The existence of Turner's Syndrome was disclosed to Nitzkin who then prepared the Starmark Employee Enrollment Form for the Adornos. Nitzkin, however, did not disclose the existence of Angela's Turner's Syndrome and the Adornos claim that Nitzkin informed them that this syndrome was not considered to be a preexisting condition which would render Angela ineligible for health insurance under the plan.
The Adornos claim that Benefit Trust indicated to them on August 14, 1989 that Angela's treatments for the pituitary dwarfism would be covered under the group's insurance plan. Then, on August 30, 1989, The Starmark informed Victor Adorno that it was rescinding the certificate of insurance for Angela Adorno claiming that her condition was a pre-existing condition which was required to be disclosed.
ERISA contains a broad preemption provision which provides that ERISA "shall supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan. . . . " 29 U.S.C. § 1144(a). The Supreme Court has recognized that Congress adopted such a broad preemption provision in order to establish a comprehensive and exclusive scheme of federal regulation of employee benefit plans. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44-6, 95 L. Ed. 2d 39, 107 S. Ct. 1549 (1987). The Court has also stated that the term "relates to" should be given its "broad, common-sense meaning." Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 739, 85 L. Ed. 2d 728, 105 S. Ct. 2380 (1985). Not every state law claim is automatically preempted by ERISA but only those that directly relate to an employee benefit plan. Pilot Life, 481 U.S. at 41.
After reviewing the claims alleged against Nitzkin we find this case directly analogous to the Fifth Circuit's holding in Perkins v. Time Ins. Co., 898 F.2d 470 (5th Cir. 1990). In Perkins, an independent agent solicited a company's participation in a group insurance plan offered by Time. An employee informed the agent that his daughter suffered from congenital eye defects which would require corrective surgery and inquired whether that surgery would be covered by Time. The employee asserted that the agent told him that a congenital defect would not be considered a preexisting condition. On the basis of this representation, the employee terminated his existing insurance coverage and elected to participate in the Time plan. When the employee proceeded with his daughter's eye surgery, his claim was denied by Time on the grounds that the congenital eye defect was a preexisting condition. Id.
In the case at hand, Nitzkin allegedly informed the Adornos that their daughter's Turner's Syndrome was not a preexisting condition. On the basis of this assertion, Adorno terminated his coverage with Travelers and elected to participate in the Benefit Trust plan. His daughter now requires treatment for a completely different condition and yet the insurance company is denying this coverage due to the fact that the company considers the Turner's Syndrome to be a preexisting condition which essentially would have denied her coverage in the first place.
The Fifth Circuit held in Perkins:
While ERISA clearly preempts claims of bad faith as against insurance companies for improper processing of a claim for benefits under an employee benefit plan, Pilot Life, and while ERISA plans cannot be modified by oral representations, . . . we are not persuaded that this logic should extend to immunize agents from personal liability for their solicitation of potential participants in a ERISA plan prior to its formation. Giving the ERISA 'relates to' preemption standard its common-sense meaning, . . . we conclude that a claim that an insurance agent fraudulently induced insured to surrender coverage under an existing policy, to participate in an ERISA plan which did not provide the promised coverage, 'relates to' that plan only indirectly. A state claim of this genre, which does not effect the relations among the principal ERISA entities (the employer, the plan fiduciaries, the plan, and the beneficiaries) as such, is not preempted by ERISA.