Life Policies Bought Through Church Group Plan Not Covered by ERISA
An Alabama federal court has ruled that life insurance policies bought by church members were not covered under a federal benefits law called ERISA, the Employee Retirement Income Security Act. This is significant, because an insured covered under an ERISA plan has fewer rights than someone who buys an individual life insurance policy. ERISA is a federal law that restricts an insured’s rights compared to state laws which regulate individual life policies.
Guardian Life Insurance Company sold policies to the church members and gave them discounted special group rates under Guardian’s Basic Term Life Plan. That plan is typically offered to an employer for its employees. When two church members filed lawsuits for unpaid life insurance benefits and other claims against the insurance company in Montgomery County Circuit Court, Guardian used a process called removal to move the case to the U.S. District Court for the Middle District of Alabama, the local federal court. Guardian Life claimed that the church members had filed not filed lawsuits under state law, but instead filed claims which should be governed exclusively by ERISA.
The church members filed a Motion to Remand the case back to the state court, arguing that even if the life insurance was a group policy that ERISA excludes church plans. The federal court evaluated the facts, and concluded that the group was in fact not covered by ERISA because it was a group. The court looked at the company’s article of incorporation and found that it was a corporation set up for religious purposes. It also found that the person who signed the articles of incorporation listed their title as “bishop,” and the actual application for group coverage sent to Guardian Life listed the “nature of business” of the group as “church.”
For good measure, the federal judge also evaluated whether the two people who had died were “plan participants” under ERISA. The judge concluded that they were not, because they were not employees of the church. Guardian Life had claimed that the federal employee benefit law applied to the life insurance claims, despite knowing that the people that had died were not employees of the group sponsor!
The law requires an insurance company claiming the protection of ERISA in federal court to must prove that a jurisdiction for the federal court exists under the federal law. Guardian Life could not do that. The federal judge remanded the case to the state court to allow the lawsuit to continue under the state law claims.
One has to wonder why Guardian Life Insurance Company claimed that ERISA applied to these policies. When people are not employees, and the group is a church, there is no basis for ERISA to apply.
Lawrence v. Nation, No. 2:16-cv-61-WKW-PWG, 2016 WL 1576340 (M.D. Ala. April 13, 2016).
If you have questions about a Life Insurance claim or whether ERISA applies to your insurance claim, contact ERISA Attorney John V. Tucker online or call (866) 282-5260 to make an appointment.