Court Finds ERISA Preempts Breach of Contract and Bad Faith Claims in Dispute Over Disability Benefit Overpayment

In Doolittle v. Hartford Financial Services Group, Inc., No. 1:25-CV-00148 (BKS/TWD), 2025 WL 2577213 (N.D.N.Y. Sept. 5, 2025), the U.S. District Court for the Northern District of New York dismissed a pro se plaintiff’s state law claims for breach of contract and bad faith, holding they were expressly preempted by the Employee Retirement Income Security Act of 1974 (“ERISA”). The decision highlights the broad scope of ERISA’s preemption provision and underscores the difficulties individuals face when attempting to enforce informal agreements that conflict with the written terms of an employee benefit plan.

Background

Plaintiff Micky R. Doolittle was insured under his employer’s long-term disability (“LTD”) plan issued by Hartford. After a 2016 car accident, Doolittle filed a claim for LTD benefits. Hartford approved the claim and began paying him $2,500 per month. As is a common practice by LTD insurers, Hartford required Doolittle to sign an agreement acknowledging that any Social Security disability benefits (“SSDI”) he later received would offset his LTD benefits, and that he would be required to repay Hartford for any resulting overpayment.

In 2019, more than three years after Hartford began paying LTD benefits, the Social Security Administration approved Doolittle’s disability claim and awarded him retroactive SSDI payments of approximately $31,000. Hartford then asserted that Doolittle’s LTD claim had been overpaid in that amount.

Doolittle contended that in 2022 he had reached a verbal agreement with a Hartford collections representative to resolve the overpayment through a lump-sum payment of $10,000. He sent Hartford a check with the notation “settled in full for $10,000,” believing this satisfied his obligations. Hartford, however, applied the payment but continued to treat the remaining balance as an outstanding overpayment. In May 2022, Hartford began withholding ongoing LTD benefits to recoup the remainder.

Despite multiple appeals and correspondence, Hartford maintained that its offset and recovery were consistent with the written plan and the signed reimbursement agreement. Doolittle then filed suit in state court, asserting breach of contract and bad faith. Hartford removed the case to federal court, arguing ERISA preempted his claims.

The Court’s Analysis

Judge Brenda K. Sannes granted Hartford’s motion to dismiss under Rule 12(b)(6). The court explained that ERISA broadly preempts any state law claim that “relates to” an employee benefit plan. Long-term disability insurance plans qualify as employee welfare benefit plans under ERISA, and claims for payment of benefits or disputes about offsets fall squarely within ERISA’s regulatory scheme.

Breach of Contract

Doolittle argued that Hartford breached its agreement by continuing to withhold LTD benefits after he paid $10,000, insisting the verbal arrangement constituted an accord and satisfaction. The court rejected this argument, noting that any such alleged agreement “dealt explicitly and exclusively” with the LTD plan’s terms. As such, the claim “related to” the ERISA plan and was expressly preempted. The court emphasized that recovery of damages under state contract law would necessarily require reference to the plan terms, which is impermissible under ERISA preemption.

Bad Faith

Doolittle also alleged Hartford acted in bad faith by withholding benefits despite the purported settlement. The court found this claim was based on the same factual allegations as his contract claim and therefore equally preempted. Courts in the Second Circuit, the decision noted, consistently hold that state law claims of insurer bad faith are barred when they involve administration of ERISA-governed plans.

Consequential Damages

Doolittle sought consequential damages for credit card and personal loan debt he said he incurred because Hartford withheld his benefits. The court determined that such damages would effectively supplement ERISA’s enforcement scheme and were therefore preempted as well.

Leave to Amend

Although the court dismissed the complaint, it granted Doolittle leave to amend. While state law claims could not proceed, the court noted that ERISA itself provides a cause of action under § 502(a)(1)(B) for participants seeking to recover benefits due under their plans. The court explained that, because Doolittle was proceeding pro se, he should be given the opportunity to replead under ERISA.

Key Takeaways from this Decision

This decision underscores several important points for disability claimants:

• ERISA’s broad preemption: State law causes of action such as breach of contract and bad faith cannot be used to challenge benefit denials or offsets under ERISA-governed plans, even if based on alleged verbal agreements.
• Written plan terms control: ERISA requires plans to be established pursuant to written instruments. Oral promises, even if recorded or memorialized informally, cannot override the written policy.
• Proper remedy lies in ERISA: Claimants must pursue relief under ERISA’s civil enforcement provisions, not under state law.
• Pro se claimants may amend: Courts often provide leeway for self-represented plaintiffs to replead under the correct statutory framework, though success requires demonstrating entitlement to benefits under the plan terms.

In Doolittle, the court dismissed the plaintiff’s claims without prejudice but allowed him thirty days to file an amended complaint under ERISA. If he fails to do so, the case will be closed.