Adams v. Symetra Life Insurance Company

Opinion

1 WO 2 3 4 5

9 Robert Luke Adams, No. CV-18-00378-TUC-JGZ (LAB)

10 Plaintiff, ORDER

11 v.

12 Symetra Life Insurance Company, et al.,

13 Respondents. 14 15 On November 3, 2020, the Court adopted Magistrate Judge Leslie A. Bowman’s 16 Report and Recommendation (R&R) to deny Defendant Symetra Life Insurance 17 Company’s Motion for Partial Summary Judgment on ERISA. (Doc. 281.) Symetra now 18 seeks reconsideration of that Order. (Doc. 285). The Court called for a response to the 19 motion for reconsideration pursuant to LRCiv 7.2(g)(2), and Plaintiff filed a Response. 20 (Docs. 286, 287.) After an independent review of the parties’ filings and the record, the 21 Court will grant both Symetra’s motion for reconsideration and the motion for partial 22 summary judgment. 23 I. Motion for Reconsideration 24 In the R&R, the magistrate judge concluded that The Agents Association (TAA) 25 established and maintained the insurance policy at issue, not Plaintiff Adams. (Doc. 265 26 at 8.) Symetra filed an Objection to that conclusion, arguing that the Adams Group PLLC 27 (“Luke Adams Agency”) established an ERISA policy by obtaining and paying for policies 28 for Adams and two of his employees. (Doc. 259 at 5-7.) 1 In denying Symetra’s motion for summary judgment, this Court declined to consider 2 Symetra’s objection that the Luke Adams Agency established the ERISA policy, 3 concluding the objection was contrary to the undisputed facts and argument originally 4 submitted by the parties that Luke Adams, as an individual, established the ERISA plan. 5 (Doc. 281 at 4-6.) However, Symetra has pointed out that it did originally argue that 6 “Plaintiff (as an employer),” i.e., Luke Adams Agency, established an ERISA plan. (Doc. 7 200 at 2.) Further, the parties agree that the Court’s distinction (between Adams as an 8 individual and the Luke Adams Agency) was immaterial. Therefore, the Court should have 9 addressed Symetra’s underlying argument. Accordingly, the Court will reconsider its order 10 denying summary judgment, consider Symetra’s original objection, and assess whether 11 Plaintiff’s disability policy was an ERISA policy established or maintained by the Luke 12 Adams Agency.1 See LRCiv 7.2(g)(1) (reconsideration is proper if matters were 13 “overlooked or misapprehended by the Court”). 14 II. Standard of Review 15 When reviewing a magistrate judge’s R&R, this Court “may accept, reject, or 16 modify, in whole or in part the findings or recommendations made by the magistrate 17 judge.” 28 U.S.C. § 636(b)(1). “[T]he district judge must review the magistrate judge’s 18 findings and recommendations de novo if objection is made, but not otherwise.” United 19 States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (emphasis in 20 original). District courts are not required to conduct “any review at all . . . of any issue that 21 is not the subject of an objection.” Thomas v. Arn, 474 U.S. 140, 149 (1985); see also 28 22 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72. Further, a party is not entitled as of right to de novo 23 review of evidence or arguments which are raised for the first time in an objection to the 24 report and recommendation, and the Court’s decision to consider newly-raised arguments 25 is discretionary. Brown v. Roe, 279 F.3d 742, 744 (9th Cir. 2002); United States v. Howell, 26 1 The Court disagrees with Adams’s assertion that in adopting the R&R, the Court 27 rejected Symetra’s argument that Luke Adams Agency established an ERISA plan. The Court expressly declined to consider Symetra’s objection that the agency established an 28 ERISA plan, concluding the argument had been waived. (Doc. 281 at 4-6.) 1 231 F.3d 615, 621-22 (9th Cir. 2000). 2 “The existence of an ERISA plan is a question of fact, to be answered in light of all 3 the surrounding facts and circumstances from the point of view of a reasonable person.” 4 Kanne v. Conn. Gen. Life Ins. Co., 867 F.2d 489, 492 (9th Cir. 1988). Symetra has the 5 burden to prove the facts necessary to establish that ERISA applies. Id. at 492 n.4 (the 6 party asserting a claim of ERISA preemption has the burden of providing the facts 7 necessary to establish the defense). 8 III. Background 9 Adams owned his own insurance agency, Luke Adams Agency.2 (Doc. 256 at 3.) 10 Adams sold insurance for Farm Bureau Financial Services (Farm Bureau). (Id.) As a Farm 11 Bureau agent, Adams was eligible for membership in The Agents Association (TAA), 12 which “represents the interests of Farm Bureau Agents.” (Id.) TAA offers its members and 13 its members’ employees a group, long-term disability policy. (Id. at 3-4.) Adams, through 14 TAA, purchased long-term disability coverage effective February 18, 2013. (Doc. 201, 15 DSOF at ¶ 5; Doc. 226, CSOF at ¶ 5.) At that time, TAA’s long-term disability plan for its 16 members was funded through a group insurance policy issued by Symetra. (Doc. 201, 17 DSOF at ¶ 30; Doc. 226, CSOF ¶ 30.) 18 In 2013, Luke Adams Agency employed Kim Hightower. (Doc. 266-1, ¶ 5.) 19 Hightower desired to take advantage of the group, long-term disability benefits available 20 through TAA. (Id.) Luke Adams Agency agreed to provide Hightower with the TAA 21 long-term disability benefits by paying for the cost. (Id.) Hightower’s coverage was 22 effective between January 1, 2017 and July 31, 2018. (Doc. 201, DSOF at ¶ 41; Doc. 226, 23 CSOF at ¶ 41.) Adams paid for the cost of his and Hightower’s coverage through his Farm 24

25 2 The parties filed statements of facts, but also submitted additional facts and exhibits in various filings during the briefing on the motion for summary judgment. Although the 26 Rules do not permit the additional factual briefing submitted by the parties in this case, neither party objected nor filed a motion to strike the additional briefing. See LRCiv 27 56.1(a)-(b). The Court has reviewed the original statements of undisputed facts, the parties’ filings, and both parties’ additional facts and exhibits, and sets forth those undisputed facts 28 relevant to resolution of the motion. 1 Bureau commissions, which were submitted in a lump sum to Symetra.3 (Doc. 201 DSOF 2 at ¶¶ 38, 46; Doc. 226, CSOF at ¶¶ 38, 43.) 3 Adams and Hightower’s long-term disability policies through TAA were not 4 completely identical but had similar terms; eventually both Adams and Hightower were 5 covered under the same group policy issued by Symetra. (Doc. 266 at 10; Doc. 282 at 2; 6 Doc. 226-3 at 5-6.) Hightower ceased working for Adams in approximately 2017. (Doc. 7 266-1 at ¶ 8.) After Hightower left Adams’s employment, Hightower’s long-term 8 disability coverage lapsed because she was no longer an employee of a TAA member. (Id. 9 at ¶ 10.) 10 Adams submitted his disability claim to Symetra on January 22, 2018, alleging 11 disability beginning on July 11, 2017. 4 (Doc. 203, DSOF at ¶ 3; Doc. 230-1, CSOF at ¶ 12 3; Doc. 1 at 3.) 13 IV. Discussion 14 ERISA applies to an “employee welfare benefit plan” that is “any plan, fund, or 15 program . . . established or maintained . . . by an employer . . . for the purpose of providing 16 for its participants or their beneficiaries, through the purchase of insurance or otherwise, 17 []medical, surgical, hospital care or benefits, or benefits in the event of sickness, accident, 18 disability, death or unemployment, or vacation benefits[.]” 29 U.S.C. § 1002(1). “The 19 regulations implementing this section provide that a plan ‘under which no employees are

20 3 From January 1, 2014 through November 2018, Adams also provided for critical illness/cancer coverage, dental coverage, and short-term disability coverage for employee 21 Merien Alexander. (Doc. 201, ¶¶ 42, 43; Doc. 226, CSOF, ¶¶ 42, 43; see also Doc. 266- 1, ¶ 5.) However, the parties do not discuss Alexander in much detail, presumably because 22 the coverage that was extended to Hightower is sufficient to establish a plan subject to ERISA, as is discussed in this order. 23 4 The record includes a potential factual discrepancy concerning the final date of 24 Hightower’s coverage. Adams alleges that when Hightower left his employment in “approximately 2017 due to illness,” her long-term disability coverage “lapsed (and she 25 was no longer entitled to benefits since she was no longer an employee of a TAA member).” (Doc. 266-1 at 3-4.) At the same time, the parties agree that Hightower’s policy 26 was effective until July 31, 2018. (Doc. 201, DSOF at ¶ 41; Doc. 226, CSOF at ¶ 41.) Plaintiff does not argue that Hightower’s coverage ended before the onset of Plaintiff’s 27 disability or that Hightower’s exit from the plan is relevant to the determination of whether Adams’s policy was part of an ERISA-governed plan. In fact, Adams appears to argue that 28 his coverage was unaffected. (Doc. 266 at 10-11.) 1 participants’ does not constitute an ERISA employee benefit plan.” Peterson v. Am. Life & 2 Health Ins. Co., 48 F.3d 404 (9th Cir. 1995). “Neither an owner of a business nor a partner 3 in a partnership can constitute an ‘employee’ for purposes of determining the existence of 4 an ERISA plan.” Id. However, a plan that meets ERISA’s statutory definition, 29 U.S.C. § 5 1002, and covers working owners and nonowner employees, is subject to ERISA. 6 Raymond B. Yates, M.D. P.C. Profit Sharing Plan v. Hendon, 541 U.S. 1, 21 (2004). 7 It is clear that, at the time of its inception in 2013, the disability plan covering Adams 8 was not subject to ERISA because it only covered Adams, who was an owner. The issue 9 that must be decided is whether Luke Adams Agency subsequently established an 10 employee benefit plan or program when it extended benefits to and purchased insurance 11 for two of its employees, including one of whom obtained long-term disability coverage 12 under the same group policy as Adams’ policy. 13 The Ninth Circuit addressed this issue in LaVenture v. Prudential Ins. Co. of Am., 14 237 F.3d 1042, 1047 (9th Cir. 2001). In LaVenture, a company purchased disability 15 insurance coverage solely for the owner-plaintiff and her husband. LaVenture, 237 F.3d at 16 1044-45. One year later, the company hired its first full-time employee and purchased 17 health insurance for that employee, and did the same for two additional employees at a 18 later date. Id. at 1044. The company did not offer the employees disability insurance. Id. 19 The issue presented to the court was whether the owner’s disability insurance policy 20 became an ERISA plan at the time the owner’s business provided health insurance benefits 21 to its employees. Id. at 1045–46. The LaVenture court concluded that it did not. The court 22 concluded that ERISA applies to an employee benefit plan when either (1) an owner and 23 employee are on the same benefit plan, or (2) the owner and employee are on different 24 plans that are “intertwined so as to constitute one overall benefit plan.” Id. at 1047. The 25 court first found that the owner-plaintiff’s disability policy was not subject to ERISA 26 because “no one other than the [owners of the company] has ever been provided any 27 disability benefit or disability insurance.” Id. The court stated that “[i]n light of the clear 28 exclusion of benefit plans covering only owners from ERISA’s scope, . . . it makes little 1 sense to treat a benefit plan, which covers only a business owner as part of the employer’s 2 employee benefit plan.” Id. (internal quotation marks and citation omitted). The court also 3 found, considering the case-specific facts, that there “was no evidence to establish that the 4 disability policy and health plan were intertwined so as to constitute an overall benefits 5 plan.” Id. The court noted that the policies bore no relationship to one another because they 6 were purchased at different times; there was no evidence that the two plans were initially 7 established with the intent to create one benefit plan; and the disability insurance plan had 8 not covered or paid any benefits to any employees. Id. 9 Looking to the plain meaning of 29 U.S.C. § 1002(1) and applying the principles 10 set forth in LaVenture, the Court concludes that Adams’s long-term disability policy is 11 subject to ERISA. The Court finds that, on the undisputed facts, Luke Adams Agency 12 established an employee benefit plan when it, through the purchase of insurance, provided 13 group, long-term disability coverage to Adams and Hightower. Although Hightower was 14 not initially covered under the same policy as Adams, this changed in April 2017 when 15 Hightower’s coverage was provided through the same group, long-term policy as Adams’s 16 coverage: Luke Adams Agency purchased the coverage through the same organization and 17 paid both premiums using commission payments, which were submitted by lump sum to 18 the insurance company. 19 For these same reasons, the Court also finds that Adams’s and Hightower’s plans 20 were sufficiently “intertwined” so as to constitute one overall benefit plan. Although the 21 plans were not identical (their coverage differed slightly because the policies fell in 22 different classes within one group policy), the plans were intertwined because they were 23 for the same type of benefits, offered through the same organization, were part of the same 24 general benefits package,5 were provided by the same insurer, under the same group policy, 25 and were paid for by Luke Adams Agency. See Steigleman v. Symetra Life Ins. Co., No. 26 CV 19-8060-PCT-ROS, 2021 WL 778605, *12, 6-13 (D. Ariz. March 1, 2021) (applying

27 5 Although TAA established the underlying benefits package, Luke Adams Agency established an ERISA plan when it, “through the purchase of insurance or otherwise,” 29 28 U.S.C. § 1002(1), adopted the same package as its own by offering the coverage to its employees and paying for the policies. 1 LaVenture to similar facts and summarizing other circuit case law to conclude ERISA 2 applied); see also Greger v. Unum Grp., No. 8:15-cv-01975-JFW-PJW, 2016 WL 3 7495477, *4 (C.D. Cal. Apr. 8, 2016) (finding single long-term disability policy constituted 4 an ERISA plan even though the partners’ coverage was in a different class than the 5 employee’s coverage). 6 The Court further notes that a judge of this Court recently found that ERISA applied 7 under nearly identical facts. See Steigleman, 2021 WL 778605, *6-13. In that case, the 8 business owner, Steigleman, purchased the same Symetra long-term disability policy 9 through TAA that Adams purchased, and later paid for coverage for employees under that 10 same policy. Id. The court considered the extent that that the two disability policies were 11 intertwined. Id. The court found that any differences in coverage available to Steigleman 12 and her employees were slight and “pale[d] in comparison to the difference between for 13 example, health insurance and disability insurance.” Id. The court noted that the “plans 14 were for the same type of benefits, through the same insurer, all paid for by the Steigleman 15 Insurance Agency.” Id.; cf. LaVenture, 237 F.3d at 1044 (noting that no one other than the 16 owner had been offered any disability benefits or insurance). The court, therefore, 17 concluded the plans were sufficiently intertwined to establish that Steigleman’s agency 18 offered a single ERISA-governed plan. Id. 19 For the foregoing reasons, the Court will dismiss Adams’s state law claims as 20 preempted by ERISA. The Court will allow Adams to file an amended complaint under 21 ERISA and will order the parties to file a proposed schedule for the remainder of the case, 22 if Plaintiff decides to proceed under ERISA. 23 V. Conclusion 24 IT IS ORDERED: 25 1. Defendant Symetra Life Insurance Company’s Motion for Reconsideration 26 (Doc. 285) is GRANTED. 27 2. The November 2, 2020 Order (Doc. 281) denying Symetra’s Partial Motion for 28 Summary Judgment on ERISA is VACATED IN PART as it relates to the issue 1 of whether Luke Adams Agency created an employee benefits plan subject to 3 3. Symetra’s Partial Motion for Summary Judgment on ERISA (Doc. 200) is 5 4. Within 30 days of the filing date of this Order, the parties shall file a Joint Report 6 addressing whether Plaintiff will file claims under ERISA. If Plaintiff decides to 7 proceed under ERISA, the parties shall propose deadlines for the remainder of 8 this case and discuss the status of any pending discovery matters in light of this 9 Order. 10 Dated this 28th day of September, 2021. 11 12 □ 13 pote Soipe 4 ; Honoral le Jennife □□□□□ United States District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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