SUAREZ v. FIRST UNUM, INC.

Filing 12

OPINION. Signed by Judge Kevin McNulty on 3/4/2015. (drw)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Gerardo SUAREZ,

Civ. No. 2:13-2445
(KM)(SCM)

Plaintiff,
V.

OPINION

PROVIDENT
LIFE
INSURANCE CO.,

AND

CASUALTY

Defendant.

KEVIN MCNULTY, U.S.D.J.:
This matter comes before the court on the motion (ECF No. 5) of
Defendants to dismiss all claims against First Unum, Inc. and to dismiss
Counts II and III of the amended complaint (ECF No.

41).

Plaintiff

Gerardo Suarez brings this action against Defendants First Unum, Inc.
(“First Unum”) and Provident Life and Casualty Co. (“Provident”),
pleading violations of ERISA, 29 U.S.C. §1132 (a)(1)(b) and RICO, 18
U.S.C. §1961, et seq., as well as breach of contract and fraud. Suarez
alleges that Provident, the carrier of his long-term disability insurance
coverage, wrongfully discontinued his disability payments.
For the reasons set forth below, the motion to dismiss is GRANTED
in part and DENIED part.
I.

DISMISSAL OF FIRST UNUM, INC.
Provident and Unum contend that Unum did not issue the

ECF Nos. 3 and 4 appear to be identical versions of the amended
complaint, except for the spacing.
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insurance policy under which Suarez sues herein. Therefore, they ask
that all claims against Unum be dismissed. (Def. Mot. 1, ECF No. 5). The
first complaint named only Unum as a defendant. (Id.). After the
complaint was filed, Unum contacted Suarez to indicate that it was
improperly named as a defendant because Suarez’s policy was issued by
Provident. (Id.). To avoid a motion to dismiss based on Unum being an
improper defendant, Suarez’s counsel agreed to file an amended
complaint. (Id.; see ECF Nos. 3, 4). However, it appears that the amended
complaint still lists First Unum in the caption, which reads “Provident
Life and Casualty Insurance Co., s/h/a First Unum, Inc.” (ECF No. 4).
The caption in the amended complaint appears to be in error. As
Suarez acknowledges, “the entity he intended from the commencement of
the suit to name was Provident Life and Casualty Insurance Co.” (P1.
Opp. 1 n.1, ECF No. 7). Because Suarez does not object to the dismissal
of Unum as a defendant (id.), all claims against Unum will be
DISMISSED and the caption will be amended to delete any reference to
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Unum.
II.

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BACKGROUND
Plaintiff Gerardo Suarez was an employee of Intesa San Paolo,

S.P.A. (“Intesa”) until he became disabled and stopped working. (Am.
Compi. ¶3, ECF No. 4).
Defendant Provident is a long-term disability compensation carrier
that was an insurer and plan administrator of a group plan for
employees of Intesa. (Id. ¶4). Suarez alleges that Provident was a

Because I dismiss all claims against First Unum, I will refer to Provident
as the sole defendant for the remainder of this opinion. References in the
amended complaint to Unum will be deemed to apply to its subsidiary,
Provident, as the context requires.

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The facts that follow are taken from the amended complaint (ECF No. 4).
They are assumed to be true solely for the purposes of the motion to dismiss.

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subsidiary of Unum, a holding company, and one of the Unum “family of
companies.” (Id. ¶5).
Suarez was one of the employees insured by Provident. (Id. ¶4). At
some point, Provident was terminated as a group carrier. At that time,
Provident offered employees the opportunity to continue their coverage
under individual plans by entering into agreements with Provident for
comparable coverage. (Id. ¶24). Suarez accepted this offer. (Id. ¶24).
At some point, Suarez was injured in two accidents involving
trauma to his head, causing him neurological damage. (Id. ¶8). Following
the accidents, in February 2008, Suarez was awarded Social Security
benefits. (Id.). The Social Security Administration determined that
Suarez’s disability began in December 2006. (Id.).
In January 2008, Suarez notified Provident that he had been
unable to work since December 2006. (Id. ¶6). Provident found that
Suarez was eligible for long-term disability payments in the amount of
$2,700 per month, which Provident began paying. (Id. ¶9). Suarez alleges
that Provident continued making the payments for several years and
then sought evidence that “would allow it to cease paying” him. (Id.

¶ 10).

Specifically, Suarez alleges that Provident hired Dr. Alexander B.
Chervinsky, a neuropsychologist, to “make every effort to render a report
which would be unfavorable to Mr. Suarez’s continued disability.” (Id.
¶11). In September 2010, Dr. Chervinsky examined Suarez and wrote a
report finding that he was not disabled. (Id. ¶ 12). Based on this report
and “other consulting reviews it paid for,” Provident discontinued its
payments to Suarez. (Id. ¶13). Suarez alleges that this was contrary to
the opinions of his treating and consulting physicians and
neuropsychologists. (Id.). He also alleges that Dr. Chervinsky’s finding of
no disability was made “despite [his] sensory problems symptomatic of
neurological impairment,” including difficulties with concentration and

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¶ 14). Suarez alleges that Dr.

senses such as taste and smell. (Id.

Chervinsky ignored many of his other symptoms, including:
bizarre behavior indicative of cognitive deficits, such as
urinating in a waste paper basket, and taking a shower with
his clothes on, and Mr. Suarez’s inability to remember
words, differences in his experiences of smells and tastes,
and other behaviors and conditions symptomatic of disabling
traumatic brain injury.
(Id.). Suarez asserts that Dr. Chervinsky wrongly attributed Suarez’s poor

performance on psychological tests to intentional under-achievement. (Id.
¶17). Suarez also accuses Dr. Chervinsky of wrongly rejecting the
findings of Suarez’s neuropsychologist, Dr. Rolland Parker. (Id.

¶J 18—19).

Finally, Suarez alleges that Dr. Chervinsky “had a proven record at the
time he was engaged by Provident.

.

.

of finding a high proportion of

claimants to be not disabled.” (Id. ¶16).
Suarez accuses Provident of not reviewing his personnel file before
terminating his disability payments. A review, he says, “would have
supported [his] assertion of a gradual deterioration in his ability to
perform his job satisfactorily.” (Id.

¶ 15). He also alleges that Provident

wrongly relied on Dr. Chervinsky’s findings and rejected Dr. Parker’s
findings to avoid making disability payments. (Id.

¶ 19). Suarez contends

that Provident acted arbitrarily and capriciously and wrongly deprived
him of the benefits of his policy. (Id. ¶20). Suarez pleads that he has
exhausted his administrative appeals under his insurance policy. (Id.
¶21).
Suarez alleges that Provident’s denial of benefits is “part of its
policy of intentionally and illegally denying legitimate claims in order to
boost its profits, in violation of the Racketeer Influenced and Corrupt
Organizations Act, (“RICO”), 18 U.S.C. §1961—1968.” (Id. ¶31). To

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support this allegation, Suarez describes investigations of First Unum’s
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disability handling practices by the United States Department of Labor
as well as regulators in forty-nine states and territories, including the
California Insurance Commissioner. (Id. ¶J33—37). He also describes
individual lawsuits against Unum. (Id. ¶J38—39, 4 1—43, 50, 56). Suarez
provides examples of whistle blower employees at Unum who have
revealed that Unum has “scrub months” before the end of each quarter
during which managers look for claims to terminate. (Id. ¶44—45). Suarez
alleges that it is Unum’s practice to give bonuses to claim handlers for
denying claims. (Id. ¶48).
Suarez also alleges that “UNUM has, in particular, taken
advantage of the ability to make subjective findings negating disability in
cases of cognitive defects caused by traumatic brain injury (“TBI”) and
other organic neurological conditions, especially where highly paid
insureds are involved.” (Id. ¶52). To support this allegation, Suarez
points to other cases in which Unum denied disability payments to
claimants despite the Social Security Administration’s having approved
benefits (id. ¶53) and despite the claimants’ medical history of treatment
for disabilities (id. ¶J54—55).
Suarez pleads four causes of action: (1) violation of ERISA; (2)
breach of contract and breach of implied covenant of good faith and fair
dealing; (3) fraud; and (4) RICO conspiracy.
Provident now moves to dismiss the second and third causes of
action under Federal Rule of Civil Procedure 12(b) (6).

Suarez presumably describes cases involving Unum because Provident is
a subsidiary of Unum. (Am. Compl. ¶5). Suarez alleges that both Unum and
Provident engage in the types of practices he describes in the complaint. (Id.).

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III.

DISCUSSION
a. Standard

Rule 12(b)(6) provides for the dismissal of a complaint, in whole or
in part, if it fails to state a claim upon which relief can be granted. The
defendant, as the moving party, bears the burden of showing that no
claim has been stated. Animal Science Products, Inc. v. China Minmetals
Corp., 654 F.3d 462, 469 n.9 (3d Cir. 2011). For the purposes of a

motion to dismiss, the facts alleged in the complaint are accepted as true
and all reasonable inferences are drawn in favor of the plaintiff. N.J.
Carpenters & the Trustees Thereof v. Tishman Const. Corp. of N.i, 760

F.3d 297, 302 (3d Cir. 2014).
Federal Rule of Procedure 8(a) does not require that a complaint
contain detailed factual allegations. Nevertheless, “a plaintiff’s obligation
to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than
labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Bell Ati. Corp. v. Twombly, 550 U.S. 544, 555
(2007). Thus, the complaint’s factual allegations must be sufficient to
raise a plaintiff’s right to relief above a speculative level, so that a claim
is “plausible on its face.” Id. at 570; see also Umland v. PLANCO Fin.
Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008). That facial-plausibility
standard is met “when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 556). While “[t]he plausibility standard is not akin

to a ‘probability requirement’.

.

.

it asks for more than a sheer

possibility.” Iqbal, 556 U.S. at 678.
b. Analysis

Provident argues that Sanchez’s insurance policy qualifies as an
ERISA plan, and that ERISA preempts Suarez’s state law claims for

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breach of contract and fraud. Sanchez maintains that determining
whether his plan is an ERISA plan poses intertwined factual and legal
issues inappropriate for resolution on a motion to dismiss. (P1. Opp. 3).
Because Sanchez has pled sufficient facts to proceed on the alternative
claims under ERISA and contract and fraud, the motion to dismiss
Counts II and III will be denied.
“A party may set out 2 or more statements of a claim or defense
alternatively or hypothetically, either in a single count or defense or in
separate ones.” Fed. R. Civ. P. 8(d)(2). Suarez has done just that in his
amended complaint. Suarez alleges a federal ERISA claim, and, in the
alternative, state-law claims for breach of contract and fraud. Suarez
acknowledges that he pleads in the alternative. (P1. Opp. 3).
Suarez may not recover under both ERISA and his contract and
fraud claims. ERISA preempts recovery under breach of contract and
fraud theories when these claims “relate to” an ERISA plan, Nat’l Sec.
Sys., Inc. v. lola, 700 F.3d 65, 83 (3d Cir. 2012), and “do not attempt to
remedy any violation of a legal duty independent of ERISA,” Aetna Health
Inc. v. Davila, 542 U.S. 200, 214 (2004). So, if Suarez’s policy is an
ERISA plan, the two state-law claims are preempted; if it is not an ERISA
plan, the ERISA claim is invalid but the state law claims are not
preempted. Suarez does not debate this point.
Provident argues that Suarez’s insurance policy qualifies as an
ERISA plan. That may be so. However, Suarez does not have the burden
of proving this or the alternative at the motion to dismiss stage.
Determining whether Sanchez’s policy is an ERISA plan will likely involve
a detailed factual inquiry that is more appropriately undertaken at the
summary judgment stage. Provident’s numerous citations to exhibits
only illustrate this point. (See e.g., Def. Reply 11, ECF No. 10).
An ERISA plan is (1) “any plan, fund, or program”; (2) “established

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or maintained by an employer or by an employee organization”; (3) “for
the purpose of providing” benefits; (4) “for its participants or their
beneficiaries.” 29 U.S.C.A.

§ 1002(1). The parties agree that Intessa’s

group policy was an FRISA plan. The question is whether Suarez’s
coverage under the group ERISA plan was “converted” or “continued”
into his current policy. A converted policy is “arguably independent from
[a previousi ERISA plan because it involves a new policy issued to an
individual.” Horan v. Reliance Standard Life Ins. Co., No. CIV.A. 12-7802
JAP, 2014 WL 346615, at *6 (D.N.J. Jan. 30, 2014) (noting that the Third
Circuit has not ruled on whether a converted policy is still subject to
ERISA). Although the Third Circuit has not ruled on the issue, some
courts have held that a group policy that is converted to an individual
plan is no longer subject to ERISA. See, e.g., Waks v. Empire Blue
Cross/Blue Shield, 263 F.3d 872, 876 (9th Cir. 2001); Demars v. CIGNA
Corp., 173 F.3d 443, 446 (1st Cir. 1999). A continuation of coverage, as
opposed to a conversion, would mean that Suarez’s current policy is still
subject to ERISA. See id.
Provident argues that Suarez’s insurance coverage was continued,
not converted. (Def. Reply 5—6). In support of this, they contend that
Suarez “admits” as much: “Provident offered to individuals formerly
covered under Intessa Sanpaolo’s ERISA plan the opportunity to continue
their coverage as individuals by entering into agreements with Provident
to subscribe to comparable coverage.” (Def. Reply 6 (citing Am. Compi.
¶24) (emphasis added)). However, it is not for Suarez to determine
whether his plan was converted or continued; thus, his opinion on the
issue, and his choice to use the word “continue” in his pleadings, are
irrelevant. The words “continuation” and “conversion” are terms of art in
the insurance world that may have legal significance. A plaintiff may not
“admit” to them any more than a plaintiff may “admit” any other legal
conclusion in his complaint. And, as pointed out above, Suarez, unsure

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of his plan’s legal status, pled in the alternative. Alternative pleading is
permissible; each alternative is not deemed an “admission” as to the
other.
Suarez and Provident also analyze whether the “safe harbor”
exception to ERISA applies to Suarez’s current policy. The safe harbor
provision states that ERISA is not applicable to any policy for which:
(1) No contributions are made by an employer or employee
organization;
(2) Participation the program is completely voluntary for
employees or members;
(3) The sole functions of the employer or employee
organization with respect to the program are, without
endorsing the program, to permit the insurer to publicize
the program to employees or members, to collect premiums
through payroll deductions or dues checkoffs and to remit
them to the insurer; and
(4) The employer or employee organization receives no
consideration in the form of cash or otherwise in connection
with the program, other than reasonable compensation,
excluding any profit, for administrative services actually
rendered in connection with payroll deductions or dues
checkoffs.
29 C.F.R. § 2510.3-1(j). Suarez argues that his current individual policy
falls under this safe harbor provision. (P1. Opp. 8—9). Provident counters
this with evidence that Intessa’s group policy does not fall under this safe
harbor exception. (Def. Reply 9—15). However, Provident’s analysis
focuses on the original group policy, which, as everyone admits, was an
ERISA plan. What is absent from the record on this motion to dismiss is
(1) enough information to determine whether Suarez’s coverage was
continued or converted; and (2) if the coverage was converted,
information regarding Suarez’s irtclivicLual plan, including (a) what, if any,
contributions Suarez’s employer makes to the individual plan; (b) what, if
any, functions Suarez’s employer has with regard to the individual plan;
and (c) what, if any, consideration Suarez’s employer receives for

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administrative services it may or may not render in connection with the
plan.
Provident’s bare assertion: “once ERISA, always ERISA” (Def. Reply
5) is unhelpful. In the cases cited by Provident, the courts were able to
determine whether the coverage was converted or continued; such is not
the case here. (See Def. Reply Br. 6—8 (citing Mass. Cas. Ins. Co. v.
Reynolds, 113 F. 3d 1450 (6th Cir. 1997); Horan, 2014 WL 346615;
Tannenbaum v. Unum Life Ins. Co. of Am., No. CIV A 03-CV-1410, 2006
WL 2671405 (E.D. Pa. Sept. 15, 2006); Brown v. Paul Revere Life Ins. Co.,
No. CIV.A. 01-1931, 2002 WL 1019021 (E.D. Pa. May 20, 2002); Solis v.
Koresko, 884 F. Supp. 2d 261, 278 (E.D. Pa. 2012)).
Contrary to Provident’s argument, it is not clear at this stage of
litigation whether Suarez’s coverage was converted or continued.
Therefore, the fact-laden inquiry as to whether Suarez’s coverage was
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converted or continued is best left to the summary judgment stage.
IV.

CONCLUSION
For the foregoing reasons, the motion to dismiss is GRANTED in

part and DENIED in part.
The motion to dismiss all claims against First Unum, Inc. will be
granted, leaving its subsidiary, Provident, a sole defendant. The motion
to dismiss Counts II and III of the Complaint is denied.
Dated: March

(, 2015
Ke in McNulty
United States District Judge

I also decline to determine at this juncture whether a group policy that is
converted, rather than continued, into an individual policy without any
employer involvement ceases to be subject to ERISA. That legal issue will be
posed, or not, depending on the outcome of discovery.

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