In Juanopulos v. Salus Claims Mgmt. LLC, No. 4:20-CV-01394, __F.Supp.3d__, 2021 WL 520453 (S.D. Tex. Feb. 9, 2021), in deciding a motion to remand the matter to state court, the district court had to decide whether ERISA governs an occupational injury benefit plan that covered just the business owner. The short answer is that it does not.
Plaintiff Juanopulos owns J&A Paint and Body Shop and alleges to be the sole proprietor and only employee. Defendant Life Insurance Company of North America (LINA) sold Plaintiff an occupational injury benefit plan for his business. The plan provides certain medical benefits for “Covered Employees” who are hurt on the job. Plaintiff filed a claim under the plan when he accidentally shot himself in the stomach while at work. He alleged that he was attempting to remove a stuck bullet from a gun he kept in his office to provide on-premises security.
Defendant Salus Claims Management LLC is a third-party administrator responsible for managing work-related injury benefit claims and Defendant Matt Reiter is a Salus employee. Reiter denied the claim on the basis that using or cleaning a gun was not within the covered scope of employment. Plaintiff unsuccessfully appealed the denial and then filed several state law claims against Defendants in Texas state court. Defendants removed based on ERISA preemption, claiming that the plan was exclusively governed by ERISA. Plaintiff sought a remand on the basis that ERISA does not apply.
In deciding whether ERISA applies, the court noted that “the Fifth Circuit has set out three distinct inquiries that courts must resolve to determine whether a particular plan qualifies as an employee welfare benefit plan under ERISA. These are:
Meredith v. Time Insurance Co., 980 F.2d 352, 355 (5th Cir. 1993).” Here, the parties dispute the third area of inquiry and whether the plan covers more than just Plaintiff as an owner. The court described this dispute as in part factual—whether other employees are covered—and relates to the first area of inquiry. The court found the answer to the first and third question to be no.
As to whether the plan exists, it must be a plan that is established or maintained by an employer for the purpose of providing medical benefits to participants or their beneficiaries. The Department of Labor regulations exclude any plan under which no employees are participants covered by the plan. See 29 CFR § 2510.3-3(b). The Fifth Circuit has held that “[a]n owner of a business is not considered an ‘employee’ for purposes of determining the existence of an ERISA plan; in other words, ERISA does not govern a plan whose only fully vested beneficiaries are a company’s owners.” Because Plaintiff alleges that he is the owner and sole employee, ERISA does not govern the plan.
Defendants raise several arguments in response which the court disposed of by finding: (1) A sole proprietor is not an employer because she has no employees and plans without employees are not regulated by ERISA; (2) the DOL regulations define a plan as one under which employees are participants so it is of no moment that the plan covers “potential employees;” (3) that the plan self-identifies to be subject to ERISA does not make it an ERISA plan; and (4) the evidence Defendants cite to does not establish that Plaintiff has any employees; he is the sole participant in the plan.
The court remanded the action to state court.
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