Raab et al v. United Healthcare Insurance Company

Filing 40

ORDER denying 18 Motion to Remand to State Court. This action is referred in toto to U.S. Magistrate Judge Thomas B. Smith for a Report and Recommendation regarding an appropriate resolution of the case. The Clerk is directed to refer Defendant's motion to dismiss (Doc. 12 ) to Magistrate Judge Smith. Signed by Judge Roy B. Dalton, Jr. on 8/25/2017. (SN)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
LAURA RAAB; and ANDRE RAAB,
Plaintiffs,
v.

Case No. 6:17-cv-1049-Orl-37TBS

UNITED HEALTHCARE INSURANCE
COMPANY,
Defendant.
_____________________________________
ORDER
In the instant motion, Plaintiffs move for remand. (Doc. 18 (“Motion”).) Defendant
responded on August 3, 2017. (Doc. 26 (“Response”).) The Court then permitted:
(1) Plaintiffs to file a reply (Doc. 32); and Defendant to file a sur-reply (Doc. 34). For the
reasons set forth below, the Motion is due to be denied.
I.

BACKGROUND

Plaintiffs brought this action seeking medical benefits under a group health
insurance policy that Defendant United Healthcare Insurance Company (“UHIC”) issued
to Constant Innovation, LLC (“Constant LLC”). Importantly, Plaintiff Andre Raab and
his wife, Nancy Raab, are the co-owners of Constant LLC. (Doc. 18-1, ¶ 2.)
Constant LLC first applied for a group health insurance policy with UHIC on
October 6, 2008. (See Doc. 26-3.) On the application form, it specified that three full-time
employees would be participating in the plan. (Doc. 26-3, p. 2.) Based on this application,
UHIC issued a group health insurance policy—Group No. GA759799BW (“the Policy”)—
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to Constant LLC with an effective date of January 1, 2009. (Doc. 26-2.)
Under the original Policy, Andre Raab was enrolled for family coverage with his
wife, and two non-owner employees were also enrolled for coverage. (Doc. 26-1, ¶ 5.)
Thereafter, in 2010, two additional non-owner employees enrolled for coverage under the
Policy. (Id. ¶ 6.) Coverage for all of the individuals under the Policy, other than Andre
Raab, terminated on January 1, 2011. (Id. ¶ 7; Doc. 32, ¶ 18.) At that point, the Policy was
updated to cover only Andre Raab, Nancy Raab, and their children. (Doc. 26-1, ¶ 7;
Doc. 32, ¶ 18.) Indeed, in 2014, the sole participants in the Policy were Andre Raab and
Nancy Raab. (Doc. 18-1, ¶ 4.) Their daughter, Plaintiff Laura Raab, was a beneficiary of
the Policy. (Id.) The Policy was terminated on January 1, 2015. (Doc. 26-1, ¶ 8.)
In 2015, Andre Raab submitted a claim under the Policy for Laura Raab’s medical
expenses during 2014. (Doc. 2, ¶¶ 5–6.) UHIC ultimately denied the claim. (Id. ¶ 14.)
Based on this denial, Plaintiffs filed suit in the Circuit Court of the Eighteenth Judicial
Circuit in and for Seminole County, Florida, on April 12, 2017, alleging claims for breach
of contract and statutory bad faith. (Id. ¶¶ 20–27.) UHIC removed the case to this Court
on June 8, 2017, on the ground that Plaintiffs claims were preempted by the Employee
Retirement Income Security Act of 1974 (“ERISA”). (Doc. 1, ¶ 7.) Plaintiffs now seek to
remand the case, arguing that ERISA is inapplicable to the Policy. (Doc. 18, at p. 6.)
II.

LEGAL STANDARDS

“On a motion to remand, the removing party bears the burden of establishing
jurisdiction.” Diaz v. Sheppard, 85 F.3d 1502, 1505 (11th Cir. 1996). Any doubts about
removal jurisdiction should be construed in favor of remand to state court. Id. Where a
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case is removed on the basis of federal question jurisdiction, the applicable federal claim
must appear on the face of the plaintiff’s well-pleaded complaint. Ervast v. Flexible Prod.
Co., 346 F.3d 1007, 1012 (11th Cir. 2003). An exception to this rule, however, is the doctrine
of complete preemption. Id. “If a federal statute completely preempts a state-law cause of
action, a claim which comes within the scope of that cause of action, even if pleaded in
terms of state law, is in reality based on federal law.” May v. Lakeland Reg'l Med. Ctr.,
No. 8:09-cv-406-T-33AEP, 2010 U.S. Dist. LEXIS 5866, *6 (M.D. Fla. Jan. 5, 2010) (citing
Aetna Health Inc. v. Davila, 542 U.S. 200, 207–08 (2004)). So “‘when a federal statute wholly
displaces the state-law cause of action through complete pre-emption, the state claim can
be removed.’” Id. (citing Aetna Health Inc., 542 U.S. at 207). ERISA completely preempts
state law claims involving rights to recover benefits under employee benefit plans. Ervast,
346 F.3d 1007, 1014 (11th Cir. 2003).
III.
A.

ANALYSIS

Post-Removal Evidence

As a preliminary matter, the Court finds that it is proper to consider post-removal
evidence relied on by UHIC in its Response—inclusive of information regarding the
Policy as it stood when it was initially issued in 2009. In their reply, Plaintiffs argue that
UHIC should be constrained to the allegations in its Notice of Removal. (Doc. 32, ¶¶ 7–
10.) But the Eleventh Circuit has “adopt[ed] a more flexible approach, allowing the
district court when necessary to consider post-removal evidence in assessing removal
jurisdiction.” Sierminski v. Transouth Fin. Corp., 216 F.3d 945, 949 (11th Cir. 2000).
“While it is undoubtedly best to include all relevant evidence in the petition for removal
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and motion to remand, there is no good reason to keep a district court from eliciting or
reviewing evidence outside the removal petition.” Id. Still, “under any manner of proof,
the jurisdictional facts that support removal must be judged at the time of the removal,
and any post-petition affidavits are allowable only if relevant to that period of time.” Id.
(quoting Allen v. R&H Oil Co., 63 F.3d 1326, 1335 (5th Cir. 1995)). Moreover, UHIC’s
post-removal evidence “does not state completely new grounds or allegations for
removal, but rather provides specific support for the grounds for removal that already
were stated in its Notice of Removal.” May, 2010 U.S. Dist. LEXIS 5866, *7–8 (finding it
proper to consider post-removal evidence with respect to complete preemption under
ERISA). Accordingly, the Court will consider UHIC’s post-removal evidence relevant to
assessing the existence of jurisdiction at the time of the removal.
B.

Safe Harbor Provision

In determining whether an employee benefit plan is governed by ERISA, the court
must examine whether it falls within the regulatory “safe harbor” provision. Miller v.
Colonial Life & Acc. Ins. Co., No. 6:13-CV-825-ORL-36KRS, 2013 WL 4855056, at *4
(M.D. Fla. Sept. 11, 2013). Pursuant to 29 C.F.R. § 2510.3-1, an employee benefit plan is
exempted from ERISA under the safe harbor provision if:
(1) No contributions are made by an employer . . . ;
(2) Participation [in] the program is completely voluntary for
employees . . . ; (3) The sole functions of the employer . . . are,
without endorsing the program, to permit the insurer to
publicize the program to employees or members, to collect
premiums through payroll deductions . . . and to remit them
to the insurer; and (4) The employer . . . receives no
consideration . . . for administrative services actually
rendered in connection with payroll deductions . . . .
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Id. A removing defendant bears the burden of proving that the policy fails to meet one of
the safe harbor provision’s criteria. Letner v. Unum Life Ins. Co. of Am.,
203 F. Supp. 2d 1291, 1300 (N.D. Fla. 2001).
Plaintiffs argue that UHIC’s Notice of Removal and Response are insufficient to
establish that the safe harbor provision does not apply to the Policy. (Doc. 32, ¶ 13.)
Plaintiffs are correct that the Policy application (Doc. 26-3) attached to UHIC’s Response
indicates that employees were to pay 100% of the policy premium. (Id. at p. 2.) However,
the group coverage documents (Doc. 26-2) also attached to UHIC’s Response explain that
the employer was required to pay at least 50% of the premium for each Eligible Person. 1
(Id. at p. 12.) The Court rejects Plaintiffs’ argument that this constitutes an insufficient
conclusory allegation. True enough, when asked by UHIC to verify the amount of
employer contribution, the broker acting on behalf of Constant LLC stated that “[t]he
employer is contributing 50% for employees and 0 for dependents.” (Doc. 34-1, p. 1.)
Thus, UHIC has sufficiently demonstrated that Constant LLC made contributions to
employee premiums in 2009. The Court, therefore, finds that UHIC has met its burden of
proving that the Policy did not fall within the safe harbor provision. 2

The Policy defines an Eligible Person as “an employee of the Enrolling Group or
other person whose connection with the Enrolling Group meets the eligibility
requirements specified in both the application and the Policy.” (Id. at 68.)
2 The Court finds it unnecessary to address UHIC’s alternative argument that it be
permitted to conduct jurisdictional discovery on the issue of ERISA’s safe harbor
provision. In any event, Plaintiffs have filed a separate, unopposed motion to conduct
such discovery, which is currently pending before the magistrate judge. (Doc. 38.)
Additionally, the Court need not address Plaintiffs’ argument that UHIC failed to
establish that the safe harbor provision did not apply to the Policy in 2014 because, as
discussed infra, the Policy did not convert to a non-ERISA plan. See Stern v. Provident Life
1

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C.

Whether There is a Relevant ERISA Plan

UHIC claims that the Policy under which Plaintiffs seek relief is governed by
ERISA. Plaintiffs assert that the Policy at issue is a non-ERISA plan and, accordingly, is
neither governed by nor preempted by ERISA. (Doc. 18, ¶¶ 8–10.) “Whether an insurance
policy falls within the ambit of ERISA depends on whether the insurance policy qualifies
as an ‘employee welfare benefit plan.’” May, 2010 U.S. Dist. LEXIS 5866, *11–13. The
Eleventh Circuit has held that an employee welfare benefit plan exits where there is:
(1) a ‘plan, fund, or program’ (2) established or maintained
(3) by an employer or by an employee organization, or by
both, (4) for the purpose of providing medical, surgical,
hospital care, sickness, accident, disability, death,
unemployment or vacation benefits, apprenticeship or other
training programs, day care centers, scholarship funds,
prepaid legal services or severance benefits (5) to participants
or their beneficiaries.
Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir. 1982) (emphasis added). An ERISA
plan “is established if[,] from the surrounding circumstances[,] a reasonable person could
ascertain the intended benefits, a class of beneficiaries, the source of financing, and the
procedures for receiving benefits.” Id. at 1373. It is clear to the Court that an ERISA plan
was established by Constant LLC in 2009. The intended benefits were the medical benefits
provided under the Policy; the class of beneficiaries was composed of Eligible Persons
including employees; the source of financing was the Policy premiums; and the
procedures for receiving benefits are set forth in the Policy. (See Doc. 26-2.) The remaining

& Accident Ins. Co., 295 F. Supp. 2d 1321, 1326 (M.D. Fla. 2003) (noting the tension between
the language of the safe harbor provision and the definition of an employee welfare
benefit plan, but determining that the latter takes precedence).
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factors in the Donovan test are otherwise plainly satisfied.
In addition, an ERISA plan “must provide benefits to at least one employee, not
including an employee who is also the owner of the business in question.” Slamen v. Paul
Revere Life Ins. Co., 166 F.3d 1102, 1104 (11th Cir. 1999). Relying upon Slamen, Plaintiffs
argue that because the Policy did not cover any non-owner employees in 2014—the year
in which Andre Raab’s claim was denied—the Policy does not fall within the realm of
ERISA. (Doc. 18, ¶ 10.) However, courts have rejected this argument, instead holding that
regardless of the characteristics of the plan on the date that a plaintiff files a claim, ERISA
will govern the plan if it originally covered a non-owner employee. Nix v. United Health
Care of Ala., Inc., 179 F. Supp. 2d 1363, 1368–70 (M.D. Ala. 2001) (explaining that the ERISA
requirement that a plan be “‘established or maintained’ by an employer covers the
situation where . . . an employer sets up an insurance plan for both owners and
employees, but later all employees cease to work for the employer, leaving only the
owners covered under the plan”). Accordingly, because the Plan initially covered
non-owner employees, it falls within ERISA.
Still, Plaintiffs argue that even if the Plan was initially governed by ERISA, it
converted to a non-ERISA plan when it ceased to cover non-owner employee participants
effective January 1, 2011. (Doc. 32, ¶¶ 16–18.) The Eleventh Circuit has noted that the
issue of “whether a policy that is initially governed by ERISA can undergo a
transformation such that it is no longer part of an ERISA plan” is one of first impression
in this Circuit. Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341, 1346 (11th Cir. 1994).
“Although the court there held that ERISA governed a converted policy when the former
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employee’s ability to obtain the converted policy continued to be integrally linked with
the original plan, the court did not decide whether conversion of a policy might defeat
ERISA coverage in other circumstances.” Mizrahi v. Provident Life & Acc. Ins. Co.,
994 F. Supp. 1452, 1453 (S.D. Fla. 1998) (explaining Glass, 33 F.3d at 1346). The Eleventh
Circuit distinguished Glass from Mimbs v. Commercial Life Insurance Company,
818 F. Supp. 1556, 1561 (S.D. Ga. 1993), in which the court held that claims arising from
the right to convert to an individual policy were governed by ERISA, while claims arising
from the converted policy itself were not. Id. Courts in this Circuit have since held that
where the employer-company contributing to the ERISA plan is sold or ceases to exist
and has no further involvement in the plan, the plan converts to an individual insurance
policy outside of the scope of ERISA. Mizrahi, 994 F. Supp. at 1453; Loudermilch v. New
England Mut. Life Ins. Co., 942 F. Supp. 1434, 1437 (S.D. Ala. 1996).
The facts here do not align with Mizrahi or Loudermilch. Constant LLC was not sold,
nor did it dissolve. The updated Policy remained a group health insurance policy issued
to Constant LLC and contemplated coverage for any future employees of the company.
(Doc. 1-2, p. 2.) Moreover, employer contribution terms remained in the plan, namely—
that Constant LLC was to contribute 50% of the premium for each Eligible Person. (Id.
at 14.) Based on these facts, the Court finds that the updated Policy continued to be
integrally linked with the original Policy much like in Glass. So the Policy continued to
be governed by ERISA throughout its existence.

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IV.

CONCLUSION

Accordingly, it is ORDERED AND ADJUDGED as follows:
1.

Plaintiff’s Motion for Remand to the Eighteenth Judicial Circuit in and for
Seminole County, Florida (Doc. 18) is DENIED.

2.

As an ERISA action, and in accordance with 28 U.S.C. § 636(b) and Local
Rule 6.01(b), this case is REFERRED in toto to U.S. Magistrate Judge
Thomas B. Smith for a Report and Recommendation regarding an
appropriate resolution of the case. The parties are encouraged to consider
consenting to jurisdiction before the magistrate judge. The consent form
may be found on the Court’s website. 3

3.

The Clerk is DIRECTED to REFER Defendant’s Motion to Dismiss Count II
of Plaintiff’s Complaint and Incorporated Memorandum of Law (Doc. 12)
to Magistrate Judge Smith.

DONE AND ORDERED in Chambers in Orlando, Florida, on August 25, 2017.

3

https://www.flmd.uscourts.gov/forms/Civil/AO_085.pdf.
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Copies to:
Counsel of Record

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