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Rosen v. Provident Life and Accident Insurance Co.

United States District Court, N.D. Alabama, Southern Division

January 21, 2015

LAWRENCE ROSEN, M.D., Plaintiff,


WILLIAM M. ACKER, Jr., District Judge.

The second amended complaint filed by Dr. Lawrence Rosen ("Rosen" or "plaintiff") against Provident Life and Accident Insurance Company ("Provident" or "defendant"), contains five counts or theories of liability. Count One, relying only upon Alabama law, alleges breach by Provident of a contract of disability insurance that, accordingly to Rosen, entitles him to substantial benefits until he reaches the age of 65. Count Two invokes 18 U.S.C. § 1962(a), claiming that Rosen suffered a "racketeering injury" arising out of Provident's alleged violation of the above-cited provision of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Count Three claims a different RICO violation, this time invoking 18 U.S.C. 1962(b). It alleges a "racketeering injury" that flowed from the use of Provident's investment of racketeering income. Count Four is a claim under Alabama law for fraud in the forms of misrepresentations by agents of Provident during the negotiations for Rosen's purchase of the coverage, misstating it, and non-disclosure of facts that Provident was obligated to disclose. Count Five is an Alabama law claim for bad faith refusal to pay the benefits to which Rosen claims he is entitled.

Contemporaneously with filing an answer, Provident filed two purportedly partially dispositive motions. The first, filed with the answer on September 26, 2014, pursuant to Federal Rule of Civil Procedure 56, seeks a partial summary judgment dismissing all of Rosen's claims brought under Alabama law. It avers that the non-RICO claims are preempted by the Employee Retirement Income Security Act ("ERISA"). Filed on October 27, 2014, the second motion invokes Federal Rule of Civil Procedure 12(c) and seeks "judgment on the pleadings", but it tracks the language of Rule 12(b)(6) by asserting that Counts Two, Three, Four, and Five each fails to state a claim upon which relief can be granted. The only explanation for Provident's not invoking Rule 12(b)(6) and instead invoking Rule 12(c) is that a motion under Rule 12(b)(6) must be filed before an answer is filed. Rosen makes no point about the possible inappropriateness of a Rule 12(c) motion as a belated substitute for a Rule 12(b)(6) motion, so the court will treat the Rule 12(c) motion just as it would a Rule 12(b)(6) motion.

It appears, then, that Provident initially defends with two affirmative propositions, one aimed at all state law claims (except the state claim for breach of an insurance contract, which cannot be dismissed with prejudice if preempted by ERISA, because it could be restated as an ERISA claim). The second asserted absolute defense is that all counts, including the two RICO counts, fail to state claims upon which relief can be granted.

If the court should grant Provident's motion for partial summary judgment under Rule 56 based on ERISA preemption, its motion under Rule 12(c), as to the non-RICO claims, would be moot. Therefore, the court must first address Provident's Rule 56 motion for ERISA preemption.

Pertinent Facts on the ERISA Preemption Question

As it must, the court gives non-movant, Rosen, the benefit of the doubt as to all of the pertinent facts reflected in the evidence before the court, no matter by which party submitted. It also gives Rosen the benefit of all logical inferences from that evidence. If there is a dispute as to a material fact, Rosen's version of that fact will be assumed to be correct for Rule 56 purposes.

Provident has accompanied its Rule 56 motion with substantial evidentiary material. In its submission, it outlines the following evidence that it says is undisputed and that entitles it to a determination, as a matter of law, that Rosen's claims (except his RICO claims) are preempted by, and thus governed by, ERISA:

1. On or about April 10, 1990, Dr. Rosen's employer, Northeast Alabama Urology Center, P.C. ("NEAUC"), entered into a Salary Allotment Agreement with Provident Life agreeing with respect to policies issued by Provident Life "[t]o pay in full the required premiums for such policies and to remit such premiums to the insurance company when due." (Declaration of Roxanne Kaminski, Exhibit 1, ¶¶ 5-6, and Ex. A thereto).
2. In consideration of NEAUC's agreement, Provident Life agreed "[t]o accept premiums for such policies in accordance with published rates for policies where premiums are so deducted and so remitted." ( Id., ¶¶ 5-6, and Ex. A thereto).
3. In return for NEAUC's entering into the Salary Allotment Agreement, NEAUC's employees could apply for and obtain individual disability insurance policies with a 12% premium discount based on NEAUC's commitment to pay the premiums for all employed participants ( Id., ¶ 5).
4. To obtain the 12% premium discount, three or more employees at NEAUC had to participate in the salary allotment program. ( Id., ¶ 7).
5. Five applications were submitted from NEAUC employees. ( Id. )
6. In conjunction with the execution of the Salary Allotment Agreement, and the receipt of the applications from five employees of NEAUC, Provident Life assigned "Risk Number" 77866 to NEAUC.
7. In May, 1990, Provident Life issued and delivered five policies to employees at NEAUC including Dr. Rosen. ( Id., ¶ 7, and Exs. B and C thereto).
8. The policies were issued with a 12% premium for all participating employees, and this discount was only available to individuals who were employees of the employer entering into the Salary Allotment Agreement. ( Id., ¶ 8).
9. A number of other employees of NEAUC applied for and received individual disability policies from Provident Life after 1990 and received a 12% premium discount because NEAUC entered into the Salary Allotment Agreement and agreed to its terms. ( Id. ¶ 9).
10. Each of the policies issued under the Salary Allotment Agreement, including Dr. Rosen's, contained a salary allotment rider referencing the Salary Allotment Agreement with NEAUC as the employer. ( Id., ¶ 10, and Ex. D thereto).
11. Provident Life also applies financial underwriting to the applications for disability coverage in which it follows guidelines to make sure that the applicant does not obtain more coverage than is allowed based on current income. If the premiums are paid by the employer with no portion of the premium included in the insured's taxable income, the employee can obtain a greater amount of coverage than he or she would be able to obtain if he or she paid the premiums or if the premiums were included in his or her taxable income. ( Id., ¶ 12).
12. Dr. Rosen applied for a Provident Life disability insurance policy. ( Id., ¶ 13, and Ex. F thereto).
13. On his application, Dr. Rosen responded "yes" to question 11(a), which asked: "Will your employer pay for all disability coverage to be carried by you with no portion of the premium to be included in your taxable income?" ( Id. )
14. Based upon representations by Dr. Rosen in his application that the premiums would be paid by his employer with no portion allocated to his taxable income, Provident Life issued the policy to him for an amount above which he would have been permitted to obtain if premiums were paid by him or were charged to him as taxable income. ( Id. , ¶ 14).
15. Dr. Rosen's policy has remained the same and has not been altered or converted since it was issued by Provident Life, and Dr. Rosen has continued to receive the benefit of the 12% premium discount he obtained based on his employer's agreement to enter into the Salary Allotment Agreement. ( Id., ¶ 16).
16. Premium statements for the policy issued to Dr. Rosen and the policies in effect have been billed under the risk group and sent directly to NEAUC up until the time of Dr. Rosen's claim. NEAUC paid those premiums directly to Provident Life. ( Id. , ¶¶ 17-18, and Ex. G thereto).

These "facts" are lifted verbatim from Provident's submission. Many of them are offered as attachments to the declaration of Roxanne Kaminski, an employee of Provident, which is the subject of a motion to strike by Rosen.

Rosen counters, not only with his motion to strike the Kaminski declaration, which, if granted, might create disputes of material fact not otherwise detectable, but with the following rendition of the "facts" that he contends are undisputed and that demonstrate that his state law claims are not preempted by ERISA:

1. Dr. Rosen has been the sole owner of NEAUC since it was formed in 1985. (See Exhibit 1)
2. At all times since its formation, Dr. Rosen has been the only doctor employed by NEAUC (See Exhibit 1)
3. Since its inception in 1985, NEAUC has never had a group disability insurance plan or policy for its employees. (See Exhibits 1 & 2)
4. NEAUC has never offered any welfare benefit plan of any kind to its employees. In fact, the only employee benefit that NEAUC has ever had is a deferred compensation plan. (See Exhibits 1 & 5)
5. In the late 1980's early 1990's, Dr. Rosen's financial advisor, Mike Monroe, brought a Provident agent to Dr. Rosen's office to present the benefits of a Provident individual disability income policy. (See Exhibits 1 & 2)
6. At that time, Dr. Rosen already had disability insurance policies with UNUM, but the Provident agent who came with Mike Monroe explained that Dr. Rosen could get the same or better coverage for less money, so Dr. Rosen filled out an application for a Provident individual disability insurance (IDI') policy and a business overhead expense (BOE') policy. (See Exhibits 1 & 2)
7. Dr. Rosen was told by the agent that the Provident policies would provide the same monthly benefits as his then existing UNUM policies and that he would get those benefits if he was unable to perform the material and substantial duties of his specialty as urologic surgeon. (See Exhibits 1 & 2)
8. Dr. Rosen had an existing individual disability policy in force with UNUM that provided $19, 300 in monthly benefits if he became totally disabled, and a BOE policy which provided $12, 000 in monthly benefits in the event he became totally disabled. (See Exhibit 3, pg. 20 Question 4, (Bates PLA-POL-IDI(7028896)-000020)
9. Dr. Rosen did not financially qualify for a $19, 300/monthly benefit with Provident, but Provident issued him a policy for that benefit amount on an ...

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