APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
(D.C. Civil No. 93-cv-01127)
BEFORE: COWEN, NYGAARD and LEWIS, Circuit Judges.
The question we address in this appeal is whether ERISA governs an insurance coverage dispute between Appellee Frank E. Matinchek ("Matinchek") and the John Alden Life Insurance Company. We hold that ERISA does not govern this dispute because an insurance coverage plan covering only a sole business owner and his or her immediate family members cannot qualify as an "employee welfare benefit plan" under ERISA. We also hold, as a result of our conclusion that ERISA does not govern this dispute, that the district court incorrectly determined it had federal subject matter jurisdiction based on Matinchek's ERISA claims. Accordingly, we will vacate the district court's judgment and remand the case with instructions to dismiss the case for lack of subject matter jurisdiction. Because there were facts in the record that support diversity jurisdiction, however, we note that the district court's dismissal should not prejudice Matinchek's right to amend his complaint to include his state law claims.
On October 28, 1991, Matinchek completed an enrollment form for group health insurance coverage from the John Alden Life Insurance Company ("John Alden"). The enrollment form presented a series of questions regarding the applicant's health history. In response to a question regarding whether the applicant had been treated for prior diseases or disorders, including diabetes, Matinchek indicated "no." Matinchek also answered "no" to questions regarding whether he was currently taking any medication and whether he had consulted a doctor (other than his personal physician) over the past three years. App. 135a.
Prior to his application for health insurance coverage with John Alden, at least two doctors had performed blood sugar tests on Matinchek. Matinchek's blood sugar levels indicated that he had a problem with diabetes. The first doctor to make this diagnosis was Dr. Barnoski, Matinchek's family physician. Initially, sometime after July 1990, Dr. Barnoski put Matinchek on a 1500 to 1800 calorie diet. Dr. Barnoski thereafter performed four separate blood tests on Matinchek between February 6, 1991 and March 6, 1991. The blood sugar readings confirmed that Matinchek had a problem with diabetes. As a result of these readings, Dr. Barnoski prescribed and instructed Matinchek to take Glucotrol, which is an oral medication taken to lower the blood sugar in individuals suffering from non-insulin dependent diabetes. App. 82a.
Matinchek then visited Dr. Perna, a specialist in endocrinology and in the treatment of diabetes. During their initial consultation on March 27, 1991, Dr. Perna confirmed, based on a blood test and on Matinchek's medical history, that Matinchek was suffering from non-insulin dependent diabetes. Dr. Perna recommended that Matinchek follow a diabetic diet and "try to lose some weight." Dr. Perna also prescribed and instructed Matinchek to take 2.5 milligrams of Diabeta once a day. Diabeta is another oral medication that is used to lower the blood sugar in patients with non-insulin dependent diabetes. Dr. Perna continued to treat Matinchek for his diabetic condition throughout 1991 and performed additional blood sugar tests on April 16, 1991, May 7, 1991, and June 27, 1991. On March 30, 1992, Dr. Perna determined that "Matinchek's diabetes was sufficiently under control such that I discontinued the use of Diabeta to assist in lowering his blood sugar." App. 82a-90a. During the time period in which Dr. Perna was treating Matinchek, Matinchek was taking his own finger-stick blood tests on a routine basis to monitor his blood sugar level. App. 66a-70a.
Thus, the record evidence establishes that Matinchek made at least three misrepresentations on his enrollment form. First, he did not reveal that he was suffering from a diabetic condition as of October 28, 1991, the date of his enrollment. Second, he stated that he had not been to see a doctor who was not his personal physician over the past three years when, in fact, he had made numerous visits to Dr. Perna. Third, he represented that he was not taking any medication when Dr. Perna's records suggested that he was taking (or supposed to have been taking) Diabeta.
After receiving the enrollment form, John Alden issued a health insurance policy covering Matinchek and his wife. At the end of February, 1992, Matinchek entered the hospital because of an undisclosed medical problem. To cover the hospitalization expenses, Matinchek filed a claim for benefits with John Alden on March 10, 1992. The claim included a hospital diagnosis code for diabetes mellitus. Upon discovering the diagnosis code, a John Alden claims examiner initiated an investigation to determine whether Matinchek had, in his enrollment form, failed to disclose his diabetes as a pre-existing medical condition. The examiner ordered Matinchek's medical records from the hospital. The ...