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LOPEZ v. GUARDIAN LIFE INS. CO. OF AMERICA

July 30, 1993

ANTONIO S. LOPEZ and SONIA LOPEZ, Plaintiff,
v.
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA and THE EPIC LIFE INSURANCE COMPANY, Defendant.



The opinion of the court was delivered by: JOHN A. NORDBERG

 Plaintiffs Antonio and Sonia Lopez filed a complaint against two insurance companies in Illinois State Court. The insurance companies removed the claim to federal court. One of them, The Guardian Life Insurance Company of America (Guardian), now files a motion to dismiss for failure to state a claim. For the reasons stated below, the motion to dismiss is GRANTED.

 BACKGROUND

 Between February 6, 1991 and August 16, 1991, Sonia Lopez incurred $ 140,128.22 in medical expenses related to a heart disorder. Ms. Lopez was covered by the group insurance plan provided through her husband Antonio's employer, Chicago Boiler Company. During the period of Ms. Lopez's illness, Chicago Boiler changed insurers. On March 31, 1991 Guardian discontinued coverage and on April 1, 1991 The Epic Life Insurance Company became the company's group insurer. Ms. Lopez has been unable to get either company to cover her medical expenses. As a result, she filed a three count complaint naming both companies as defendants.

 Only Count I is directed at Guardian. Ms. Lopez claims that Guardian is liable for her medical bills because of an alleged violation of an Illinois insurance law. Specifically, she claims Guardian acted in contravention of section 367i of the Illinois Insurance Codes's requirement that:

 
An insurer discontinuing a group health insurance policy shall provide to the policyholder for delivery to covered employees or members a notice as to the date such discontinuation is to be effective and urging them to refer to their group certificates to determine what contract rights, if any, are available to them. ILL. REV. STAT. ch. 73, para. 979i (1989)

 Guardian now files this motion to dismiss Count I. Pursuant to Federal Rule of Civil Procedure 12(b)(6), Guardian argues that Count I fails to state a claim upon which relief can be granted. Guardian argues that Ms. Lopez may not recover under the Illinois regulation because it has been preempted by federal statute. The federal Employee Retirement Income Security Act of 1974, 29 U.S.C. ยง 1144 (1985), (ERISA) provides broad preemption of state regulations of employee benefit plans. Guardian argues that the Illinois statute regulates such a plan and, pursuant to the Supremacy Clause of the Constitution, is superseded by federal ERISA regulations.

 ANALYSIS

 For this motion to dismiss the Court must answer two distinct questions. At the outset, the Court must determine if the insurance arrangement between Guardian and Chicago Boiler is the type of employee benefit plan covered by ERISA at all. If it is, the Court must answer the second question of whether ERISA preempts the plaintiff's claim under the Illinois Insurance Code.

 AN ERISA PLAN?

 The question of whether an insurance arrangement qualifies as an ERISA regulated employee benefit plan is determined by the level of employer participation in the plan. Brundage-Peterson v. Compcare Health Services Ins., 877 F.2d 509, 510 (7th Cir. 1989). If an employer plays an active role in the administration of an insurance package, the arrangement will be covered by ERISA. However, if an employer merely allows an insurer to offer a plan to its employees, the arrangement may avoid ERISA regulation. Id. at 511. The Department of Labor has adopted provisions defining the level of employer participation needed to bring a plan within ERISA regulation. A plan will not be regulated by ERISA if all of the following are met:

 
1. No contributions are made by an employer or employee organization;
 
2. Participation in the program is completely voluntary for employees or members;
 
3. The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll ...

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