Court Finds PwC Partner’s Disability Coverage Falls Under ERISA, Preempting State Law Claims

In Larocque v. Life Insurance Company of North America, No. 5:25-CV-02522-PCP, 2025 WL 2597399 (N.D. Cal. Sept. 8, 2025), the court dismissed a PwC partner’s state law claims for breach of contract and bad faith after finding that his long-term disability policy was integrated into his employer’s ERISA-governed benefits plan.

Background

Plaintiff LaRocque, a certified public accountant and equity partner at PricewaterhouseCoopers LLP (PwC), received long-term disability (LTD) coverage through the Partner Long Term Disability Plan, a policy issued by Life Insurance Company of North America (LINA). This plan covered only PwC’s U.S. partners and principals—not employees. PwC separately offered health and welfare benefits, including disability coverage, to its employees under the PwC Health & Welfare Benefits Plan.

In 2023, LaRocque took medical leave due to long-haul COVID and filed an LTD claim with LINA. LINA denied his claim and LaRocque then sued LINA, bringing state law claims for breach of contract and breach of the implied covenant of good faith and fair dealing, while also asserting an alternative claim for benefits under ERISA. LINA moved to dismiss, arguing that ERISA preempted the state law claims.

Legal Issue: Does ERISA Apply?

The core dispute was whether LaRocque’s LTD policy, covering only PwC partners, was governed by ERISA. ERISA generally applies to “employee welfare benefit plans” established or maintained by employers for their employees, but plans covering only business owners or partners are not subject to ERISA. However, if such a policy is integrated into a broader ERISA plan for employees, it can become part of that plan and thus fall under ERISA’s reach.

LaRocque argued that because the LTD policy applied only to partners, it remained outside ERISA. LINA countered that by 2022, PwC had expressly documented its intent to integrate the partner LTD policy into its ERISA-governed welfare benefits plan, making it subject to ERISA preemption.

The Court’s Analysis

Judge P. Casey Pitts framed the question as a legal one: whether an employer’s intent and documented action to integrate a non-ERISA policy into a broader ERISA plan is enough to bring that policy under ERISA.

Evidence of Integration

LINA pointed to Amendment documents from 2022 and 2023, which described the Partner Long Term Disability Plan as a “component of” the PwC Employee Welfare Benefit Plan. These documents showed that by the time LaRocque’s claim accrued, PwC considered the partner LTD policy part of its integrated ERISA plan.

Precedents Considered

• In Peterson v. American Life & Health Ins. Co., the Ninth Circuit held that an owner-only policy could fall under ERISA if it was a component of a larger ERISA plan. But that case dealt with plans that originally covered employees and later only owners remained.
• In LaVenture v. Prudential Ins. Co., the Ninth Circuit held that a non-ERISA owner’s plan does not automatically convert to an ERISA plan just because the employer later sponsors an ERISA-covered employee plan. Importantly, however, that case lacked evidence of intent to integrate the plans.

Here, unlike in LaVenture, PwC’s amendments showed clear intent to integrate the partner LTD policy into its ERISA benefits program. The court emphasized that ERISA’s definition of “employee welfare benefit plan” looks not just at why a plan was established, but also at how it is maintained. That language allowed the court to consider later integration efforts.

Policy Considerations

The court reasoned that if only a policy’s original establishment mattered, employers could easily sidestep ERISA by maintaining separate, technically “owner-only” policies outside ERISA—even when their intent was to create a unified benefits program. Such a formalistic rule would elevate form over substance.

Holding

The court concluded that by at least 2022, PwC had integrated the partner LTD policy into its ERISA-governed benefits plan. As a result, LaRocque’s claim for LTD benefits was governed exclusively by ERISA, and his state law claims were preempted. The court dismissed the breach of contract and bad faith claims with prejudice.

Key Takeaways

• Employer Intent Matters
  If an employer expressly integrates a non-ERISA plan into a broader ERISA plan, the non-ERISA plan can become subject to ERISA’s requirements and preemption.
• Partners’ Coverage Can Be Swept In
  Even if a disability policy covers only partners or owners, it may still be governed by ERISA if treated as part of the employer’s overall benefits program.
• State Law Remedies Barred
  Once ERISA applies, state law claims such as breach of contract or bad faith are preempted, leaving claimants with only ERISA remedies.

Why This Decision Is Significant

This ruling underscores that employers’ structuring and documentation of benefits plans carry serious consequences. For professional service firms like PwC, which often extend different benefits to partners and employees, integrating those benefits under a single plan may subject all of them to ERISA oversight. For individuals like LaRocque, that can mean losing access to potentially more favorable state law remedies and being restricted to ERISA’s narrower remedial scheme.