E-Alert Case Updates

Plaintiff’s State Law Claims Are ERISA Preempted and Only Breach of Fiduciary Duty Claim Survives Defendants’ Motion to Dismiss

Gross v. St. Agnes Health Care Inc.
Civil Action No. ELH-12-2990 (U.S. District Court for the District of Maryland, September 12, 2013)
by Colleen K. O’Brien, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In 2001, Plaintiff enrolled in a “Supplemental Term Life Insurance Policy” (the “Policy”) through St. Agnes for herself, her then-husband, David Gross, and their four (4) children, which she paid through payroll deductions. Upon enrolling, plaintiff received a document titled, “Supplemental Term Life Insurance Plan – Summary Plan Description” (“SPD”). The SPD provided that additional life insurance coverage could be purchased through the Plan for yourself or “eligible dependents,” which included an “eligible spouse.” The SPD stated that dependent coverage ended when a dependent ceased to be eligible as a dependent. The SPD advised that if there were any discrepancies between the information in the SPD and the official Plan documents, the Plan documents and insurance certificates controlled. The Policy defined “Dependent” as, inter alia, “your lawful spouse.”

In 2004, Plaintiff and her husband contemplated divorce, but were concerned about the life insurance policies if they should divorce. Plaintiff allegedly met with a benefits coordinator at St. Agnes who assured Plaintiff that she could maintain the life insurance coverage on her husband even if they were separated or divorced. Allegedly relying on this, Plaintiff and her husband divorced in 2006. After the divorce, Plaintiff submitted forms to disenroll her husband from various health insurance benefits citing the divorce as the reason for the change, but she did not disenroll him from the life insurance policy, and she continued to pay premiums on the life insurance policy on her husband through payroll deductions. After her ex-husband passed away, Plaintiff claimed the insurance benefits, and the plan administrator denied the claim on the basis that Plaintiff’s ex-husband was not an eligible dependent. The plan administrator also recommended that Plaintiff seek a reimbursement of premiums from her employer.

Plaintiff subsequently filed suit against her employer, St. Agnes Health Care, Inc. (“St. Agnes”), and Ascension Health, the plan administrator, asserting that benefits were wrongfully denied and that defendants misrepresented plaintiff’s eligibility for life insurance benefits, despite her divorce. Plaintiff claimed breach of contract, fraudulent misrepresentation, negligent misrepresentation, promissory estoppel, waiver, breach of fiduciary duties under § 504 of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1104, and interference with protected rights under §§ 510 & 511 of ERISA, 29 U.S.C. §§ 1140 & 1141.

Defendants moved to dismiss for failure to state a claim under FED. R. CIV. P. 12(b)(6). Defendants argued that the state law claims were preempted by ERISA and that the ERISA claims failed to state a claim. Plaintiff also moved to file a Second Amended Complaint, seeking to add ING Employee Benefits ReliaStar Life Insurance Company (“ING” or “ING ReliaStar”), the claims administrator, which Defendants opposed. The Court granted the Motion to Dismiss in part, and denied it in part, and granted the Motion to Amend, in part, and denied it in part.

Plaintiff’s claims were all based on the same underlying factual premise: Defendants failed to provide life insurance benefits under the Policy in connection with the death of Plaintiff’s ex-husband, despite the benefit coordinator’s representations that plaintiff’s divorce would not affect her eligibility to recover the death benefit. These allegations gave rise to five (5) state law claims (breach of contract, fraudulent misrepresentation, negligent misrepresentation, promissory estoppel, and waiver). The Court agreed that all of these claims were preempted by ERISA. The Court rejected any oral modification to the ERISA Plan allegedly made by the benefits coordinator to permit the ex-spouse to continue to be an eligible covered dependent for purposes of the life insurance policy. The Court granted the Defendants’ motion to dismiss as to these state law claims and denied Plaintiff’s motion to file an amended Complaint to add these claims against the claims administrator Defendant on the grounds of futility.

In terms of the ERISA claims, the Court determined that Plaintiff did not state a cause of action for breach of fiduciary duty as against the employer, St. Agnes, because it was not an ERISA fiduciary. Plaintiff did, however, state a claim for breach of fiduciary duty against the plan and claims administrator because she alleged that these defendants fostered plaintiff’s mistaken understanding and knew or should have known that plaintiff was laboring under a material misunderstanding of plan benefits, yet failed to correct that misunderstanding. As to Plaintiff’s claim for interference with protected rights under ERISA, Plaintiff failed to respond to Defendants’ arguments with respect to this claim, and thereby abandoned her claim, and in any event, dismissal of this claim was also legally appropriate. Finally, because Plaintiff was divorced at the time of her former husband’s death, he was not a lawful or eligible spouse for whose death the plaintiff was entitled to recover life insurance benefits under the terms of the Policy, and accordingly, Plaintiff failed to state an ERISA claim for denial of benefits.