Peery v. Carolina Care Plan Inc. , 144 F. App'x 300 ( 2005 )


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  •                              UNPUBLISHED
    UNITED STATES COURT OF APPEALS
    FOR THE FOURTH CIRCUIT
    No. 04-1579
    CHARLES V. PEERY, MD,
    Plaintiff - Appellant,
    versus
    CAROLINA   CARE  PLAN   INCORPORATED;      UNITED
    HEALTHCARE INSURANCE COMPANY,
    Defendants - Appellees.
    Appeal from the United States District Court for the District of
    South Carolina, at Charleston. David C. Norton, District Judge.
    (CA-03-457-2-18)
    Argued:   March 16, 2005                      Decided:   July 20, 2005
    Before WIDENER and SHEDD, Circuit Judges, and HAMILTON, Senior
    Circuit Judge.
    Affirmed by unpublished opinion. Judge Shedd wrote the opinion, in
    which Judge Widener and Senior Judge Hamilton joined.
    ARGUED: Douglas Herring Westbrook, Charleston, South Carolina, for
    Appellant.   Michael Jay Zaretsky, CHORPENNING, GOOD, CARLET &
    GARRISON, Clifton, New Jersey; Noah M. Hicks, II, WILLOUGHBY &
    HOEFER, P.A., Columbia, South Carolina, for Appellees. ON BRIEF:
    Mitchell M. Willoughby, WILLOUGHBY & HOEFER, P.A., Columbia, South
    Carolina, for Appellee Carolina Care Plan, Inc. Michael W. DeWitt,
    CHORPENNING, GOOD & PANDORA CO., L.P.A., Columbus, Ohio; Angus H.
    Macaulay, Jr., NEXSEN, PRUET, JACOBS & POLLARD, L.L.C., Columbia,
    South Carolina, for Appellee United Healthcare Insurance Co.
    Unpublished opinions are not binding precedent in this circuit.
    See Local Rule 36(c).
    2
    SHEDD, Circuit Judge:
    Dr. Charles V. Peery brought suit against Carolina Care Plan,
    Inc. (“Carolina Care”) and United Healthcare Insurance Co. (“United
    Healthcare”) to recover health insurance benefits pursuant to a
    plan governed by the Employee Retirement Income Security Act of
    1974, 
    29 U.S.C. § 1001
    , et seq. (“ERISA”).                 The district court
    granted summary judgment in favor of Carolina Care and United
    Healthcare, concluding that the ERISA plan effectively terminated
    before   Peery’s     claim   for    benefits    arose.     For     the     following
    reasons, we affirm.
    I.
    A.
    Peery is the sole shareholder of Charles V. Peery, M.D., P.A.
    (the   “Peery     Group”),   an    employer    and    sponsor    of   an   employee
    benefits plan (the “Plan”) governed by ERISA.               The Plan provided
    that in exchange for the Peery Group’s timely payment of premiums,
    Carolina    Care     would   provide    health       maintenance      organization
    benefits    and    United    Healthcare       would    provide    out-of-network
    benefits to plan participants.          According to the Plan, the Peery
    Group was required to make its premium payments “in advance on a
    monthly basis,” with each payment due on the first day of the
    month.    J.A. 19.    A grace period of thirty-one days was available
    for any payment, during which time the Plan would continue in
    3
    force. In no event, however, could this grace period extend beyond
    the date on which the Plan terminated.                 The Plan provided for
    automatic termination in the event of non-payment of premiums:
    3.5 Grace Period. . . . This Policy shall automatically
    terminate retroactive to the last paid date of Coverage,
    if the grace period expires and any Policy Charge remains
    unpaid . . . .
    . . .
    5.1 Conditions for Termination of This Entire Policy.
    This Policy and all Coverage under this Policy shall
    automatically terminate on the earliest of the dates
    specified below:
    (a)    Retroactive to the last paid date of Coverage,
    if any Policy Charge remains unpaid.
    J.A. 20.
    The Peery Group frequently failed to make timely premium
    payments. During the two-year period from August 1997 to September
    1999, Carolina Care and United Healthcare threatened to terminate
    the Plan sixteen different times.             The Plan was terminated once in
    1998, but Carolina Care eventually reinstated its coverage.
    When    the    Peery    Group   failed    to   make   timely    payment   for
    coverage    in     October   1999,   Carolina       Care   invoked   the   Plan’s
    automatic termination provisions and informed the Peery Group that
    the Plan would be terminated effective September 30, 1999 -- the
    last paid date of coverage -- if payment were not made immediately.
    The Peery Group did not respond to this demand, and on November 30,
    1999, Carolina Care notified the Peery Group that the Plan was
    terminated as of September 30, 1999.
    4
    During October and November 1999, Carolina Care continued to
    pay claims of Peery Group employees for services that required up-
    front payment and for services performed while the Plan was still
    in force.     Carolina Care also paid other claims pursuant to a
    provision in the Plan authorizing Carolina Care to pay claims that
    it was not required to pay without incurring any obligation to pay
    similar claims in the future.1
    In February 2000, Peery suffered a stroke that required
    extensive medical care.    Mrs. Peery called Kelly Norman, Carolina
    Care’s account service supervisor, to give notice of Peery’s
    condition.     According to Mrs. Peery, Norman assured her that
    Carolina Care would reinstate coverage upon payment of the past-due
    premiums.    Mrs. Peery remitted a payment of $3,899.34 to Carolina
    Care -- representing the amount of premiums past due plus one
    additional    month’s   premium.   Mrs.   Peery   also   completed   an
    automatic-bank-draft form and returned it to Carolina Care along
    with a voided check.    On February 18, 2000, Carolina Care notified
    Peery that it was declining to reinstate the Plan based on the
    Peery Group’s payment history and that the Plan remained terminated
    1
    The Plan provided that Carolina Care “may, in certain
    circumstances for purposes of overall cost savings or efficiency
    and in its sole discretion, Cover services which would otherwise
    not be Covered.   The fact that [Carolina Care] does so in any
    particular case shall not in any way be deemed to require it to do
    so in other similar cases.” J.A. 45.
    5
    as of September 30, 1999.      Carolina Care later returned Mrs.
    Peery’s check.
    B.
    Peery filed this lawsuit in February 2003, seeking recovery of
    benefits under the Plan.   Peery subsequently amended his complaint
    to assert that Carolina Care violated 
    S.C. Code Ann. § 38-71-760
    (2000) (Ҥ 760") by failing to give adequate notice of termination
    of coverage.   Section 760 provides, in pertinent part, as follows:
    (a) This section applies to a group accident, group
    health, or group accident and health insurance or health
    maintenance organization policy or certificate that is
    delivered, issued for delivery, or renewed in this State
    which provides hospital, surgical, or major medical
    expense insurance, or any combination of these coverages,
    on an expense incurred basis. . . .
    (b) If a policy or contract subject to this article
    provides for automatic discontinuance of the policy or
    contract after a premium or subscription charge has
    remained unpaid through the grace period allowed for the
    payment, the carrier is liable for valid claims for
    covered losses incurred prior to the end of the grace
    period.
    (c) If the actions of the carrier after the end of the
    grace period indicate that it considers the policy or
    contract as continuing in force beyond the end of the
    grace period such as by continuing to recognize claims
    subsequently incurred, the carrier is liable for valid
    claims for losses beginning on or before the effective
    date of the written notice of discontinuance to the
    policyholder or other entity responsible for making
    payments or submitting subscription charges to the
    carrier. . . .
    (d) In addition to the notice required under Section 38-
    71-870 or Section 38-71-675, any notice of discontinuance
    by the carrier shall include a request to the group
    6
    policyholder or other entity involved to notify
    certificate holders covered under the policy or
    subscriber contract of the date when the group policy or
    contract will discontinue and advise that, unless
    otherwise provided in the policy or contract, the carrier
    is not liable for claims for losses incurred after such
    date.   The notice shall also advise, when the plan
    involves certificate holder contributions, that, if the
    policyholder or other entity continues to collect
    contributions for the coverage beyond the date of
    discontinuance, the policyholder or other entity may be
    held solely liable for the benefits for which the
    contributions are collected.
    (e) The carrier shall prepare and furnish to the
    policyholder or other entity at the same time an
    appropriate sample notice form to be distributed to the
    certificate holders concerned indicating the effective
    date of the discontinuance and urge the certificate
    holders to refer to their certificates or contracts in
    order to determine what rights are available to them as
    a result of the discontinuance.
    . . . .
    C.
    Carolina Care argued that ERISA preempts § 760 and the state
    statute is not saved by 
    29 U.S.C. § 1144
    (b)(2)(A).    Relying upon
    Kentucky Association of Health Plans, Inc. v. Miller, 
    538 U.S. 329
    (2003), Carolina Care argued that the relevant provisions of § 760
    do not “substantially affect the risk pooling arrangement between
    the insurer and insured” and so are not saved from preemption under
    § 1144(b)(2)(A).   Id. at 342.   According to Carolina Care, it did
    not violate the statute’s notice provisions in any event because
    those provisions do not apply where a plan terminates automatically
    for nonpayment.
    7
    Peery     argued      that    §    760       does   affect     the    risk    pooling
    arrangement between Carolina Care and its insureds and so is saved
    from preemption.      According to Peery, § 760 required Carolina Care
    to   provide    coverage      despite         the    Peery    Group’s      nonpayment     of
    premiums    because      Carolina        Care’s       conduct      suggested       that   it
    considered the Plan to remain in effect beyond the grace period.
    Since Carolina Care never provided a written notice of termination
    that complied with the specific requirements of § 760, Carolina
    Care was required to provide coverage for Peery’s claim.
    Both parties moved for summary judgment.                       The district court
    held a hearing on the motions and later entered an order granting
    summary judgment to the defendants.                   Rather than decide the ERISA
    preemption issue, the district court decided the merits of Peery’s
    claims under both ERISA and § 760. Assuming that § 760 was
    preempted by ERISA, as the defendants argued, the district court
    concluded      that   the    Plan       had    terminated       under      the   automatic
    termination     provisions,        such       that    Peery    was    not    entitled     to
    benefits.     Assuming that § 760 was not preempted by ERISA, as Peery
    argued, the district court concluded that Carolina Care was not
    required to provide the notice described in the statute and the
    Plan terminated when the relevant grace period expired.                               This
    appeal followed.
    8
    II.
    We review de novo the district court’s order granting summary
    judgment to the defendants.          See Bailey v. Blue Cross & Blue
    Shield, 
    67 F.3d 53
    , 56 (4th Cir. 1995).              Summary judgment is
    appropriate when there is no genuine issue of material fact and the
    moving party is entitled to judgment as a matter of law.              Fed. R.
    Civ. P. 56(c).
    Peery argues on appeal that the district court erred in
    assuming that § 760 is preempted by ERISA and by ruling that
    Carolina    Care   complied   with   the   statute   even   if   it   was   not
    preempted by ERISA.      We need not decide whether ERISA preempts
    § 760; rather, we assume, as Peery argues, that § 760 is not
    preempted.    Further, although the defendants contend that § 760
    does not apply to Carolina Care because it is not the type of
    insurer sought to be covered by the statute, we assume that the
    statute applies in this case.        It is undisputed that Carolina Care
    did not provide the particularized notice of termination described
    in § 760.    Therefore, the dispositive question is whether Carolina
    Care was required to provide such notice at all.
    A.
    Carolina Care purported to terminate coverage under the Plan
    pursuant to the Plan’s automatic termination provisions.               In two
    different provisions, the Plan stated that it would “automatically
    9
    terminate” if the grace period expired and the Peery Group had not
    made the scheduled premium payment.        Section 760 allows such an
    automatic termination, stating that “[i]f a policy or contract
    subject to this article provides for automatic discontinuance of
    the policy or contract after a premium or subscription charge has
    remained unpaid through the grace period allowed for the payment,
    the carrier is liable for valid claims for covered losses incurred
    prior to the end of the grace period.”        
    S.C. Code Ann. § 38-71
    -
    760(b).      Likewise,    the   relevant   administrative   regulation
    specifically provides that “[n]o written notice of termination
    shall be required to be given for termination due to nonpayment of
    premium.”    
    S.C. Code Ann. Regs. 69
    -22.IV.B.4 (2004).2
    Peery does not dispute the fact that the grace period for the
    October 1999 premium payment expired without payment by the Peery
    Group.    Pursuant to the terms of the Plan, coverage automatically
    terminated retroactive to the last paid date of coverage, i.e.,
    September 30, 1999.      Neither the Plan nor the statute explicitly
    required it, but Carolina Care gave the Peery Group written notice
    of the termination of coverage.         Carolina Care’s decision to
    provide such notice did not subject Carolina Care to the particular
    requirements of the statute.      Because Peery’s claim arose after
    2
    We have held that an insurer need not “make some affirmative
    acknowledgment” of automatic termination such as occurred in this
    case. See Coleman v. Nationwide Life Ins. Co., 
    969 F.2d 54
    , 58
    (4th Cir. 1992).
    10
    coverage had terminated, Carolina Care was not required to pay
    benefits.
    B.
    Peery   contends,   however,    that   Carolina    Care’s    conduct
    indicated that it deemed the Plan to continue in force beyond the
    end of the grace period and thus was required to provide written
    notice    of   termination    that    complied   with    specific   notice
    requirements.    “If the actions of the carrier after the end of the
    grace period indicate that it considers the policy or contract as
    continuing in force beyond the end of the grace period such as by
    continuing to recognize claims subsequently incurred, the carrier
    is liable for valid claims for losses beginning on or before the
    effective date of the written notice of discontinuance.” 
    S.C. Code Ann. § 38-71-760
    (c).       Such written notice of discontinuance must
    comply with the particular requirements described in § 760(d) and
    (e).
    The November 30, 1999, letter stated in the plainest terms
    that Carolina Care deemed the Plan terminated as of September 30,
    1999:
    The grace period for receiving premium payment for the
    month(s) of OCTOBER 1999 has expired.    As of today’s
    date, we have not received the premium due.
    Your contract with [Carolina Care] has therefore been
    terminated. This termination is due to non-payment, in
    accordance with South Carolina Department of Insurance
    11
    Rule 69-22.   All health care benefits with [Carolina
    Care] are cancelled effective September 30, 1999.
    J.A. 231.    This letter is sufficient to indicate Carolina Care’s
    understanding that the Plan had been terminated.           Carolina Care’s
    continued payment of certain claims did not indicate a contrary
    position, since the Plan itself provided that Carolina Care could
    provide benefits gratuitously without undertaking any obligation to
    provide other benefits in similar circumstances.             The fact that
    Carolina    Care    paid   benefits    for   claims   arising   before    the
    termination date and claims for services requiring up-front payment
    does not indicate that Carolina Care considered the Plan still in
    force. Because Carolina Care’s actions did not in any way indicate
    that it considered the Plan to continue after the date of automatic
    termination, § 760(c) is not applicable in this case and did not
    require Carolina Care to provide the particularized notice required
    by § 760(d) and (e).
    III.
    Even if Peery is correct that § 760 is saved from ERISA
    preemption, and even if he is correct that the statute applies to
    the   defendants,    the   district    court   correctly   ruled   that   the
    defendants did not violate that statute but followed the terms of
    the Plan.   Because we conclude that the defendants are entitled to
    judgment as a matter of law, the order of the district court is
    AFFIRMED.
    12
    

Document Info

Docket Number: 04-1579

Citation Numbers: 144 F. App'x 300

Judges: Hamilton, Shedd, Widener

Filed Date: 7/20/2005

Precedential Status: Non-Precedential

Modified Date: 8/7/2023