Cox v. Lincoln National Life Insurance Company, The

Filing 21

ORDER Finding ERISA Preemption of State Law Claims, Dismissing Plaintiff's Claims, and Directing Filing of Amended Complaint. Defendant's Memorandum in Support of ERISA Preemption 16 is GRANTED. Plaintiff's claims are pre-empted by ERISA and, therefore, DISMISSED. Plaintiff to file amended complaint no later than 4/27/11, by Judge Christine M. Arguello on 4/13/11.(lsw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 10-cv-02544-CMA-MEH
LEANNA COX,
Plaintiff,
v.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY,
Defendant.

ORDER FINDING ERISA PREEMPTION OF STATE LAW CLAIMS, DISMISSING
PLAINTIFF’S CLAIMS, AND DIRECTING FILING OF AMENDED COMPLAINT

This matter is before the Court on Defendant’s Memorandum in Support of
ERISA Preemption. (Doc. #16). For the following reasons, the Court finds that
Plaintiff’s state law claims are preempted by the Employee Retirement Income Security
Act of 1974 (“ERISA”).
I. BACKGROUND
This action arises from a dispute concerning Defendant The Lincoln National Life
Insurance Company’s alleged failure to pay insurance benefits to Plaintiff, the listed
beneficiary, on a life insurance plan purchased by her deceased husband, Pete W. Cox.

On September 29, 2010, Plaintiff filed a complaint in Denver County District
Court against Defendant, alleging three claims for relief, for what essentially amounts
to breach of contract; an award of double the maximum insurance benefits, and

reasonable attorneys’ fees and costs under Colo. Rev. Stat. § 10-3-1116; and breach
of good faith and fair dealing, for which Plaintiff seeks an award of punitive damages,
reasonable attorneys’ fees, and costs. (Doc. # 1-1.)
At a December 17, 2010 Scheduling Conference before United States Magistrate
Judge Michael E. Hegarty, a briefing schedule was set for the parties to address
whether ERISA preempted Plaintiff’s claims. Accordingly, Defendant filed the instant
brief on January 4, 2011 (“Opening Brief”). (Doc. # 16.) Plaintiff responded on January
17, 2011 (Doc. # 17), and Defendant replied on January 27, 2011 (Doc. # 19). In her
response, Plaintiff concedes that ERISA preempts her state common law claims for
breach of contract (Claim 1) and breach of good faith and fair dealing (Claim 3). (Doc. #
17 at 2) (“To the extent that this court determines that this lawsuit involves solely an
ERISA claim, Plaintiff understands that ERISA preempts Colorado common law.”).
Accordingly, dismissal of Plaintiff’s first and third claims for relief is warranted and the
Court will address only the extent to which ERISA preempts Plaintiff’s claim for an
award of double the maximum insurance benefits and reasonable attorneys’ fees and
costs under Colo. Rev. Stat. § 10-3-1116 (Claim 2).
II. ERISA PREEMPTION
A.

WHETHER PLAINTIFF’S CLAIMS ARISE UNDER ERISA
As noted by the Tenth Circuit, an “employee welfare benefit plan” falls under

ERISA when it includes the following elements: it is (1) any plan, fund, or program
(2) established or maintained (3) by an employer (4) for the purpose of providing

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benefits (5) to participants or their beneficiaries. 29 U.S.C. § 1002(1); Peckham v. Gen
State Mut. of Utah, 964 F.2d 1043, 1047 (10th Cir. 1992); Curtiss v. Union Cent. Life
Ins. Co., 823 F. Supp. 851, 854 (D. Colo. 1993).
A particular benefits plan falls under ERISA if “from the surrounding
circumstances a reasonable person can ascertain the intended benefits, the class of
beneficiaries, the source of financing, [ ] the procedure for receiving benefits,” and if it
requires ongoing administration. Peckham, 964 F.2d at 1047-48 (quotation and citation
omitted); see also Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987). The latter
characteristic, ongoing administration, is crucial, as it distinguishes an ERISA-governed
plan from an insurance contract. Curtiss, 823 F. Supp. at 855.
“The ‘established or maintained’ requirement appears designed to ensure that
the plan is part of an employment relationship,’” which can be ascertained by “looking at
the degree of participation by the employer in the establishment or maintenance of the
plan.” Peckham, 964 F.2d at 1049; see also 29 C.F.R. § 2510.3-1(j) (excluding from
ERISA coverage group-type insurance plans in which employer makes no contribution,
does not mandate participation by its employees, does not endorse the plan, and
receives no profit in connection with the plan).
In the instant case, as evidenced by the Affidavit of Barbara J. True and
supporting documents, which Defendant submitted in support of its Opening Brief, the
at-issue life insurance plan qualifies as an employee welfare benefit plan under ERISA;
the plan was established and maintained by Mr. Cox’s employer, Axis Commercial

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Realty Inc., for providing life insurance benefits to participants or their beneficiaries,
such as Plaintiff. (Doc. # 16-1.)
B.

ERISA’S PREEMPTIVE EFFECT ON PLAINTIFF’S SECOND CLAIM FOR
RELIEF UNDER COLO. REV. STAT. § 10-3-1116
In support of its Motion, Defendant presents the following three arguments as to

why Plaintiff’s second claim for relief under section 10-3-1116(1) fails: (1) section 10-31116 does not apply to life insurance claims; (2) even if section 10-3-1116 was
applicable to life insurance claims, the statute was enacted after the formation of the
at-issue life insurance policy and, thus, the statute cannot be applied retroactively;
and (3) ERISA preempts claims under section 10-3-1116(1). (Doc. #19 at 3-8).
Pursuant to its holding in Flowers v. Life Ins. Co. of N.Am., the Court agrees
that ERISA preempts claims under section 10-3-1116(1). No. 10-cv-02155, 2011 WL
1002871, at *4-5 (D. Colo. Mar. 15, 2011). In Flowers, this Court reasoned that section
10-3-1116(1) is not protected by ERISA’s “savings clause,” 29 U.S.C. § 1144(b)(2)(A),
because the subsection does not regulate insurance; specifically, the subsection does
not substantially affect the risk pooling arrangement between the insurer and the
insured. Id. at *2-3. Rather, this Court concluded that subsection 10-3-1116(1) “merely
creates an additional remedy for policyholders,” and, therefore, falls under ERISA’s
“pre-emption clause,” 29 U.S.C. § 1144(a), which states that, except as provided under
ERISA’s savings clause, “the provisions of this subchapter and subchapter III of this
chapter shall supersede any and all State laws insofar as they may nor or hereafter
relate to any employee benefit plan[.]” Id. at *4.
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As with the claim at issue in Flowers, Plaintiff’s second claim for relief is, in
reality, a claim that comes within the scope of ERISA, despite the fact that it is pleaded
in terms of state law. Accordingly, dismissal of Plaintiff’s second claim for relief is
warranted; the Court need not address Defendant’s other arguments concerning the
inadequacy of this claim.
III. CONCLUSION
Accordingly, IT IS ORDERED THAT:
(1)

Defendant’s Memorandum in Support of ERISA Preemption (Doc. # 16) is
GRANTED;

(2)

Plaintiff’s claims are pre-empted by ERISA and, therefore, DISMISSED;
and

(3)

Plaintiff is directed to file an amended complaint, restating her claims
under federal law, by no later than Wednesday, April 27, 2011. Failure
to file timely an amended complaint will result in dismissal of this action,
without prejudice.

DATED: April

13

, 2011
BY THE COURT:

_______________________________
CHRISTINE M. ARGUELLO
United States District Judge

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