District Court Dismisses ERISA And Non-ERISA Claims for Disability Benefits Finding That ERISA Coverage Had Terminated and Plaintiff’s Other Claims Were Preempted, Time-Barred or Not Viable

In Diederichs v. FCA US LLC, No. 23-CV-11287, 2024 WL 5168087 (E.D. Mich. Dec. 19, 2024), Michigan Eastern District Judge Robert J. White adopted the Magistrate Judge’s report and recommendations granting Defendant’s motion to dismiss Plaintiff’s action seeking disability benefits under the employer’s Disability Assistance Program (“DAP”) followed by long-term disability (“LTD”) benefits, and denying Plaintiff’s motion to file a second amended complaint.

Plaintiff brought this action as conservator for her husband, who stopped working due to early onset Alzheimer’s Disease in October 2018. Defendant denied Plaintiff’s DAP claim on June 6, 2022. A claim for LTD benefits was never submitted. Plaintiff brought suit alleging claims for recovery of benefits and breach of fiduciary duty pursuant to ERISA.

In recommending that Defendant’s motion to dismiss be granted, the Magistrate Judge first found that the DAP is not an ERISA plan, but a “payroll practice,” in that it pays the employee’s compensation out of the company’s general assets and does not require the protections of ERISA. To the extent that Plaintiff intended to raise a breach of contract claim under the DAP, the Magistrate Judge found that claim would also be dismissed as the DAP is not an enforceable contract, and the terms of the program allow Defendant to terminate at any time. Plaintiff objected, arguing that the employer promised DAP benefits as partial compensation for employment, and that the Magistrate Judge failed to properly construe the DAP and its terms consistent with this clear purpose.

Section 8.01 of the DAP provides that FCA “shall have the right to terminate the Plan at any time and for any reason. The Company, in its sole discretion, may choose to terminate immediately any or all benefits for any or all past, present or future Employees.” Section 8.02 provides that FCA “shall have the right at any time, and from time to time, to amend, in whole or in part, any or all provisions of the Plan. The Company may make any such amendment(s) effective with respect to any or all past, present or future Employees. Any such amendment may be made with or without retroactive effect.” The Court found that the Magistrate Judge’s interpretation of “the plain terms of Sections 8.01 and 8.02 of the DAP” was reasonable and indicated that the FCA was not bound to perform under the plan and the retroactivity language of Section 8.02 evidenced FCA’s intent not to be bound by its terms.

With regard to Plaintiff’s two ERISA claims for breach of fiduciary duty, the Court agreed with the Magistrate Judge’s conclusion that they are time-barred, thus rendering Plaintiff’s general viability argument moot. The Court found that Plaintiff had not made the case that the six-year period applied to her claims. Plaintiff needed to bring her breach of fiduciary duty claims within three years of actual knowledge of the facts of the claims. She was given actual knowledge in September 2019 with the plan documents. A lawsuit needed to be filed during or before September 2022. Plaintiff’s May 2023 lawsuit was late. Moreover, equitable estoppel did not apply as Plaintiff was not diligent in pursuing a disability claim.

With regard to Plaintiff’s ERISA LTD claim, the Court again agreed with the Magistrate Judge’s recommendation. The Court first noted that the LTD’s requirement that DAP benefits be exhausted as a prerequisite to benefits is a basis for dismissal. Further, the Court held that the husband’s termination from employment was another basis for dismissal. The LTD Plan made clear that if the employee resigns or is discharged, LTD coverage ceases as of the last day worked. According to the Complaint, Plaintiff alleged that her husband was paid through his termination on December 18, 2018. So, there was no period of LTD eligibility. As he was not eligible for benefits on the face of the complaint, the claim for benefits was also properly dismissed.

Finally, with regard to Plaintiff’s motion to file a second amended complaint, the court agreed with the Magistrate Judge’s conclusion that the proposed additional claim of promissory estoppel was not viable because the DAP terms did not create clear and definite promise upon which Plaintiff’s husband could rely. As such no amendment could cure the defects of the complaint.

As demonstrated in this case, navigating the disability process with both employers and insurers can be challenging. If your employer or insurer has denied your disability insurance claim, contact us for assistance.