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Old Converted Policy is Non-ERISA – N.D. Cal.

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  • Old Converted Policy is Non-ERISA – N.D. Cal.

    Here’s a new case out of the Northern District of California entitled Laural Jilka v. Unum Group, et al. The issue before the court is whether or not the policy is governed by ERISA and should have been removed to Federal Court. The court concludes that even if it was at one point, it no longer was. The court does not feel the need to address whether it initially started as an ERISA plan, but concludes that it no longer is.

    Under these circumstances, even assuming plaintiff’s policy was an ERISA plan from 1989 to 1998, it stopped being one in 1998. After that point in time, her policy much more closely resembled a “converted policy” (i.e., a policy converted from group coverage to individual coverage) that was no longer subject to ERISA. See Waks v. Empire Blue Cross/Blue Shield, 263 F.3d 872, 875 (9th Cir. 2001) (“Waks’ converted policy covered her as an individual and not as an employee of SCS or of any other employer. Her converted policy is therefore not itself an ERISA plan.”). In Eberlein v. Provident Life & Accident Ins. Co., No. 06-cv-02454-REB-MJW, 2008 WL 791944, at *2 (D. Colo. Mar. 20, 2008), the plaintiff received a letter from Provident with identical wording as the one Jilka received, stating, “Now, even though your policy is no longer paid through Risk #53574, ASSOC. ANESTHESIOLOGIST MEDICAL GROUP, you can continue this policy and retain the multi-life discount.” And like Jilka, plaintiff Eberlein “indicated that he wished to pay premiums on a quarterly basis, signed the letter, and returned it to Provident before the deadline specified in the letter,” and he “personally . . . paid the premiums for the policy” thereafter. Id. The court found that Eberlein’s disability policy “does not fit precisely the usual concepts of continuation or conversion policies” but, emphasizing that Eberlein’s former employer “bears no administrative or financial responsibility for Eberlein’s policy,” concluded that “the policy is not subject to ERISA regulation.” Id. at *4-7.

    The policy behind ERISA strongly supports that same conclusion here. As the First Circuit observed in Demars, “[i]n passing ERISA, Congress’s purpose was twofold: to protect employees and to protect employers. Congress wanted to safeguard employee interests by reducing the threat of abuse or mismanagement of funds that had been accumulated to finance employee benefits, while at the same time safeguarding employer interests by eliminating ‘the threat of conflicting and inconsistent State and local regulation’ of employee benefit plans.” 173 F.3d at 446 (internal citations omitted). Those policy goals clearly have no application here. Jilka left her employment with HNC in January 2001, and HNC itself ceased to exist around 2002. Dkt. No. 11-4 ¶¶ 12-13. In a case like this, “ERISA preemption would be an absurd result because there is no ERISA plan and no administrator.” Waks, 263 F.3d at 876. HNC “ceased operations” close to two decades ago, and any ERISA plan presumably “was terminated at that time.” Id. “State law therefore cannot impose conflicting requirements on any employer or ERISA plan administrator.” Id. The Court consequently concludes that plaintiff’s individual disability policy is not regulated by ERISA, and her state law claims under that policy are not preempted by ERISA.
    The opinion is attached below.
    Attached Files
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