Duncan v. Unum Life Ins. Co. of Am., 2022 WL 2812659 (M.D. Tenn. 2022)
A person sued an insurer in state court docket after it denied parts of his declare for long-term incapacity (LTD) advantages. Searching for the safety of ERISA preemption, the insurer efficiently eliminated the case to federal court docket. In reference to the person’s request for a jury trial, the federal court docket wanted to find out whether or not the LTD coverage was topic to ERISA. (Generally, there is no such thing as a proper to a jury trial for ERISA lawsuits.) To do that, the court docket analyzed whether or not the LTD coverage was a part of an employer-sponsored ERISA plan or whether or not it fell throughout the DOL’s regulatory protected harbor exempting sure “voluntary” insurance coverage preparations from ERISA if workers pay the complete premium and the employer makes no contributions and doesn’t endorse the association.
The employer provided a wide range of advantages, with protection offered underneath 4 separate insurance policies obtained from the identical insurer and offered as a gaggle advantages plan for workers—primary life, voluntary life, short-term incapacity, and the LTD protection. The employer paid the premiums for the essential life protection, whereas premiums for the opposite kinds of protection had been employee-funded. The court docket agreed with the insurer that the LTD coverage was a element of the employer’s total plan and was endorsed by the employer, making the protected harbor inapplicable. It rejected the person’s competition that the LTD coverage ought to be severed from the employer’s different advantages and analyzed individually underneath the protected harbor. Distinguishing a case the person cited in assist of severing the LTD coverage from the others, the court docket famous that, amongst different issues, the insurance policies in that case had been issued by completely different insurers, whereas right here the employer procured the entire insurance policies from the identical insurer on the similar time. The court docket defined that “employee-funded incapacity advantages will not be severable from employer-funded insurance coverage” for functions of evaluating ERISA’s applicability—notably when the employer “actively engaged in deciding on each the employer-funded and employee-funded insurance policies that comprise a advantages bundle.” There was proof right here that the employer utilized for the protection, chosen the kinds of protection that will be included within the plan, and retained the proper to amend, modify, or terminate the plan—actions that mirrored endorsement. For the reason that LTD coverage was a part of the general ERISA plan, the person was not entitled to a jury trial.
EBIA Remark: As a result of state-law claims usually carry greater potential damages and penalties than these obtainable underneath ERISA, people usually search to make use of the voluntary plan protected harbor to keep away from ERISA’s utility, whereas insurers take the alternative stance (see, e.g., our Checkpoint article). For employers, misunderstanding the protected harbor’s parameters—believing that the protected harbor applies when the truth is it doesn’t—can result in ERISA compliance failures. Given the info recognized by the court docket, nevertheless, it seems that this employer meant all elements to be a part of its ERISA advantages program. For extra info, see EBIA’s ERISA Compliance handbook at Sections VII.C (“Detailed Evaluation of Voluntary Plan Secure Harbor”) and XXXVI.J.2 (“Is There a Proper to Jury Trial Underneath ERISA?”).
Contributing Editors: EBIA Employees.