those payable under the two year mental disorder limitation of the Plan.
Sparkes disagreed with this conclusion, and challenged the termination of
her benefits pursuant to the internal review procedures of the plan.
Following the exhaustion. of these internal remedies, Sparkes commenced
the instant action.
III. STANDARD OF REVIEW
A. Summary Judgment
A moving party is entitled to summary judgment "if the pleadings,
depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as
a matter of law." Fed.R.Civ.P. 56(c). The ultimate inquiry is whether a
reasonable jury could find for the nonmoving party based on the evidence
presented, the legitimate inferences that could be drawn from that
evidence in favor of the nonmoving party, and the applicable burden of
proof. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct.
2505, 91 L.Ed.2d 202 (1986). In determining a motion for summary
judgment, all inferences to be drawn from the facts contained in the
exhibits and depositions "must be viewed in the light most favorable to
the party opposing the motion." United States v. Diebold; Inc.,
369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); Hawkins v.
Steingut, 829 F.2d 317, 319 (2d Cir. 1987). Nevertheless, "the litigant
opposing summary judgment `may not rest upon mere conclusory allegations
or denials' as a vehicle for obtaining a trial." Quinn v. Syracuse Model
Neighborhood Corp., 613 F.2d 438, 445 (2d Cir. 1980) (quoting SEC v.
Research Automation Corp., 585 F.2d 31, 33 (2d Cir. 1978)).
For the reasons set forth below, defendants' motion for summary
judgment is granted as to plaintiffs state law claim, and plaintiffs and
defendants' motions for summary judgment are both denied as to plaintiffs
first and second causes of action under ERISA.
A. Plaintiff's State Law Claim
Defendants move for summary judgment as to Sparkes' third cause of
action, discrimination in violation of New York Insurance Law §
4224, on the grounds that this claim is preempted by ERISA, and
alternatively on the grounds that Section 4224 provides no express or
implied private right of action. Although not preempted by ERISA, there
is no private right of action under Section 4224, and accordingly,
plaintiffs state law claim must be dismissed.
1. ERISA Preemption
One of the most notable characteristics of ERISA is the extent to which
it preempts state laws which "relate to" employee benefit plans. Section
1144(a) of ERISA states that "[e]xcept as provided in subsection (b) of
this section, the provisions of this subchapter . . . shall supersede any
and all state laws insofar as they may now or hereafter relate to any
employee benefit plan. . . ." 29 U.S.C. § 1144 (a). Section 1144(b)
of ERISA (the "saving clause") saves from the broad sweep of ERISA
preemption "any law of any State which regulates insurance, banking, or
securities." Under this section, causes of action based on state laws
which "purport to regulate insurance" are not preempted "even if they
also "relate to' employee benefit plans." Shackelton v. Conn. General
Life Ins. Co., 817 F. Supp. 277, 281 (N.D.N.Y. 1993).
The first issue to resolve with regard to the question of ERISA
preemption is whether or not New York Insurance Law Section 4224 "relates
to" an employee benefit plan. A state law "relates to" such a plan "in
the normal sense of the phrase, if it has a connection with or reference
such a plan."*fn1 Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96, 103
S.Ct. 2890, 77 L.Ed.2d 490 (1983). ERISA does not, however, preempt state
laws with "`only a tenuous, remote, or peripheral connection with covered
plans, as is the case with many laws of general applicability.'" New York
State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins.
Co., 514 U.S. 645, 661, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995) (quoting
District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125,
130 n. 1, 113 S.Ct. 580, 121 L.Ed.2d 513 (1992)). In order to evaluate
whether the presumption against preemption normally applicable to federal
laws has been overcome in a particular case, a court is required to "go
beyond the unhelpful text [of 29 U.S.C. § 1144(a)] and the
frustrating difficulty of defining its key term, and look instead to the
objectives of the ERISA statute as a guide to the scope of the state law
that Congress understood would survive." Id. at 655, 115 S.Ct. 1671.
Because Section 4224 directly regulates insurance plans, it does not have
a connection that is merely "tenuous, remote, or peripheral" to an ERISA
plan, and is not within "the scope of the state law that Congress
understood would survive." Id. at 661, 665, 115 S.Ct. 1671. Accordingly,
Section 4224 is preempted by ERISA unless it is saved by application of
the saving clause.
Whether or not Section 4224 is saved from preemption by the saving
clause depends upon whether it is a law that "regulates insurance."
Courts employ a two-part analysis to determine whether a state law
regulates insurance. First, courts consider the "common-sense view" of
the language of the saving clause itself.*fn2 If this so-called "common
sense" test is met, courts then look to the case law interpreting the
phrase "business of insurance' under the McCarran-Ferguson Act,
15 U.S.C. § 1101 et seq., for guidance in interpreting the saving
clause. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48, 107 S.Ct. 1549,
95 L.Ed.2d 39 (1987).
Federal case law under the McCarran-Ferguson Act has developed a
three-prong test used to determine whether a particular practice involves
the business of insurance. A court is to consider:
[F]irst, whether the practice has the effect of
transferring or spreading a policyholder's risk;
second, whether the practice is an integral part of
the policy relationship between the insurer and the
insured; and third, whether the practice is limited to
entities within the insurance industry.
Metropolitan Life Ins. Co. v. Massachusetts,
It is clear that Section 4224 does regulate insurance within the
meaning of 1144(b)(2)(A). The prohibitions of Section 4224 have "the
effect of transferring or spreading a policyholder's risk" by prohibiting
accident and health insurers from refusing to insure persons within a
particular class for discriminatory reasons, or from discriminatorily
offering policies on different terms and conditions than those available
to policyholders generally. Section 4224 is also "an integral part of the
policy relationship between the insurer and the insured," because by
prohibiting the inclusion of discriminatory terms in insurance policies,
it "limit[s] the type of insurance that an insurer may sell to the
policyholder." Metropolitan Life, 471 U.S. at 743, 105 S.Ct. 2380. See
also PAS v. Travelers Ins. Co., 7 F.3d 349, 355 (3d Cir. 1993) ("A law
that prohibits certain policy provisions may be every bit as integral to
the insurer-insured relationship as one that mandates the inclusion of
certain terms."). Finally, the third prong is met because "the statute is
explicitly aimed at — and solely applicable to — the
insurance industry." Natoli v. First Reliance Standard Life Ins. Co.,
00-CV-5914, 2001 WL 15673, slip op. at 8 (S.D.N.Y. January 5, 2001)
(citing Ward; 526 U.S. at 375, 119 S.Ct. 1380). Accordingly, New York
Insurance Law § 4224 is not preempted by ERISA.
2. Implied Private Right of Action
However, this determination does not end the inquiry on this motion.
Defendants have also argued that plaintiffs state law claim must be
dismissed because there is no private right of action under Section
4224. This appears to be a novel question under New York law.
In support of their argument against finding a private right of action
under Section 4224, defendants rely upon several New York cases,
involving other sections of the Insurance Law, which hold that there is
no private right of action under the sections at issue in those cases. In
opposition, plaintiff cites several state and federal cases which involved
claims brought under Section 4224. The question of the existence of a
private right of action under Section 4224 does not appear to have been
raised in any of the cases cited by either side.
In the absence of any controlling authority, New York courts apply a
three-part inquiry to determine whether or not a private right of action
should be implied where the statute at issue is silent as to the
existence of such a right. This test is whether (1) the plaintiff is one
of the class for whose particular benefit the statute was enacted; (2)
recognition of a private right of action would promote the legislative
purpose; and (3) creation of such a right would be consistent with the
legislative scheme. Uhr v. East Greenbush Central Sch Dist., 94 N.Y.2d 32,
38, 698 N.Y.S.2d 609, 720 N.E.2d 886 (1999).
In the instant case, it is clear that Sparkes is not a member of a
class for whose particular benefit the statute was enacted. Section 4224
applies to discrimination in the terms and conditions of insurance plans
generally, and not merely to discrimination against any particular class
of individuals. See Dornberger v. Metropolitan Life Ins. Co.,
961 F. Supp. 506, 547-48 (S.D.N.Y. 1997) (Section 4224's prohibitions on
discrimination not limited to "small, insular minority groups."). As
such, it cannot be said that Section 4224 was enacted for the "particular
benefit" of persons with disabilities, as the statute applies with equal
force to all forms of discrimination-be it based on race, age, or
Moreover, while implying a private right of action would likely further
the legislative purpose of eliminating discrimination by insurers, such
an implied right of action would not be consistent with the legislative
scheme. Section 109 of the Insurance Law establishes the procedures for
enforcement of various provisions of the Insurance Law by the
Superintendent of Insurance. It does not provide for a private right of
action. Buccino v. Contimental Assur. Co., 578 F. Supp. 1518, 1526
(S.D.N.Y. 1983). Where the legislature intended that a particular
provision of the Insurance Law be enforced through a private right of
action, it expressly so provided in the terms of the statute. See, e.g.,
Insurance Law §§ 3420, 4226. Accordingly, because implying a private
right of action would be inconsistent with two of the three prongs of the
test set forth by the New York Court of Appeals in Uhr, no such right
will be implied in this case. Plaintiffs claim under Section 4224 must be
B. Plaintiff's ERISA Claims
With regard to plaintiffs first and second causes of action under
ERISA, these claims involve factual disputes that preclude a grant of
summary judgment to either side.
As noted above, there is considerable dispute between the parties as to
whether or not plaintiff, in fact, suffers from CFS, or whether her
symptoms are attributable to depression. This dispute is at the heart of
this lawsuit. Summarized briefly, plaintiff contends that Northwestern
improperly concluded that her symptoms were caused by depression (a
mental health condition) based on the lack of an apparent physical cause
for her condition. She argues that this diagnosis was improper because
CFS is a "diagnosis of exclusion" — in other words, because there
is no known cause of CFS, doctors diagnose it by excluding all other
possible physical causes. Plaintiff argues that Northwestern improperly
failed to consider evidence that she did not suffer from depression, and
lacked any reasonable medical basis for its determination that Sparkes
suffered from depression. Northwestern argues in opposition that it had
more than enough evidence in Sparkes' file to conclude that she did, in
fact, suffer from depression and not CFS.
Each side has offered voluminous support for their respective
positions, consisting of depositions, medical records, scholarly
publications, affidavits, newspaper articles, and more.*fn3 Viewing each
side's submissions in the light most favorable to the opposing party, an
issue of fact remains for trial as to the cause of plaintiffs
disability. This dispute precludes a grant of summary judgment to either
side on plaintiffs first and second causes of action under ERISA.
Moreover, there are significant disputes as to whether or not Sparkes'
claim was appropriately investigated by Northwestem prior to its February
26, 1996, decision to terminate her benefits. Plaintiff contends that the
investigation conducted by Northwestern was superficial, and therefore,
wholly inadequate to support its conclusion that she did not suffer from
CFS. In opposition, Northwestern has argued that it did conduct a
sufficient investigation of Sparkes' claim in that Dr. Bradley Fancher
reviewed Sparkes' file and concluded that, in his medical opinion, the
file did not support the conclusion that Sparkes suffered from CFS.
Again, viewing each side's submissions in the light most favorable to the
other, neither has demonstrated an absence of disputed material fact on
Therefore, because there are disputes over material facts as to
plaintiffs ERISA claims, summary judgment is not warranted for either side
as to these causes of action. Accordingly, both plaintiffs and
defendants' motions for summary judgment
must be denied as to plaintiffs first and second causes of action.
After careful consideration of the objections and submissions of the
parties, the relevant parts of the record, and the applicable law, it is
1. Plaintiffs motion for partial summary judgment is DENIED; and
2. Defendants' motion for summary judgment is GRANTED in part and
DENIED in part as follows:
a. Defendants' motion for summary judgment is DENIED as to plaintiffs
first and second causes of action under ERISA;
b. Defendants' motion for summary judgment is GRANTED as to plaintiffs
third cause of action under New York Insurance Law § 4224; and
3. Plaintiffs third cause of action is DISMISSED.