Is it an ERISA Plan or Not? Court Allows Discovery to Decide if AD&D Policy is ERISA Plan
A Nevada federal judge has allowed an insurance company to get discovery into whether an Accidental Death (AD&D) insurance policy was a group plan or not. That is a crucial fact in insurance cases, because there are huge differences between state law which regulates individual policies and federal law which regulates group policies. Life insurance companies generally have stronger rights in group claims than they do in individual policy claims.
Lawsuit Filed Under State Law For Breach of Contact
In Wells v. Hartford Life & Accident Insurance Company, the Plaintiff was Heidi Wells, the beneficiary of Timothy Wells. Timothy had neck surgery, and tragically passed in his sleep while recovering from the surgery. The Clark County Medical Examiner ruled the death an accident resulting from “a combination of Oxycodone, Methadone, Alprazolan, Morphine and Cyclobenzaprine Intoxication,” all medications he was prescribed by doctors. Heidi Wells filed a claim for accidental death benefits with Hartford under Timothy Wells’ Accidental Death & Dismemberment (AD&D) policy. After Hartford denied the claim, Heidi Wells filed a lawsuit seeking damages for Hartford’s breach of contract under state law in the amount of the AD&D benefits.
Hartford Claims ERISA, the Federal Employee Benefits Law, Applies
Hartford filed a Motion to Dismiss the lawsuit, claiming that the Employee Retirement Income Security Act (ERISA) applied. If true, the court would have had to dismiss Heidi Wells’ lawsuit, because ERISA allows only a special type of lawsuit for benefits owed, rather than an action for breach of contract under state law.
Hartford claimed that Timothy Wells was a member of a labor union that participated in a group AD&D policy, and that was how he obtained the coverage. Heidi Wells’ attorney argued to the court that just because a union plan may have existed does not show whether exceptions to ERISA may apply.
As the court stated in its opinion, “Wells argues that whether or not the Policy is governed by ERISA would require the Court to engage in a factual inquiry to determine if Decedent’s union promoted, sponsored, endorsed, or supported the Policy.” Promoting, sponsoring, and supporting a plan are shorthand for a portion of ERISA regulations that carve certain types of group coverage out of ERISA where the employer does little to nothing to push the plan as a “group plan.”
Whether ERISA Applies to an Insurance Plan is a Factual Question
The Nevada court recognized that whether a plan is subject to ERISA involves answering a question: did an employer or union establish or maintain the plan for its employees? The court’s opinion acknowledges that it could not grant Hartford’s Motion to Dismiss (a motion based on legal pleading technicalities) without knowing the facts.
Hartford Ask For, and the Court Granted, Discovery on Whether an ERISA Plan Exists
Realizing the judge would not grant the Motion to Dismiss, Hartford asked the court for the change to take discovery – written requests for information, oral depositions, etc. – to find out if the union created an ERISA plan. The judge recognized that this was necessary, and denied the Motion to Dismiss, but issued an order allowing Hartford to engage in discovery to find out if the union established or maintained an employee welfare benefit plan covered by ERISA. Basically, the judge decided to let Hartford go out and discovery more facts to try to prove that the union had established or maintained a group plan for the benefit of its members.
TAKEAWAY: Discovery is often necessary in ERISA cases to answer factual questions that did not arise in the pre-lawsuit claim process. Whether ERISA applies can be an open question, and it must be answered to determine what insurance law will apply to a case.
CASE: Wells v. Hartford Life & Accident Insurance Company, Case No. 2:16-cv-00056-GMN-CWH, 2016 WL 4257769 (D. Nev. Aug. 10, 2016).
Has a life insurance company denied your group Accidental Death or Dismemberment claim. Call experienced, top-rated Life Insurance attorney John V. Tucker for a free consultation at (866) 282-5260.