344 F.Supp.2d 283 (2004) | Cited 2 times | D. Massachusetts | November 1, 2004


Plaintiff Northern Kare Facilities/Kingdom Kare, LLC ("NorthernKare") sponsored a group health care benefit plan (the "ERISAplan"), and funded it with a bank account.1 Northern Karecontracted with Defendants Intermediary Insurance Service Inc.("Intermediary") and The MEGA Life and Health Insurance Company("MEGA Life") to provide stop-loss insurance coverage. Stop-lossinsurance protects the policyholder against excessive employeeclaims by reimbursing the policyholder for a portion of planbenefits that exceeds designated amounts.2 Under thisstop-loss policy, Intermediary and MEGA Life have no authority toapprove or deny employee claims for health care benefits. The policy declares,"Any and all reimbursements payable under the Policy will be madesolely to the Policyholder [Northern Kare]."3 And thepolicy expressly denies the existence of any right or legalrelationship between the insurance companies and any personcovered under Northern Kare's ERISA plan.4

The dispute underlying this litigation arose when Northern Karesought reimbursement from Intermediary and MEGA Life for certainplan benefits paid by Northern Kare to its employees.Intermediary and MEGA Life refused to reimburse Northern Kare.Northern Kare then sued for breach of contract and unfair tradepractice. Intermediary and MEGA Life moved to dismiss, arguingthat Northern Kare's state law claims are preempted by ERISA andthat Northern Kare has no standing to sue under M.G.L.chapter 93A, section 11.


In considering a Rule 12(b)(1) motion to dismiss, this courtwill "construe the Complaint liberally and treat all well-pleadedfacts as true, according the plaintiff the benefit of allreasonable inferences."5 A claim should be dismissedpursuant to Rule 12(b)(6) "only if it appears beyond doubt thatthe plaintiff can prove no set of facts in support of his claimwhich would entitle him to relief."6 A. ERISA Preemption

It is undisputed, at least for the purposes of this motion,that Northern Kare sponsored and maintains a self-funded ERISAplan.7 The Employee Retirement Income Security Actpreempts state laws "insofar as they may now or hereafter relateto any employee benefit plan."8 Accordingly, thequestion is whether Northern Kare's claims for breach of contractand unfair trade practice "relate to" Northern Kare's self-fundedERISA plan in such a way that those claims are preempted.

When applying ERISA's preemption provision, courts must startwith the "presumption that Congress does not intend to supplantstate law."9 In addition, the First Circuit emphasizesthe Supreme Court's "warning that, unless congressional intent topreempt clearly appears, ERISA will not be deemed to supplantstate law in areas traditionally regulated by thestates."10 Courts must look to "the objectives of theERISA statute as a guide to the scope of the state law thatCongress understood would survive."11 In conceivingERISA, Congress sought to "protect . . . the interests ofparticipants in employee benefit plans and their beneficiaries . . .by establishing standards of conduct, responsibility, and obligation forfiduciaries of employee benefit plans, and by providing forappropriate remedies."12 Consequently, the fiduciarystatus of the Defendants is highly relevant to ERISA's preemptivescope.13

Intermediary and MEGA Life do not argue that they are ERISAfiduciaries, and the evidence strongly suggests that they arenot. These insurance companies do not possess any powers orresponsibilities that ordinarily confer fiduciarystatus.14 Although they reserve the right to auditNorthern Kare's books,15 Intermediary and MEGA Life haveno decision-making authority to approve or deny plan benefitsclaimed by Northern Kare's employees, to manage or dispose ofplan assets, or to administer or amend the plan.16Intermediary and MEGA Life's obligations to Northern Kare asinsurers, therefore, bear no relation to ERISA's fiduciaryduties.

Yet this does not end the inquiry. For the purposes ofpreemption, a state law "relates to" an employee benefit plan if it "[1] has a connection with or [2]a reference to such a plan."17 Under the "connectionwith" heading, a state cause of action is preempted if itconstitutes an "alternative enforcement mechanism" providing aremedy for the breach of fiduciary duties and other obligationscreated and enforced by ERISA.18 State laws are alsopreempted if they "interfere with the administration of coveredemployee benefit plans, purport to regulate plan benefits, orimpose additional reporting requirements."19

There is no suggestion that judicial enforcement of thestop-loss insurance contract will function as an "alternativeenforcement mechanism" creating "a remedy for the violation of aright expressly guaranteed and exclusively enforced by the ERISAstatute."20 When seeking reimbursement, Northern Karemust provide Intermediary and MEGA Life with proof ofloss.21 But this contractual obligation does not"interfere with the administration of covered employee benefitplans, purport to regulate plan benefits, or impose additionalreporting requirements."22

Under the "reference to" heading, state laws are preempted whenthey act "immediately and exclusively upon ERISA plans . . . orwhere the existence of ERISA plans is essential to the law's operation."23 Northern Kare's claims, though, arebased on generally applicable principles of traditional statecontract law and the law of unfair trade practice. These lawsfunction "irrespective of the existence or non-existence of anERISA plan."24 The mere fact that reference to the ERISAplan is necessary to determine liability under the stop-losspolicy constitutes an "incidental relation" to the plan,insufficient to preempt state law.25

Seeking to avoid this analysis, Intermediary and MEGA Lifeargue that the stop-loss insurance policy itself constitutes anERISA plan and that Northern Kare's state law claims surelyrelate to this plan.26 The stop-loss policy, however,was clearly not designed to be an "employee welfare benefit plan"as defined by ERISA.

An ERISA plan is a "plan, fund or program" established ormaintained by an employer "for the purpose of providing" healthcare and other benefits for employees and planbeneficiaries.27 The purpose of the stop-loss insurancepolicy is to protect Northern Kare, not its employees, againstexcess financial loss.28 The policy declares, "Any andall reimbursements payable under the Policy will be made solely to the Policyholder[Northern Kare]."29 Intermediary and MEGA Life simply donot provide benefits of any kind to Northern Kare's employees.Indeed, the stop-loss policy expressly denies any right or legalrelationship between the insurance companies and any personcovered under Northern Kare's self-funded ERISA plan.30Given the language of the contract, it strains credulity forIntermediary and MEGA Life to argue that, by issuing the policy,they intended to establish an ERISA plan on behalf of NorthernKare's employees. Northern Kare's state law claims are notpreempted by ERISA.

B. Unfair Trade Practice

Intermediary and MEGA Life also contend that Northern Kare, asa business entity, has "no standing to bring an action underM.G.L. Chapter 176D, Section 3(9), through M.G.L. Chapter93A, § 11."31 This is true but irrelevant because Northern Karehas alleged violations of M.G.L. chapter 93A, section2.32 Under M.G.L. chapter 93A, section 11, businessorganizations can sue for unfair or deceptive acts proscribed bysection 2.33 At this stage of the litigation, it does not appear "beyond doubt that the plaintiff can prove no setof facts in support of his claim which would entitle him torelief."34


For the foregoing reasons, the Motion to Dismiss of DefendantsIntermediary Insurance Services and The MEGA Life and HealthInsurance Company is DENIED.


1. Compl. ¶ 13; Mem. of Law in Supp. of Mot. to Dismiss ofDefs. at 2-3. Northern Kare paid Defendant Benefirst to providethird-party administrative services for the ERISA plan.Benefirst, however, is not a party to the present motion todismiss.

2. BLACK'S LAW DICTIONARY 807 (7th ed. 1999).

3. Compl. Ex. B (Accident and Sickness Excess Loss InsurancePolicy) at 8.

4. Id.

5. Murphy v. United States, 45 F.3d 520, 522 (1st Cir.1995).

6. Roeder v. Alpha Indus., Inc., 814 F.2d 22, 25 (1st Cir.1987) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957))(internal quotation marks omitted).

7. Compl. ¶ 10; Pl.'s Mem. of Law in Supp. of its Opp'n toDefs. Mot. to Dismiss at 1; Mem. of Law in Supp. of Mot. toDismiss of Defs. at 2-3. The parties also agree that thestop-loss insurance policy does not convert the self-funded planinto an "insured plan." Northern Kare's state law claims are notsaved from preemption by 29 U.S.C. § 1144(b)(2)(A).

8. 29 U.S.C. § 1144(a) (emphasis added).

9. Carpenters Local Union No. 26 v. United States Fid. &Guar. Co., 215 F.3d 136, 139 (quoting N.Y. State Conf. of BlueCross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645,654 (1995)).

10. Id. at 139-40.

11. Id. at 140.

12. Id. (quoting 29 U.S.C. § 1001(b)) (emphasis added).

13. See, e.g., Mortgage Lenders Network USA, Inc. v.CoreSource, Inc., No. 3:03CV1578, 2004 WL 2093506 (D. Conn.Sept. 16, 2004) (holding that defendant plan supervisor was notan ERISA fiduciary, and therefore, plaintiff's state claims werenot preempted).

14. [A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.29 U.S.C. § 1002(21)(A).

15. See Compl. Ex. B at 8.

16. "[C]ourts have uniformly rejected a per se view offiduciary status arising from the issuance of a policy alone."ERISA FIDUCIARY LAW 149 (Susan P. Serota & Frederick A. Brodieeds., 1995).

17. Carpenters Local, 215 F.3d at 140 (quoting Cal. Div. ofLabor Standards Enforcement v. Dillingham Constr., 519 U.S. 316,324 (1997)) (alterations in original).

18. Id. at 140-41.

19. Id. at 141.

20. Id.

21. See Compl. ¶¶ 20-21.

22. Carpenters Local, 215 F.3d at 141.

23. Id. at 143 (quoting Cal. Div. of Labor StandardsEnforcement v. Dillingham Constr., 519 U.S. 316, 325 (1997)).

24. Id. at 144.

25. Union Health Care, Inc. v. John Alden Life Ins. Co.,908 F. Supp. 429, 435 (S.D. Miss. 1995) (holding that employer'sbreach of contract claims against reinsures were not preempted byERISA).

26. Mem. of Law in Supp. of Mot. to Dismiss of Defs. at 5-6.

27. 29 U.S.C. § 1002(1).

28. See Strategic Outsourcing, Inc. v. Commerce BenefitsGroup Agency, Inc., 54 F. Supp. 2d 566, 573 (W.D.N.C. 1999)("Reinsurance coverage does not provide insurance benefits forthe plan participants but instead is in the nature of excessliability coverage for the employer and, as such, falls outsidethe scope of both the plan and ERISA.").

29. Compl. Ex. B at 8.

30. Id.

31. Mem. of Law in Supp. of Mot. to Dismiss of Defs. at 13.

32. Compl. ¶¶ 44, 46.

33. See St. Paul Vill. Condo. Ass'n v. St. Paul Fire &Marine Ins. Co., No. Civ. A. 93-2546, 1996 WL 384249, at *6(Mass.Super. July 2, 1996) (noting that "even in a commercialdispute between business organizations, a violation of c. 176Dthat rises to a level so as to constitute an unfair or deceptiveact for purposes of c. 93A, § 2, would seem to support anindependent claim for violation of c. 93A, § 11"); see also M.DeMatteo Const. Co. v. Century Indem. Co., 182 F. Supp. 2d 146,161 (D. Mass. 2001) (explaining that business entities "can sueonly under section 11 of chapter 93A for a violation of section 2of that chapter, and not under either section 9 or section 11 ofthat chapter for a violation of chapter 176D").

34. Roeder v. Alpha Indus., Inc., 814 F.2d 22, 25 (1st Cir.1987) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957))(internal quotations marks omitted).

Back to top