When ERISA Plan Terms Override the Employer’s Conduct: A Lapsed Life Insurance Policy and a Denied Claim

In Strawson v. Transport Labor Contract/Leasing Inc., No. 24 CV 06158, 2026 WL 3257583 (N.D. Ill. Oct. 29, 2026), the U.S. District Court for the Northern District of Illinois dismissed with prejudice a beneficiary’s ERISA suit to recover $100,000 in supplemental life insurance, holding that the insured’s coverage had lapsed under the plain terms of the MetLife plan months before his death. Plaintiff, the named beneficiary, sued the employer, Transport Labor Contract/Leasing Inc. (TLC), and Metropolitan Life Insurance Company (MetLife) under ERISA, and added an ERISA estoppel theory and an FMLA interference claim. The court rejected all three.

Plaintiff’s husband worked for TLC and carried a $100,000 MetLife supplemental life policy naming her as beneficiary. He fell ill in March 2023 and stopped working no later than April 3, 2023. TLC kept issuing pay stubs, deducted life insurance premiums from his pay through June 2, 2023, continued his medical, dental, and vision coverage, and left a company truck on his property until July 2023. He died on August 23, 2023. TLC first sent Plaintiff a claim form, then, on October 19, 2023, told her the life insurance had ended as of her husband’s termination date. MetLife denied the claim, and both defendants refunded the deducted premiums.

When does ERISA life insurance coverage end under the plan’s terms?

Because the plan gave MetLife discretionary authority to interpret its terms and determine eligibility, the court reviewed the denial under the deferential arbitrary and capricious standard, citing Firestone Tire & Rubber Co. v. Bruch. The plan’s “Date Your Insurance Ends” provision ended coverage when employment ended, and employment ended when an employee ceased to be “Actively at Work,” defined as performing all usual job duties on a full-time basis of at least 30 hours per week. A separate “Continuation of Insurance with Premium Payment” provision let TLC keep coverage in force for up to three months after an employee stopped active work due to sickness, after which, absent a return to work, both employment and insurance ended.

Applying those terms, the court found that the insured ceased active work on April 3, 2023, that the three-month continuation carried his coverage only into early July 2023, and that his death on August 23 fell well outside any period of coverage. The court read the two provisions as consistent, operating together to fix a single ending date rather than conflicting.

Can continued premiums, pay stubs, and a company truck keep coverage alive?

The court said no. Plaintiff argued that TLC treated her husband as an active employee by deducting premiums, issuing pay stubs, maintaining his health benefits, and leaving a work truck on his property. The court held that the plan turned on objective terms, not on the parties’ subjective views or on conduct the plan never referenced. The location of a work truck had no bearing on the plan’s definition of active work, and Plaintiff never alleged that her husband performed 30 or more hours of job duties during that period. The plan’s port, convert, and 31-day post-termination death provisions did not help, because Plaintiff never alleged that her husband exercised the conversion or portability options, and he did not die within 31 days of the coverage’s end. The plan’s reference to FMLA leave only noted that legally mandated leave might qualify for continuation, and Plaintiff never alleged her husband took such leave. The court therefore upheld MetLife’s denial as neither arbitrary nor capricious.

Does ERISA estoppel revive a lapsed policy?

No. Under Seventh Circuit law, conduct by those implementing a plan can estop enforcement of its written terms only in “extreme circumstances,” and ERISA estoppel requires a knowing written misrepresentation, reasonable reliance, and resulting detriment, citing Coker v. Trans World Airlines, Inc. The court found that TLC’s roughly two months of premium deductions fell short of extreme circumstances, contrasting Silva v. Fortis Benefits Insurance Co., where two deductions did not support estoppel, with Metropolitan Life Insurance Co. v. Sun, where an insurer charged years of premiums on a ported policy before declaring the decedent ineligible after his death. Several alleged representations were not in writing, others came after the husband’s death and so could not have prompted reliance, and the court found no reasonable reliance because the written plan already spelled out how long coverage lasted.

Did the FMLA interference claim fare any better?

It did not. Plaintiff alleged that TLC failed to give her husband the FMLA eligibility notice the statute requires. The court did not decide whether the FMLA even applied, because the claim failed on other grounds. The FMLA requires an employer to maintain group health coverage during leave but expressly excludes supplemental insurance paid through an employee’s voluntary payroll deductions, which is exactly what this life policy was. An FMLA plaintiff must also show prejudice from a notice failure, citing Ragsdale v. Wolverine World Wide, Inc. Plaintiff’s theory, that proper notice would have led her husband to investigate his life insurance and buy a personal policy, had nothing to do with how he structured his leave, the kind of prejudice the statute contemplates. The court dismissed the FMLA claim, and because repleading would not cure the complaint’s defects, it dismissed the entire case with prejudice.