Latham v. The Lincoln National Life Insurance Company
MEMORANDUM OPINION & ORDER: 19 MOTION for Order Regarding Whether This Action is Governed by ERISA, request is GRANTED. Signed by Judge Danny C. Reeves on 9/21/2015.(STC)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
THE LINCOLN NATIONAL LIFE
Civil Action No. 5: 15-141-DCR
This matter is pending for consideration of Plaintiff Eileen Latham’s motion for an
order regarding whether this action is governed by the Employee Retirement Income
Security Act (“ERISA”). 29 U.S.C. §§ 1001, et seq. [Record No. 19] Latham claims that
removal under 28 U.S.C. § 1441(a) is improper insofar as it is premised on the existence of a
federal question. 28 U.S.C. § 1331. [Record No. 19-1, p. 4] Specifically, she argues that the
long-term disability benefits she received from the defendant are not governed by ERISA.
Defendant Lincoln National Life Insurance Company (“Lincoln”) contends that
removal is proper because the benefits form part of a larger “Plan” governed by ERISA.
[Record No. 20] For the reasons outlined below, the Court concludes that ERISA governs
Latham’s claims regarding long-term disability benefits.
While employed at Nurses Registry and Home Health Care (“Nurses Registry”) in
Fayette County, Kentucky, Eileen Latham elected to become insured under a long-term
disability insurance (“LTD”) policy with The Lincoln National Life Insurance Company.
[Record No. 1-1, p. 5] Lincoln provided a LTD policy, among other insurance policies, to
employees of Nurses Registry.
[Id.; Record No. 20-2, p. 6, “Application for Group
Insurance”] The plaintiff alleges that she became disabled under the terms of the LTD policy
in July of 2012. [Record No. 1-1, p. 6] On January 18, 2013, the defendant approved her
claim for partial LTD benefits effective October 8, 2012. [Id.]
In September 2012, Latham became employed part-time, consistent with her partial
disability benefits. [Record No. 19-1, p. 1] However, by letter dated May 1, 2014, Lincoln
informed her that she was no longer eligible to continue receiving LTD benefits beyond
October 8, 2014. [Record No. 1-1, p. 6] Latham subsequently appealed, and Lincoln
affirmed its earlier decision by letter dated July 12, 2014. [Id.] The plaintiff then filed a
second-level appeal. By letter dated December 9, 2014, the defendant again affirmed its
prior determination. [Id.]
Having exhausted her administrative remedies, Latham filed suit against Lincoln in
the Fayette Circuit Court on April 21, 2015, asserting breach of contract and negligence
claims. [Record No. 1-1, pp. 4, 7] On May 19, 2015, Lincoln filed a Notice of Removal,
alleging both diversity and federal-question jurisdiction.1 28 U.S.C. §§ 1331, 1332, 1441,
1446. [Record No. 1, p. 1] Specifically, Lincoln asserted that Latham’s LTD policy is part
of an employee welfare benefit plan governed by ERISA. 29 U.S.C. §§ 1001, et seq.
On July 16, 2015, this Court directed the parties to submit briefs addressing whether
ERISA governs the claims asserted byLatham. [Record No. 17] In support of her motion,
Even if there were no federal questions presented, removal would still be proper because there is
complete diversity among the parties and the matter in controversy exceeds $75,000, exclusive of interest
and costs. 28 U.S.C. § 1332. [Record No. 1, p. 4]
Latham contends that disability benefits fall within ERISA’s “safe harbor” as set forth in 29
C.F.R. § 2510.3-1(j). [Record No. 19-1, p. 5] She further asserts that LTD coverage is not
part of a “plan” that is “established or maintained” by Nurses Registry. [Id., pp. 13, 15] In
response, Lincoln claims that the benefits fall outside the safe harbor and that they form part
of an ERISA plan established and maintained by Nurses Registry. [Record No. 20, pp. 4, 14,
Under 28 U.S.C. § 1441(a), a defendant may remove any civil action brought in a
state court if the district court would have original jurisdiction. District courts have original
jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United
States. 28 U.S.C. § 1331. For removal premised on federal-question jurisdiction, the burden
is on the party seeking removal. Long v. Bando Mfg. of Am., Inc., 201 F.3d 754, 757 (6th
This Court undertakes a three-step inquiry in determining whether ERISA governs an
employee welfare benefit plan.
First, it applies the “safe harbor regulations” of the
Department of Labor. Thompson v. Am. Home Assurance Co., 95 F.3d 429, 43435 (6th Cir.
1996) (referring to 29 C.F.R. § 2510.3-1(j)). Next, the court determines whether a “plan”
exists. Id. at 435. Third, it asks whether the employer “established or maintained” the plan
with the intent of providing benefits to its employees.” Id. As described below, Latham’s
LTD policy does not fall within the exemption. Further, Nurses Registry established and
maintained a plan with the intent of providing benefits to its employees.
Under 29 C.F.R. § 2510.3-1(j), insurance programs do not qualify as “employee
welfare benefit plans” subject to ERISA if all of the following criteria are met: (i) the
employer makes no contributions to the program; (2) participation in the program is
completely voluntary for employees; (3) the employer does not endorse the program; and (4)
the employer receives no consideration in connection with the program, excluding reasonable
compensation for administrative services. Fugarino v. Hartford Life & Accident Ins. Co.,
969 F.2d 178, 183 (6th Cir. 1992) (A program is exempted from ERISA only if all four
criteria are met.).
Latham claims that Lincoln has not shown that the long-term disability benefits she
received fall out of the exemption set forth in 29 C.F.R. § 2510.3-1(j). [Record 19-1, pp.
513] Lincoln, on the other hand, contends that the safe harbor does not apply to Latham’s
benefits for two reasons. [Record No. 20, p. 4] First, it asserts that Nurses Registry made
contributions to the overall “Plan” governing Latham’s LTD benefits. [Id., pp. 59] Second,
it argues that Nurses Registry “endorsed” the plan of which the LTD benefits were a part.
[Id., pp. 914] Lincoln concedes that the other two factors (i.e., that employees participated
voluntarily in the program and that Nurses Registry received no meaningful compensation)
are not applicable to Latham’s case. [Id., p. 13]
A benefits plan falls within the protections of the safe harbor only if the employer
makes no contributions to the plan. 29 C.F.R. § 2510.3-1(j)(1). Latham claims that, because
Nurses Registry made no contributions to any employee’s LTD benefits plan, her claim
meets the first criterion of the safe harbor. [Record No. 21, p. 3] Lincoln, however, asserts
that because Nurses Registry paid the premiums for all registered employees’ basic group
life insurance, it made contributions to the overall “Plan.” [Record No. 20, p. 6] The
ultimate issue is whether the LTD policy is severable from the other insurance policies
offered by Nurses Registry to its employees.
“Employers may establish ERISA plans very easily.” Libbey-Owens v. Blue Cross
and Blue Shield Mut. of Ohio, 982 F.2d 1031, 1034 (6th Cir. 1993) (citing Int’l Res., Inc. v.
New York Life Ins. Co., 950 F.2d 294, 297 (6th Cir. 1991). “[E]mployee welfare benefit
plans may be created through the mere purchase of a group health insurance policy when the
owner does not retain control, administrative power, or responsibility for benefits.” Id. The
Sixth Circuit has dealt very little with the “contribution” criterion. However, in Helfman v.
GE Group Life Assurance Co., the court found that an employer failed this criterion when it
contributed to some employees’ LTD benefits and not others’. 573 F.3d 383, 391 (6th Cir.
2009). Looking to the underlying policy objectives of ERISA, the court reasoned that
allowing ERISA to apply to only some employees under the plan would create disparate
governance schemes. 2
Id. at 390.
The court also noted that, contrary to Latham’s assertion, the first criterion is not viewed from the
employee’s perspective. Id. at 391. [Record No. 21, p. 3]
District courts within this circuit have applied Helfman’s reasoning. For example, in
Fitgerald v. Cont’l Assurance Co., the court stated that it could not “ignore the contributions
made by [the employer] simply because the portion of the Policy under which Plaintiff seeks
payment was contributory.”3 NO. 5:07-413, 2008 WL 5427635, at *4 (E.D. Ky. Dec. 30,
2008). In Fitzgerald, the employer made contributions to Basic Life, Accidental Death &
Dismemberment (“AD&D”), and Retiree Life portions of its policy, but employees were
responsible for paying the premiums for dependent life insurance coverage. Id. at *1.
Looking to other circuits, the court stated that, when determining whether a benefit plan is
subject to ERISA, its various aspects “ought not to be unbundled.” Id. at *4.
Similarly, in Pemberton v. Reliance Std. Life Ins. Co., the district court found that
“[c]omponent policies of an overall benefits plan cannot be considered independent of the
plan for ‘safe harbor’ analysis purposes.” NO. 08-86-JBC, 2008 WL 4498811, at *3 (E.D.
Ky. Sept. 30, 2008) (citing Gaylor v. John Hancock Mut. Life Ins. Co., 112 F.3d 460, 463
(10th Cir. 1997); Postma v. Paul Revere Life Ins. Co., 223 F.3d 533, 538 (7th Cir. 2000);
Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341, 1345 (11th Cir. 1994)). Pemberton
closely resembles the present case, as the employer in Pemberton did not pay any premiums
for the LTD coverage but subsidized other benefits in its plan. Id. The court did not sever
the LTD coverage from the remainder of the plan in its analysis. Thus, it held that the first
prong of the safe harbor test was not met. Id.
By “contributory,” the court meant that the policy was one to which employees, not employers,
contributed. Id. at *1.
Other circuits have construed the “no contribution” requirement consistently with the
Sixth Circuit’s interpretation. For example, in Gaylor, the Seventh Circuit held that an
employer contributed to a plan where it paid the premiums for the mandatory AD&D policies
but not for the optional policies, such as the plaintiff’s disability package. 112 F.3d at 463.
Similarly, in Gross v. Sun Life Assurance Co. of Canada, the First Circuit concluded that the
non-contribution requirement was not met when the employer contributed to the life and
AD&D policies but not to the plaintiff’s LTD policy. 734 F.3d 1, 10 (1st Cir. 2013). Also,
in Smith v. Jefferson Pilot Life Ins. Co., the Eleventh Circuit found that an employer
contributed to a plan where it paid the premiums for life and medical insurance while the
employee paid the premiums for the dependent coverage. 14 F.3d 562, 568 (11th Cir. 1994).
Here, Lincoln argues that the LTD benefits Latham received cannot be severed from
the other insurance policies offered by Nurses Registry to its employees. [Record No. 20, p.
6] However, Latham contends that severance is proper. [Record No. 21, p. 8] Lincoln’s
position is more consistent with applicable authorities. The Sixth Circuit focuses on the
underlying policy objectives of ERISA in assessing the “no contribution” criterion. Helfman
v. GE Group Life Assurance Co., 573 F.3d 383, 39091 (6th Cir. 2009). While Helfman is
distinguishable from Latham’s case because the employer in Helfman contributed to some
employees’ packages within the same LTD plan, its reasoning is instructive. “‘The purpose
of ERISA preemption was to avoid conflicting federal and state regulation and to create a
nationally uniform administration of employee benefit plans.’”
Id. at 390 (citing
Penny/Ohlmann/Nieman, Inc. v. Miami Valley Pension Corp., 399 F.3d 692, 698 (6th Cir.
2005)). In particular, the plaintiff in Helfman advocated for a “hybrid approach,” where his
case would be governed by ERISA while others’ cases would not. But the court declined to
take that approach, explaining that it would lead to an “anomaly that the same plan will be
controlled by discrete regimes.” Id. (internal quotation omitted). Further, the Sixth Circuit’s
liberal approach to finding ERISA-governed plans in Libbey-Owens and International
Resources affirms Helfman’s policy-based reasoning. Libbey-Owens v. Blue Cross and Blue
Shield Mut. of Ohio, 982 F.2d 1031, 1034 (6th Cir. 1993); Int’l Resources, Inc. v. New York
Life Ins. Co., 950 F.2d 294, 297 (6th Cir. 1991).
In reaching this determination, the Court follows other district courts within this
circuit. Pemberton is directly on point, as that court found the safe harbor did not apply
where the employer subsidized many benefits of an overall plan, while the employees paid
the premiums for the LTD coverage. NO. 08-86-JBC, 2008 WL 4498811, at *3 (E.D. Ky.
Sept. 30, 2008). Further, Fitzgerald resembles the present case but is not directly on point,
as the non-subsidized benefits in that case were dependent care benefits, rather than LTD
benefits. NO. 5:07-413, 2008 WL 5427635, at *1 (Dec. 30, 2008). Some courts have found
that dependent care coverage is additional coverage of the same kind as life insurance,
meaning it cannot be viewed separately from life insurance, while LTD benefits constitute a
different kind of coverage. See, e.g., Metoyer v. Am. Intern. Life Assurance Co. of New York,
296 F. Supp. 2d 745, 750 (S.D. Tex. 2003). This Court acts consistently with Pemberton and
the Sixth Circuit generally in rejecting that approach. 2008 WL 5427635, at *4.
Considering the policies outlined in Helfman, the Court finds that the LTD benefits
Latham received cannot be severed from the basic group life insurance policy. Nurses
Registry funded the basic group life insurance policy -- the policy in which employees would
most likely enroll -- for all registering employees. [Record No. 20-2, p. 8] It then offered an
optional LTD policy from the same insurer.4 [Id.] Further, it applied for this coverage on the
same form as the basic group life coverage, and all the policies shared a Group ID. [Id., pp.
6, 8] In addition, the group contact from Nurses Registry for all policies was the same
person, and negotiations for the different policies appear in the same document. [Id., p. 8,
“RGO Initiator Checklist”] If this Court were to sever the Lincoln LTD policy from the
basic group life insurance policy, it would subject employees to differing legal regimes for
their policies from the same insurer under coverage negotiated by the same employer during
a single period. Based upon the policy objectives outlined in Helfman, Libbey-Owens, and
International Resources, the Court declines to do so.
In refusing to sever the LTD policy, this Court also follows the approaches outlined in
the Seventh, Tenth, and Eleventh Circuits. Gaylor v. John Hancock Mut. Life Ins. Co., 112
F.3d 460, 463 (10th Cir. 1997); Gross v. Sun Life Assurance Co. of Canada, 734 F.3d 1, 10
(1st Cir. 2013); Smith v. Jefferson Pilot Life Ins. Co. 14 F.3d 562, 568 (11th Cir. 1994).
While Smith involves dependent care benefits, which may be linked more closely with life
insurance benefits than an LTD plan, Gaylor and Gross closely resemble Latham’s case. In
both, the courts held that severance was not appropriate where the employer contributed to
life and AD&D packages, but not to disability packages, under the same general plan. 112
See, e.g., Gonzales v. Unum Life Ins. Co., No. 09cv468BTM, 2009 WL 3226519, at *56 (S.D.
Cali. Oct. 2, 2009) (explaining how ERISA only exempts “separately administered” disability plans
maintained to comply with state disability benefits laws) (citing Shaw v. Delta Airlines, Inc., 463 U.S. 85,
107 (1983)); see also Estate of Thomson v. Zurich Am. Ins. Co., No. CV11-9110-PCT-JAT, 2012 WL
5031738, at *4 (requiring defendant to offer evidence that insurance benefits were offered as a single
F.3d at 463; 734 F.3d at 10. Because this Court finds it improper to sever the LTD policy
from the other policies offered by Nurses Registry to its employees, Latham cannot meet the
“no contribution” requirement of the safe harbor. Therefore, Latham’s claims regarding the
LTD policy do not qualify for the exemption.
Additionally, the LTD benefits do not qualify for the exemption because Lincoln has
shown that Nurses Registry “endorsed” the LTD policy. A benefit plan may only fall within
the safe harbor if the employer does not endorse it. Under 29 C.F.R. § 2510-3(j)(3), the sole
functions of the employer must be to permit the insurer to publicize the program and to
collect premiums through payroll deductions, remitting them to the insurer. “Where the
employer ‘offends the ideal of employer neutrality’ as a result of its level of involvement,
ERISA is properly invoked.” Thompson v. Am. Home Assurance Co., 95 F.3d 429, 436 (6th
Cir. 1996) (quoting Johnson v. Watts Regulator Co., 63 F.3d 1129, 1133 (1st Cir. 1995)).
The defendant must make a factual showing of substantial employer involvement in the
creation or administration of the plan. Id. (emphasis added).
Five factors appear in Thompson for this endorsement analysis: (i) the role the
employer plays in determining eligibility and in negotiating the policy terms; (ii) whether the
employer is named as the plan administrator; (iii) the existence of a plan description given to
the employee that refers to ERISA; (iv) materials suggesting to employees that the employer
endorses the plan; and (v) the employer’s participation in claim processing. Booth v. Life
Ins. Co. of N. Am., No. 3:05cv-526-S, 2006 WL 3306846, *23 (W.D. Ky. Nov. 9, 2006). In
assessing these factors, the court should place emphasis on the employee’s point of view.
Thompson, 95 F.3d at 437. However, this does not mean that a “specific employee has to
know that a plan is governed by ERISA . . . . [I]t means that if a reasonable person in
possession of the facts would be able to discern that a plan existed, then that plan is possibly
(dependent on the other factors) an ERISA plan.” Nicholas v. Std. Ins. Co., 48 F. App’x 557,
564 (6th Cir. 2002) (rejecting plaintiff’s contention that plan was not an ERISA plan as
applied to him because he did not receive a copy of the summary plan description). In
Nicholas, the court found endorsement where: (1) the employer determined employee
eligibility and policy terms; (2) the employer was named the plan administrator; and (3) a
summary plan description referenced ERISA. Id. Therefore, a court may find endorsement
where only these three factors are present.
Eligibility and Negotiation
“Where an employer plays an active role in either determining which employees will
be eligible for coverage or in negotiating the terms of the policy . . . the extent of employer
involvement is inconsistent with ‘employer neutrality’ . . . . ” Thompson, 95 F.3d at 436. In
Nicholas, the court emphasized the importance of the employer’s involvement in determining
which employees were eligible for coverage and the extent of such coverage. 48 F. App’x at
563. For instance, the employer’s director of human services, Jim Tomaw, met regularly
with the insurance broker. Id. Tomaw adjusted the benefit payment on the LTD plan at
issue and restricted the LTD to salaried employees. Id. Thus, the court concluded that the
employer “did not act neutrally in the creation of the plan, nor in the selection of plan
contents.” Id. at 562.
Latham’s case closely resembles Nicholas with respect to the first factor set out in
Thomas. Nurses Registry selected the terms of coverage (e.g., basic, voluntary), the amounts
of coverage, and eligibility requirements (minimum hours worked, employee effective date,
[Record No. 20-2, p. 3, Daly Decl. ¶5; p. 6, Application; p. 9,
“Administration of Your Policy;” p. 19, “Voluntary Long Term Disability Schedule] Nurses
Registry also negotiated for open enrollment. [Record No. 20-2, pp. 6, 12] Further, it
bargained so that Lincoln would take over the inforce amounts from prior insurers. [Id., p.
23, “e-mail from Webster to Sweetay”] Moreover, Nurses Registry had Lincoln grandfather
two employees whose amounts were over the Guaranteed Issue dollar amount. [Id., p. 8,
RGO Initiator Checklist; p. 23, “e-mail”] From this description, Nurses Registry did not
“simply allow insurers to advertise a range of pre-determined plans to [its] employees.”
Nicholas, 48 F. App’x at 563; compare with Tinsley v. Conn. Gen. Life Ins. Co., 744 F. Supp.
2d 637, 644 (finding that defendant failed to present any evidence of employer negotiations
with the insurer). Thus, this factor weighs heavily in favor of a finding of endorsement.
“[W]here the employer is named as the plan administrator, a finding of endorsement
may be appropriate.” Thompson v. Am. Home Assurance Co., 95 F.3d 429, 436 (6th Cir.
1996). But an employer can be a plan administrator “in name only and still satisfy the four
requirements of the safe harbor regulation . . .”
Stuart v. Unum Life Ins. Co. of Am., 217
Though Latham states that “[t]he alleged negotiations do not constitute any form of
endorsement,” she does not deny that Nurses Registry determined some of the eligibility factors or that it
negotiated some of the terms with Lincoln. [Record No. 21, p. 12 (emphasis added)] She merely points
out that Lincoln also determined some aspects of eligibility. [Record No. 19-1, p. 9]
F.3d 1145, 1153 (9th Cir. 2000). Under 29 U.S.C. § 1002-16(A)(ii), if a plan does not
designate an “administrator,” a “plan sponsor” may be viewed as the administrator.
Daniel Baughn, a Nurses Registry employee, is named as the “Administrator” for at
least one of the policies Nurses Registry negotiated with Lincoln, though he is not
specifically listed as the administrator of Latham’s LTD policy. [Record No. 20-2, p. 9]
Here, the listing of Baughn as a plan administrator does not weigh strongly in favor of
endorsement because Latham would not have seen the Application. Bailey v. Minn. Life Ins.
Co., No. 07-196-JBC, 2009 WL 803701, at *5 (E.D. Ky. March 24, 2009). However, the
Summary of Benefits received by Latham states that the LTD policy is “sponsored by”
Nurses Registry. [Record No. 19-5, p. 2] Under the regulations, this could give a reasonable
employee an indication that Nurses Registry is the administrator of the policy. 29 U.S.C. §
1002-16(A)(ii). On the other hand, because Lincoln was the actual claims administrator for
the LTD policy, the reasonable employee would view the term “sponsored by” as a
designation for Nurses Registry “in name only.” Bailey, 2009 WL 803701, at *5. [Record
No. 19-8, pp. 1012, “Claims Procedures”] Thus, this factor does not weigh in favor of
Plan Description with Reference to ERISA
“[W]here the employer provides a summary plan description that specifically refers to
ERISA” to an employee, that employee “is entitled to presume that the employer’s actions
indicate involvement sufficient to bring the plan within the ERISA framework.” Thompson
v. Am. Home Assurance Co., 95 F.3d 429, 437 (6th Cir. 1996). In Nicholas, the existence of
a summary plan unequivocally stating that the LTD plan was governed by ERISA weighed
heavily in favor of the court’s finding of endorsement. Nicholas v. Std. Ins. Co., 48 F. App’x
557, 564 (6th Cir. 2002).
In Latham’s case, the LTD policy provides,
Claims Subject to ERISA (Employee Retirement Income Security Act of
1974). Before bringing a civil legal action under the federal labor law known
as ERISA, an employee benefit plan participant must exhaust available
administrative remedies. Under this Policy, the Insured Employee must first
seek two administrative reviews of the adverse claim decision, in accord with
this provision. If an ERISA claimant brings legal action under Section 502(a)
of ERISA after the required reviews; then the Company will waive any right to
assert that he or she failed to exhaust administrative remedies.
[Record No. 19-8, p. 12]
Latham was aware of this provision, as she demanded copies of plan documents from
Lincoln under section 502(c) of ERISA.6
This factor weighs heavily in favor of
endorsement, as it would lead a reasonable employee to conclude that ERISA governs the
specific LTD policy. Nicholas, 48 F. App’x at 564.
Materials Provided to Employee
Endorsement may be found where an employer provides materials to employees that
suggest its involvement in setting the terms of coverage or in administering claims.
Insurance policies bearing the employer’s logo are particularly compelling in suggesting
employer involvement. Thomas, 95 F.3d at 437. Latham alleges that, because Nurses
Registry’s logo does not appear on the LTD policy, Enrollment Form for Group Insurance,
Certificate of Coverage, and Summary of Benefits, this factor weighs in her favor. [Record
Latham argues that the Court should view her request for documents as pleading in the
alternative, rather than as a concession that ERISA governs. [Record No. 21, pp. 1012] Because the
Court only uses Latham’s demand for documents to demonstrate her knowledge of the ERISA provision,
it need not address this argument.
No. 19-1, pp. 1112]
Lincoln responds that identifying Nurses Registry as the
“policyholder” on the LTD policy and as the “sponsor” on the Summary of Benefits suggest
endorsement.7 [Record Nos. 22, p. 8; 19-10, p. 15; 19-5, p. 2]
While the Court does not find this factor to strongly suggest endorsement, it does find
that the factor weighs in favor of Lincoln. A reasonable employee, in looking to the LTD
policy, correspondence with Lincoln, and Summary of Benefits, could find that Nurses
Registry offended the ideal of employer neutrality. See, e.g., Pemberton v. Reliance Std. Life
Ins. Co., NO. 08-86-JBC, 2008 WL 4498811, at *6 (E.D. Ky. Sept. 30, 2008) (while
employer’s logo did not appear on the LTD policy documents, enrollment information and
other forms for the Plan suggested endorsement of the LTD coverage). [Record Nos. 19-10,
p. 15; 20-2, pp. 2324; 19-5, p. 2]
Participation in Claim Processing
Lincoln concedes that Nurses Registry had no involvement in administering LTD
benefits. [Record No. 20, p. 13] Thus, this factor clearly weighs in favor of Latham. See
Pemberton, 2008 WL 4498811, at *6.
After analyzing the five factors set out in Thompson, the Court finds that Nurses
Registry endorsed the LTD policy. Thompson v. Am. Home Assurance Co., 95 F.3d 429 (6th
Cir. 1996). Controlling precedent holds that where an employer: (i) determines coverage
eligibility; (ii) negotiates terms of the policy; (iii) is named the plan administrator; and (iv)
provides a summary plan description referencing ERISA, the safe harbor does not apply.
In its first brief, Lincoln stated it “did not have any evidence to present relevant to the Court’s
inquiry on the fourth factor,” however, some of the evidence it presented for the other factors is relevant
for the Court’s analysis of the fourth factor. [Record No. 20, p. 13]
Nicholas v. Std. Ins. Co., 48 F. App’x 557, 564 (6th Cir. 2002). While this case may be
weaker than Nicholas regarding the name of the “Plan Administrator,” it is stronger than
Nicholas on the fourth factor, as some materials provided to Latham suggest endorsement.8
Finding that Latham’s policy falls out of the safe harbor provision, the Court now turns to the
question of whether Nurses Registry established or maintained an ERISA plan.
Existence of a “Plan”
An ERISA plan exists if “from the surrounding circumstances a reasonable person
could ascertain the intended benefits, beneficiaries, source of financing, and procedures for
receiving benefits.” Int'l Resources, Inc. v. New York Life Ins. Co., 950 F.2d 294, 297 (6th
Cir.1991) (citing Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir.1982)). The Court
reviews the plan as a whole to see if a “plan” exists. Pemberton, 2008 WL 4498811, at *6.
Latham asserts that her case does not fit within the framework set out in International
Resources because Latham, rather than her employer, opted into the LTD plan and paid the
premiums herself.9 [Record No. 19-1, p. 14] But Lincoln argues that a reasonable person
could ascertain all four factors set out in International Resources. [Record No. 22, p. 11]
In that sense, this case resembles Pemberton, where the district court found endorsement based on
strong showings of the first and fourth prongs. Pemberton, 2008 WL 4498811, at *56.
Latham essentially makes the argument that was successful in Bailey v. Minn. Life Ins. Co., No.
07-196-JBC, 2009 WL 803701, at *7 (E.D. Ky. March 24, 2009). In Bailey, the district court reasoned
that because the employer in International Resources chose and funded a plan for all employees, a
reasonable employee would more easily conclude that it advertised an ERISA plan. Id. The court stated
that a reasonable employee would not conclude, on the other hand, that the employer in Bailey advertised
the policy at issue. Id. As this Court finds the reasoning in Bailey to be more applicable to the
“endorsement” prong in the “safe harbor” analysis, it rejects that approach. Contrary to Latham’s
assertion, the determination of whether a “plan” exists instead focuses on the court’s ability to ascertain
the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits. Int'l
Resources, Inc. v. New York Life Ins. Co., 950 F.2d 294, 297 (6th Cir.1991).
Regarding the first factor (i.e., intended benefits), the Voluntary Long Term
Disability Schedule and the Summary of Benefits provide the maximum monthly benefit
percentage an employee may receive, as well as the maximum benefit periods for different
age groups. [Record Nos. 19-5, pp. 23; 20-2, pp. 1920] For the second factor, the
Summary of Benefits defines the class of beneficiaries as all “full-time employees” working
at least 30 hours per week. [Record No. 19-5, p. 2] Regarding the third factor, a reasonable
person could determine that funding was provided through a combination of employer and
employee contributions. Pemberton, 2008 WL 4498811, at *6. [Record No. 20-2, p. 8] And
with respect to the fourth factor, the procedures for receiving benefits are outlined in the
“Claims Procedures.” [Record No. 20-3, pp. 1921] Because a reasonable person could
ascertain the intended benefits, the class of beneficiaries, the source of financing, and the
procedures for the LTD plan, an ERISA plan exists. See, e.g., Carter v. Guardian Life Ins.
Co. of Am., No. 11-3-ART, 2011 WL 1884625, at *2 (E.D. Ky. May 18, 2011).
Actions to “Establish or Maintain” the Plan
Finally, the defendant must prove that the employer “established or maintained the
plan with the intent of providing benefits to its employees.”
Thompson v. Am. Home
Assurance Co., 95 F.3d 429, 435 (6th Cir. 1996) (citing 29 U.S.C. § 1002(1)). “Employers
may establish ERISA plans very easily.” Libbey-Owens v. Blue Cross and Blue Shield Mut.
of Ohio, 982 F.2d 1031, 1034 (6th Cir. 1993). In fact, they may do so by merely purchasing
group health insurance, even if they do not retain control, administrative power, or
responsibility for benefits. Id. It is not necessary that the employer be involved in plan
administration for it to establish and maintain a plan. 10 Carter, 2011 WL 1884625, at *3.
Here, Nurses Registry contracted with Lincoln to provide LTD benefits to its
employees, negotiating over the terms and conditions of the policy. [Record No. 20-2, p. 8,
RGO Checklist] For instance, it determined eligibility criteria and bargained to grandfather
in two specific employees. [Id., pp. 3, 8, 23] Because the statute only requires “some
meaningful degree of participation by the employer in the creation or administration of the
plan,” the Court concludes that Nurses Registry established and maintained an ERISA plan.
Thompson v. Am. Home Assurance Co., 95 F.3d 429, 438 (6th Cir. 1996) (quoting Hansen v.
Cont’l Ins. Co., 940 F.2d 971, 977 (5th Cir. 1991)) (emphasis added).
Defendant Lincoln has established that Latham’s long-term disability policy does not
fall within the safe harbor regulations set out in 29 C.F.R. § 2510.3-1(j) because: (i) Nurses
Registry contributed to the overall plan of which the LTD benefits were a part and (ii) Nurses
Registry endorsed the LTD policy. Additionally, Lincoln has shown that a reasonable person
could ascertain the intended benefits, beneficiaries, sources of funding, and procedures for
receiving benefits of the ERISA “plan.” And Lincoln has demonstrated that Nurses Registry
established and maintained the plan at issue.
Since Latham’s LTD policy satisfies the three-part Thompson test, ERISA governs
the plaintiff’s claims asserted under that policy. Therefore, removal based on the existence
The Sixth Circuit rejected the Fifth Circuit’s approach advocated by Latham, at least insofar as a
plaintiff alleges that an employer must administer claims in order to establish or maintain a policy. Int’l
Res., Inc. v. New York Life Ins. Co., 950 F.2d 294, 297 (6th Cir. 1991). [Record No. 19-1, p. 15]
of a federal-question is proper. 28 U.S.C. §§ 1441(a), 1331. To the extent that the plaintiff
seeks an order regarding whether this action is governed by ERISA [Record No. 19], that
request is GRANTED.
This 21st day of September, 2015.
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