Do you Have to Sue Your Employer In An ERISA Disability Case?
When your disability benefits through your employer’s group plan are denied, do you have to sue the employer in addition to the disability insurance administrator?
Sue the Employer or Not? Depends on Where You Live.
Depending on the region of the country you live in, the law will require you to sue the employer or leave them out. In some parts of the country, the employer is a proper party to an ERISA lawsuit. In others, you only sue the insurance company or the disability plan administrator that makes the claim decisions. The reason for this is that different courts have split on what the federal ERISA statute requires.
There are 11 federal appeals court regions, called Circuits. You have to know the law of your Circuit to answer the question. If you live in Alabama, Florida, Georgia, or Mississippi, a new case out of one of Alabama’s federal courts explains the law in the Eleventh Circuit.
In the Eleventh Circuit, You Only Sue the ERISA Plan Administrator.
The case, Dempsey v. Sedgewick Claims Management Services, involves the denial of Short Term Disability benefits. Dempsey filed suit in the U.S. District Court for the Northern District of Alabama, suing both Sedgewick and his employer, Honda Manufacturing of Alabama, LLC. In this Complaint, Dempsey described all of the claims processing and decisions to deny his claim as being done by Sedgewick, not Honda.
The District Judge explained the Eleventh Circuit law as follows:
The Eleventh Circuit has made it clear that “[t]he proper party defendant in an action concerning ERISA benefits is the party that controls administration of the plan.” Garren v. John Hancock Mut. Life Ins. Co., 114 F.3d 186, 187 (11th Cir. 1997); cf. also Rosen v. TRW, Inc., 979 F.2d 191, 193-94 (11th Cir.1992) (“We agree with the reasoning of the First Circuit and we hold that if a company is administrating the plan, then it can be held liable for ERISA violations, regardless of the provisions of the plan document.”); Caudle v. Life Ins. Co. of N. Am., 33 F. Supp. 3d 1288, 1297 (N.D. Ala. 2014) (dismissing Honda Health Plan from ERISA benefits count on additional ground that it was “not a plan administrator” and, therefore, was an improper party concerning that claim in light of Eleventh Circuit’s holding Garren).
In the Dempsey case, the plaintiff did not allege that Honda took part in the administration of his claim in any way. The court had not choice but to dismiss Honday, because only the person or company that controls the plan administration is named as a defendant in a lawsuit.
The Employer Could be a Proper Party…If it Controls Plan Administration or Decisions.
The Eleventh Circuit has not ruled out suing the employer who sponsored the ERISA plan in a benefit denial lawsuit. For example, in the Dempsey case, if Honda had made the final claim decision or somehow controlled the decision that Sedgewick made on the claim, it would have been a proper party.
Also, our firm has successfully kept employers in ERISA lawsuits by alleging that the employer control the funds of a plan from which benefits are paid, even when the employer did not make claim decisions. The court needs to be able to issue a decision which binds not on the claim decision maker, but also the entity that cuts the checks.
An ERISA attorney must know the law of the of the Circuit in which they are filing suit to successfully keep the proper parties in the case.
CASE: Dempsey v. Sedgewick Claims Management Services, Case No. 4:16-cv-1003-VEH, 2016 WL 453130 (N.D. Ala. 8/30/2016).