California District Court Rejects ERISA Preemption for “Voluntary” Executive Disability Coverage Marketed Through Employer

A recent decision out of the Central District of California is a helpful reminder that insurers do not get to “ERISA-wash” a claim simply because coverage was offered to employees through an employer channel. When the employer stays neutral, employees pay the full premium, and the insurer sells what is functionally an individually owned policy governed by state law, ERISA may never come into play—no matter how aggressively the insurer invokes it after a claim dispute arises.

In Koo v. Unum Grp., No. 2:25-CV-05797-JFW-BFMX, —F.Supp.3d—-, 2025 WL 3687545 (C.D. Cal. Dec. 16, 2025), Judge John F. Walter held that a disability policy issued to a New York Life executive partner was not part of an ERISA-governed employee welfare benefit plan, fell within the Department of Labor’s safe harbor regulation, and remained an individually owned, California-regulated disability policy. As a result, the court found that the plaintiff’s state-law causes of action were not preempted, and struck the insurer’s ERISA defenses.

The Background: A “Supplemental Individual Disability” Policy, Not an Employer Plan

Plaintiff Koo worked as an Executive Partner in New York Life’s Financial and Insurance Services Division. While employed there, he was offered the opportunity to purchase an individual disability income policy issued by Provident (part of the Unum family) through an outside broker.

The record was unusually clear about what New York Life intended—and what it did not intend.

The enrollment materials included a June 30, 2016 New York Life memorandum titled “Unum Elective Supplemental Disability Program,” which told employees:

• purchase of any policy was “completely voluntary,”
• New York Life did not sponsor, contribute to, or endorse the program, and
• the program was not subject to ERISA.

That same message showed up repeatedly—both in communications to employees and in internal correspondence reflected in Unum’s “risk file,” where New York Life insisted on language confirming it was not creating an ERISA plan and was not endorsing the program.

The policy itself looked like what it was marketed as: individual disability insurance (IDI). It was individually underwritten (including personal financial and medical information), described as “individually owned,” “non-cancellable,” “paid with post-tax dollars,” and portable—“belongs to you, even if you change employers.” Premiums were initially remitted through payroll deduction (with New York Life acting as remitter), and after Koo left New York Life, he paid premiums directly.

Koo submitted a claim in 2017. Defendants paid residual disability benefits for roughly six years before terminating benefits in May 2024 and upholding the termination on appeal in December 2024.

When litigation followed, Defendants pushed ERISA preemption—both as a jurisdictional basis and as affirmative defenses.

The Legal Framework: Defendants Had the Burden

The court began with a point that often gets lost in ERISA preemption fights: the insurer bears the burden of proving ERISA applies when it invokes ERISA preemption as a basis for federal jurisdiction or as a defense.

To establish an ERISA “employee welfare benefit plan,” defendants had to show a plan, fund, or program that was established or maintained by an employer for the purpose of providing disability benefits. Whether such a plan exists is a factual determination based on “all the surrounding facts and circumstances.”

On this record, the court held defendants did not meet their burden.

No ERISA Plan Was “Established or Maintained”

The decision offers two independent and reinforcing reasons why ERISA did not apply.

First, the policy did not satisfy core statutory characteristics of an ERISA plan. ERISA requires that employee benefit plans be established by written instrument and include, among other things, a named fiduciary and procedures for amending the plan and identifying who has authority to amend it. The court concluded the policy did not identify a fiduciary, did not provide amendment procedures, and did not identify an amending authority—defects that courts in the Ninth Circuit treat as significant when a defendant attempts to transform a policy into an “ERISA plan.”

The court cited Westover v. Provident Life & Accident Insurance Co., 580 F. Supp. 3d 959 (W.D. Wash. 2022), which rejected ERISA status for a similar Provident individual disability policy lacking these elements, concluding the insurer failed to show the existence of a “plan, fund, or program” under ERISA.

Second, there was no ongoing employer administrative scheme. ERISA is concerned with the administration of benefit plans that require ongoing, particularized administration by the employer—discretionary decision-making, plan governance, and continuing oversight. Here, New York Life did not administer claims, interpret eligibility, decide disputes, or operate any benefits apparatus. Its role was limited to ministerial tasks: permitting marketing, notifying employees, and remitting payroll deductions. As the Supreme Court has noted, “to do little more than write a check hardly constitutes the operation of a benefit plan.” Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 12 (1987).

The DOL Safe Harbor Applied—And Precluded ERISA

Even if defendants tried to characterize the arrangement as a “group or group-type” program, the court held it fit squarely within the Department of Labor’s safe harbor regulation, which excludes certain insurance programs from ERISA when four conditions are met:

1. No employer contributions
2. Completely voluntary participation
3. Employer’s sole functions (without endorsement) are to permit publicity and collect/remit premiums
4. Employer receives no consideration other than reasonable compensation for administrative services

The court found all four satisfied.

1) No Employer Contributions (Payroll Deduction ≠ Contribution)

Koo paid 100% of premiums. New York Life did not subsidize or reimburse them. The fact that premiums were processed through payroll deduction early on did not convert the arrangement into an employer-funded plan.

Defendants pointed to discounted premiums, but the court emphasized there was no evidence New York Life negotiated that discount. Consistent with other cases, the court treated an insurer’s unilateral discount—especially one tied to the mechanics of payroll deduction—as not an employer “contribution.”

2) Participation Was Voluntary

New York Life’s memorandum and the enrollment kit described the program as elective and “completely voluntary.” That factor strongly supported safe harbor protection.

3) No Employer Endorsement (And the Record Was Clear)

“Endorsement” is assessed from the viewpoint of an objectively reasonable employee: would the employee understand the employer merely facilitated access, or would it appear the employer made the program part of its own benefits package?

Here, New York Life did more than stay neutral—it repeatedly affirmatively disclaimed endorsement. The court pointed to:

• the express ERISA disclaimers in the employer memorandum,
• repeated insistence in communications with Unum that the program was not an ERISA plan,
• Unum’s own recognition that ERISA status was the employer’s decision, not the insurer’s, and
• New York Life’s limited role confined to the ministerial functions the safe harbor expressly allows.

4) No Employer Consideration

Plaintiff attested New York Life received no consideration, and defendants offered no contrary evidence.

Surrounding Circumstances: The Policy Was Treated as a California-Regulated Individual Contract

The court also found it telling that defendants themselves repeatedly treated the policy as subject to California law—directing the plaintiff to the California Department of Insurance, advising about California protections against unintentional lapse/cancellation, and including California-specific exclusions and limitations. Those details reinforced that this was a state-regulated individual policy, not an employer plan governed by ERISA.

The Result: State-Law Claims Survive; ERISA Defenses Stricken

Based on all the surrounding circumstances—employer disclaimers, voluntary participation, employee-paid premiums, individual underwriting, absence of plan features, absence of ongoing employer administration, and insurer references to state-law rights—the court held:

• the policy is not governed by ERISA,
• state-law claims are not preempted, and
• defendants’ ERISA-based defenses (including limitations-of-remedies tied to ERISA) were stricken.

Why This Decision Matters

Insurers frequently attempt to force disability disputes into ERISA because it can sharply restrict remedies, eliminate juries, and narrow discovery. Koo is a strong reminder that ERISA is not a label an insurer can apply after the fact. The question is whether the employer established or maintained an ERISA plan and whether the arrangement fits within the DOL safe harbor.

For claimants, the practical takeaway is straightforward: when coverage was sold as individually owned, paid with post-tax dollars, and the employer’s role was limited to allowing marketing and remitting payroll deductions—especially with explicit employer disclaimers—ERISA may not apply, and state-law remedies may remain available.