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THAYER v. GROUP HOSPITALIZATION & MED. SERVS.

December 9, 1987

Henrietta Thayer, Plaintiff,
v.
Group Hospitalization And Medical Services, Inc., Defendant


Joyce Hens Green, U.S.D.J.


The opinion of the court was delivered by: GREEN

JOYCE HENS GREEN, U.S.D.J.

 In this complaint, originally filed in Superior Court and removed to this Court by defendant on September 22, 1987, plaintiff alleges that defendant, her insurer, breached its contract with her by refusing to make further payments for her medical care at a Christian Science facility and that, in so doing, defendant discriminated against her on the basis of religion. This matter now comes before the Court on defendant's motion to dismiss on the grounds of federal preemption and failure to state a claim. For the reasons set forth below, defendant's motion is granted.

 I. ERISA

 Plaintiff is a subscriber to a health care coverage plan issued to Howard University by defendant Group Hospitalization and Medical Service, Inc. ("GHMSI" also trading as "Blue Cross and Blue Shield of the National Capital Area"), which processes claims submitted under the plan. Plaintiff admits this is an "employee welfare benefit plan" as defined by section 3 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1002(1). Citing the recent Supreme Court decision in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S. Ct. 1549, 95 L. Ed. 2d 39 (1987), defendant argues that plaintiff's state law claims for breach of contract are preempted by ERISA. The Court agrees.

 Pilot Life expansively interpreted ERISA's preemption provisions and held that state law suits asserting improper processing of claims for benefits under an ERISA-regulated plan are preempted by the federal statute. *fn1" While Pilot Life has only begun to be applied by the lower courts, *fn2" its application to this case is clear.

 In Pilot Life, plaintiff sought permanent disability benefits after a work-related accident from Pilot Life Insurance Company ("Pilot Life"), which "bore the responsibility for determining who would receive disability benefits" under the long-term disability employee benefit plan established between Pilot Life and plaintiff's employer. 107 S. Ct. at 1551. The insurance company provided benefits to plaintiff for two years, then terminated and reinstated them several times over the next three years. Id. Plaintiff brought a diversity action in federal court alleging "tortious breach of contract," "breach of fiduciary duties," and "fraud in the inducement," but did not mention ERISA. The District Court granted the insurance company's motion for summary judgment on the basis that ERISA preempted plaintiff's common law claim for failure to pay benefits. The Court of Appeals reversed. The Supreme Court granted certiorari and unanimously affirmed the District Court.

 Looking at both the plain language of the preemption provision of ERISA and at congressional intent, the Court concluded:

 
the detailed provisions of § 502(a) set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans. The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA.
 
. . . .
 
All suits brought by beneficiaries or participants asserting improper processing of claims under ERISA-regulated plans [should] be treated as federal questions governed by § 502(a).

 107 S. Ct. at 1556-57. In reaching this conclusion, the Court considered the scope of the ERISA "savings" clause, 29 U.S.C. § 1144(b)(2)(A), which provides that state laws "which regulate insurance" are not preempted by ERISA. Using both "common sense" and case law interpreting the phrase "business of insurance," the Court reasoned that only state laws that are "specifically directed toward [the insurance] industry" are saved from preemption, id. at 1554, rejecting completely the reasoning applied in the lower court cases relied on by plaintiff in the instant case. See Plaintiff's Opposition, at 2 (citing Lederman v. Pacific Mutual Life Insurance Co., 494 F. Supp. 1020 (C.D. Ca. 1980); Austin v. General American Life Ins. Co., 498 F. Supp. 844 (N.D. Ala. 1980); Cate v. Blue Cross and Blue Shield, 434 F. Supp. 1187 (E.D. Tenn. 1977)).

 Plaintiff attempts to distinguish Pilot Life by suggesting that the insurance company in that case had a fiduciary duty to the plaintiff, whereas in this case the only relationship defendant has to plaintiff is "via the contract." Plaintiff's Opposition, at 2. Such a distinction is neither apparent nor persuasive. The undisputed facts indicate that defendant GHMSI, like Pilot Life, was the decisionmaker as to whether the plaintiff would continue to receive benefits under the plan governed by ERISA and thus constitutes an "ERISA fiduciary." McLaughlin v. Connecticut Gen. Life Ins. Co., 565 F. Supp. 434, 441 (N.D. Cal. 1985). There is no basis for reading Pilot Life as narrowly as plaintiff suggests.


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