Charles v. Peery, Md

UNPUBLISHED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Affirmed by unpublished opinion.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.

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2
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

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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

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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.

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1The 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
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

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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

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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.

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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.

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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

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2We 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
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

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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

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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.
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