District Court Dismisses Plaintiff’s ERISA and non-ERISA Claims for Disability Benefits

In Diederichs v. FCA US LLC, No. 23-11287, 2024 WL 1957328 (E.D. Mich. Apr. 30, 2024), Michigan Eastern District Magistrate Judge Curits Ivy, Jr. granted 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.

Plaintiff brought this action as conservator for her husband, who stopped working due to early onset Alzheimer’s Disease in October 2018. He was placed on suspended status with pay until his termination in December 2018. Although Plaintiff provided notice of intent to submit claims for both DAP and LTD benefits, it is unclear when she applied for DAP benefits. Defendant denied the 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 granting Defendant’s motion to dismiss, the Court 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 Court found that claim would also be dismissed as the DAP is not an enforceable contract, the DAP was not bound to perform as the terms of the program allow Defendant to terminate at any time.

The Court further held that Plaintiff’s two ERISA claims for breach of fiduciary duty are time-barred. 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 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 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 dismissed.

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.