking, or securities.” Id. A law regulates
insurance when: (1) it is specifically directed at the insurance
industry; (2) it transfers or spreads policyholder risk; and (3) it
affects an integral part of the policy relationship between insurer
and insured. Gahn v. Allstate Life Ins., 926 F.2d 1449, 1453 (5th
Cir. 1991). Unfortunately for Mr. McNeil, none of the remaining
state law claims satisfies these requirements. Thus, these state
laws do not fall within the savings clause.
V
For the reasons stated herein, the district court’s decision
is, in all respects,
A F F I R M E D.
28