District Court Finds Beneficiary’s Claim Against Guardian For Life Insurance Proceeds Is Preempted by ERISA

In Waggeh v. Guardian Life Ins. Co. of Am., No. CV 22-11800-FDS, 2023 WL 4373897 (D. Mass. July 6, 2023), District of Massachusetts Chief Judge Saylor granted Guardian’s motion to dismiss Plaintiff’s complaint for wrongful denial of life insurance proceeds due to preemption by the Employee Retirement Income Security Act of 1974 (“ERISA”).

In 2019, Decedent completed an application for life insurance through his employment with Berkshire Healthcare Systems, Inc., which was underwritten by Guardian. According to the complaint, Guardian approved Decedent’s application despite its failure to seek any further medical testing, examinations or

make any further inquiries, and despite its knowledge of decedent’s medical condition. Guardian issued the policy in 2019, only a few months prior to Decedent’s death. According to the complaint, the premiums were paid, and the policy was in force at the time of his death. Plaintiff-beneficiary filed a claim for benefits, to which Guardian only offered a return of premiums stating that Decedent had misrepresented his medical condition. Guardian also asserted that Plaintiff’s claim and the policy were governed by ERISA.

On a FRCP 12(b)(6) Motion to Dismiss, the Court noted that on its face, the complaint alleges facts indicating the policy was part of an employee welfare benefit plan governed by ERISA. Decedent applied for the policy through his employer, and the policy’s purpose was unquestionably to provide benefits in the event of death. Plaintiff nonetheless contended that her claim fell outside the provisions of ERISA for two reasons.

First, Plaintiff contended that the life-insurance policy was exempt from ERISA because it meets all four factors necessary for ERISA exemption pursuant to Section 1003(a), which excludes an employee welfare benefit program in which: (1) no contributions are made by an employer, (2) participation in the program is completely voluntary, (3) the employer does not endorse the program, but merely allows the insurer to publicize it, and only collects premiums through payroll deductions to remit to the insurer, and (4) the employer receives no consideration in connection with the program. Plaintiff asserted, without citing to any facts alleged in the complaint, that Berkshire made no contributions to the plan, that Decedent’s participation was voluntary, that Berkshire acted solely as a conduit between Decedent and Guardian, and that Berkshire received no consideration from Guardian in connection with the plan.

Second, Plaintiff contended that the life-insurance benefit was a “payroll practice” under 29 C.F.R. § 2510.3-1(b), which exempts from ERISA an employee’s normal compensation for periods of employee absenteeism for medical reasons.

In response, Guardian submitted an affidavit from the manager of benefits administration at Berkshire who averred that (1) Berkshire paid for benefits through the plan, including life insurance; (2) served as the administrator of the plan; (3) distributed plan information; collected premiums and employee data; and (4) encouraged employees to participate in the plan. The affidavit also asserted that the life insurance benefit was not a payroll practice because the promised benefit is a lump sum payment to the decedent’s beneficiary, and not a payout of the decedent’s normal compensation.

The Court rejected the affidavit because it was “outside the pleadings” and could therefore not be considered in opposition to a motion to dismiss. Instead, the Court found that Plaintiff failed to satisfy her burden to demonstrate that the complaint stated a claim that was factually plausible. It noted that the complaint does not contain any of the claimed factual assertions as to the roles of Berkshire and Guardian in the plan. And there are no factual allegations in the complaint that suggest that the life insurance benefit falls within the exclusion identified in Section 1003(a). The complaint only states that “the disability and voluntary life insurance policies are not part of an ERISA plan but instead are a mere payroll practice.” The Court found that such a conclusory statement—without more—was insufficient to state a plausible basis for inferring that ERISA preemption does not apply.

If Guardian has denied your life insurance claim, contact us for assistance.