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PROTOCARE OF METRO. N.Y., INC. v. MUTUAL ASSN. ADM

October 18, 1994

PROTOCARE OF METROPOLITAN N.Y., INC., Plaintiff,
v.
MUTUAL ASSOCIATION ADMINISTRATORS, INC. and NEIGHBORHOOD CLEANERS ASSOCIATION EMPLOYEES BENEFIT PLAN, Defendants.



The opinion of the court was delivered by: MICHAEL B. MUKASEY

 MICHAEL B. MUKASEY, U.S.D.J.

 Plaintiff Protocare of Metropolitan N.Y., Inc. has brought this action against Mutual Association Administrators, Inc. and Neighborhood Cleaners Association Employees Benefit Plan alleging breach of contract and violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. § 1132. Defendants have moved to dismiss both claims, pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). Matters outside the pleadings having been presented to the court, Fed. R. Civ. P. 12(c) authorizes conversion of defendants' motion to dismiss into a motion for summary judgment pursuant to Fed. R. Civ. P. 56(c). For the reasons set forth below, defendants' motion is granted as to the alleged breach of contract and denied as to the alleged violation of ERISA.

 I.

 On August 21, 1992, Chae Chun Im, a Korean immigrant, signed an application for participation and membership in the Neighborhood Cleaners Association Employees Benefit Plan ("NCA Plan" or "Plan"). The NCA Plan is an employee welfare benefit plan within the meaning of 29 U.S.C. § 1002(1). Defendant Mutual is a third-party claims administrator of the NCA Plan, 29 U.S.C. § 1002(1b)(A), possesses no assets of the Plan, and lacks authorization to make final determinations on who is eligible for benefits under the Plan. (Jarmolowsky Aff. P 13) On his application form, Im responded "no" to the following questions: "in the past 2 years, has any named person consulted a physician/practitioner; in the past 2 years, has any named person taken prescribed medication; has any named person ever had cancer?" (Jarmolowsky Aff. Exh. 1)

 Less than one week before filling out the application, however, Im had consulted a physician who had prescribed medication. The treating physician's impression was that Im "has an infiltrating type of adenocarcinoma [cancer] of the stomach." (Jarmolowsky Aff. Exh. 4). The application form states, above the signature line, that "the giving of false information on this application shall result in cancellation and revocation of membership in and benefits from the Trust." (Id.)

 In March 1993, Im sought medical treatment for his stomach cancer from plaintiff Protocare, a third-party medical service provider. Defendant Mutual allegedly informed defendant that Im was covered by the Plan. Im then allegedly assigned to Protocare his insurance benefits, and also executed a security agreement. Relying on this information, plaintiff treated Im for stomach cancer, and sent invoices for the treatment, along with the assignment of benefits, to Mutual.

 On April 22, 1993, Mutual informed Im that he would be denied all benefits from the Plan because he had failed to disclose his previous medical history in the application form, and because "at least part of your treatment was for a preexisting condition." (Jarmolowsky Aff. Exh. 5) Mutual sent Im a check for the full amount he had contributed to the Plan, cancelled his policy, and refused to pay plaintiff's submitted bills, which totalled $ 42,326.68. (Jarmolowsky Aff. P 5) Plaintiff alleges that Mutual did not explain its cancellation of Im's policy until long after Im died of cancer. (Pl. Memo. at 3)

 Plaintiff's attorney wrote to Mutual on two occasions, stating that as Im's assignee it had standing to enforce the Plan provisions, and requesting an appeal of Mutual's rescission of Im's policy, a copy of the NCA Plan and other related information. In response, Mutual explained that Im's policy had been revoked because he "gave false medical information on his application" (Jarmolowsky Aff. Exh. 6), and that Im, the only potential plaintiff with standing, had never submitted an appeal (Id.).

 Protocare initially brought this action in New York State Supreme Court, New York County, against the NCA Plan and Mutual for failure to pay Im's benefits and for failure to provide plan documents and information. (Def. Memo. at 3) Defendants then removed the case to this court, invoking the court's original jurisdiction over ERISA claims.

 II.

 Plaintiff's first claim, alleging breach of contract, is preempted by ERISA. ERISA's preemption provisions are "deliberately expansive, and designed to 'establish pension plan regulation as exclusively a federal concern.'" Pilot Life Ins. v. Dedeaux, 481 U.S. 41, 45-46, 95 L. Ed. 2d 39, 107 S. Ct. 1549 (1987) (quotation omitted). Section 514(a) of ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. 1144(a). The phrase "relate to" has "'its broad common-sense meaning, such that a state law relates to a benefit plan in its normal sense of the phrase, if it has a connection with or reference to such a plan.'" Pilot Life, 481 U.S. at 47 (quotations omitted). The preemption clause is not limited to "'state laws specifically designed to affect employee benefit plans,'" id. at 47-48 (quotation omitted); rather, it preempts state statutes of general application and state common-law causes of action. See id; see also Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 138-40, 112 L. Ed. 2d 474, 111 S. Ct. 478 (1990) (same); NYSA-ILA Med. & Clinical Serv. Fund, 27 F.3d 823, 826 (2d Cir. 1994) ("even where a state law has no express link to an employee benefit plan, it can be preempted 'insofar as the law applies to benefit plans in particular cases'") (quotation omitted); Snyder v. Elliot W. Dann Co., 854 F. Supp. 264, 273 (S.D.N.Y. 1994) ("As a matter of law all state common law claims of promissory estoppel, breach of contract or fraud are preempted by ERISA"). Plaintiff argues that state insurance laws are not preempted by ERISA. The Supreme Court has concluded otherwise: "State laws that directly regulate insurance . . . do not reach self-funded employee benefit plans." FMC Corp. v. Holliday, 498 U.S. 52, 61, 112 L. Ed. 2d 356, 111 S. Ct. 403 (1990). Because the NCA Plan is self-funded, New York's insurance laws do not apply.

 Even if plaintiff's contract claims were not preempted by ERISA, the clear provisions of the NCA Plan would warrant summary judgment. The Plan's documents and its Summary Plan Description ("SPD") "govern an employer's obligations under ERISA plans." Synder, 854 F. Supp. at 271 (quoting Moore v. Metropolitan Life Ins. Co., 856 F.2d 488, 492 (2d Cir. 1988)). As explained to Im on April 22, 1993, and as stated explicitly in the SPD, failure to disclose "full and accurate" medical history results in the denial of plan benefits. (Jarmolowsky Aff. Exh. 5; SPD at 53). Further, the SPD explains that "no benefits will be provided" for preexisting conditions. (SPD at 35; Jarmolowsky Aff. Exh. 5)

 Plaintiff does not deny that Im failed to report accurately his medical history, nor does plaintiff deny that Im's treatment was for a preexisting condition. All that plaintiff can offer to refute the facial violation of the Plan is to allege Im's limited knowledge of English, and the possibility that he was not informed of the initial diagnoses. Even if this latter claim were true, however, plaintiff cannot deny that Im failed to report on his Plan application that he had seen a physician just one day earlier, and that he had received prescribed medication, failure to disclose both of which constitute violations of the NCA Plan. Thus, even when all evidence is examined in the light most favorable to plaintiff, as it must be on a motion for summary judgment, there are no material issues of fact in dispute that warrant a trial on plaintiff's first claim. Anderson v. Liberty Lobby, Inc., ...


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