Shearer v. Southwest Service Life Insurance Co.

Because Lance Shearer's employer did no more than pay the premiums on the insurance policy and the Employee Retirement Income Security Act does not regulate the "bare purchase of insurance," ERISA did not pre-empt Shearer's claims. Thus, the district court lacked jurisdiction over the case.

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Click here for the full text of this decision FACTS:Lance Shearer is the 50 percent owner of Intercontinental Materials Management Inc. (IMMI), as well as an employee of the company. His mother, Christal Shearer, owns the other half of IMMI. On June 10, 2004, Lance applied for health insurance for himself and his family from Southwest Service Life Insurance Co. (SWSL). The premiums for the policy were paid by IMMI. Lance and Christal both stated in their affidavits that this was done for bookkeeping purposes. Some time later, Shearer’s son suffered an injury requiring hospitalization and surgery. Shearer submitted a claim under his policy to SWSL. Although SWSL paid for a portion of the claim, Shearer contended that the policy required SWSL to pay for the entire amount. Shearer filed suit against SWSL and its agent Richard Sanders in Texas state court on March 2, 2007, bringing state law claims of misrepresentation, breach of contract, unfair and deceptive trade practices, and unfair claim settlement practices. SWSL, with Sanders’ consent, removed the case on April 6, 2007. SWSL and Sanders claimed that the insurance policy at issue was covered by ERISA; thus ERISA pre-empted Shearer’s claims and they were removable pursuant to 28 U.S.C. �1331. Shortly after removal, the district court struck Sanders as a defendant. Shearer then filed a motion to remand, arguing that his insurance policy was not an ERISA plan. The district court denied the motion without comment. The district court then granted SWSL’s motion for summary judgment, ruling that Lance’s claims failed to meet the ERISA standard for relief. Lance appealed, contending that the district court lacked jurisdiction over the case because the insurance policy was not an ERISA plan. HOLDING:Vacated and remanded. ERISA, the court stated, defines an employee welfare benefit plan as a plan, fund or program established or maintained by an employer 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, medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment. The court used a three-prong test to determine whether an employee benefit arrangement met the definition of an employee welfare benefit plan and, thus, was an ERISA plan. To be an ERISA plan, the court stated, an arrangement must be: a plan; not excluded from ERISA coverage by the safe-harbor provisions established by the Department of Labor; and established or maintained by the employer with the intent to benefit employees. Lance conceded that his insurance policy constituted a plan and did not fall within the safe-harbor provisions of the Department of Labor. However, Lance asserted that his insurance policy failed the third element of the test, because it was not established or maintained by IMMI with the intent to benefit employees. The court noted its precedents that if an employer does no more than purchase insurance for its employees and has no further involvement with the collection of premiums, administration of the policy or submission of claims, then the employer has not established an ERISA plan. Thus, the court concluded that IMMI’s payment of premiums on two separate policies for two different employees, while not providing insurance for any other employees, was not sufficient evidence of IMMI’s intent to establish or maintain an ERISA plan. Accordingly, because IMMI’s payment of premiums alone was insufficient to create an ERISA plan, the district court lacked jurisdiction over the case. OPINION:Prado, J.; Jolly, Prado and Southwick, JJ.

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