Ninth Circuit Holds ERISA Does Not Govern Long-Term Disability Policy Purchased Through Insurance Agents Association

In Steigleman v. Symetra Life Insurance Company, No. 21-15613, 2022 WL 912255 (9th Cir. Mar. 29, 2022), Plaintiff-Appellant Jill Steigleman appealed the district court’s order granting summary judgment to Defendant-Appellee Symetra Life Insurance Company on her claim for bad faith under Arizona law as it relates to Symetra’s administration of her claim for long-term disability (“LTD”) benefits. As noted in the district court opinion, Steigleman owned and operated Steigleman Insurance Agency, LLC. Under the LLC, she worked as an agent selling Farm Bureau Financial Services insurance and was eligible to join The Agents Association (“TAA”). TAA offered a benefits package, which included long-term disability insurance. Steigleman purchased LTD coverage through TAA, and the premiums were paid by her LLC. Eventually, Steigleman hired two employees who were also offered the same benefits with TAA. The LLC paid all the employees’ premiums. The district court determined that Steigleman’s LTD policy was part of an employee welfare benefit plan governed by ERISA.

The Ninth Circuit found that the district court erred in holding that Steigleman’s LTD policy was governed by ERISA. Though Steigleman’s employees gained access to group-type disability insurance coverage through her membership in the TAA, and the LLC paid the premiums for the employees’ coverage, these facts are not sufficient to show that Steigleman established or maintained an ERISA plan. The record does not show that the LLC specifically contracted with TAA to extend disability coverage to the LLC employees. Further, the TAA does not qualify as an employee organization capable of establishing or maintaining an ERISA plan. On this point, the court noted that TAA does not engage with Farm Bureau on typical issues incidental to employment relationships. After finding that ERISA does not govern this action, the court determined that the district court erred in concluding that Symetra’s conduct was reasonable as a matter of law, where Symetra engaged in conduct that a jury could reasonably conclude was unreasonable.