Nicholas Malfitano Jun. 16, 2016, 3:56pm


PHILADELPHIA – A federal court has rejected a May 26 motion for reconsideration connected to a dismissal of a lawsuit alleging breach of contract and breach of fiduciary duty filed against Reliance Standard Life Insurance Company, the International Brotherhood of Electrical Workers (IBEW) Local 380 and the Union’s Trustees of the Health, Welfare and Pension Plans.

Judge Gerald J. Pappert of the U.S. District Court for the Eastern District of Pennsylvania ruled June 14 that the Court had “no basis for the Court to disturb its prior opinion” in this matter; which stated plaintiff Sidney L. Haymaker had not sufficiently alleged her claims against the defendants for their supposed failure to inform her late husband, Bruce A. Haymaker, of his possible eligibility for life insurance benefits.

“ERISA preempted Haymaker’s breach of contract and breach of fiduciary duty claims; and even if construed to allege ERISA violations, Haymaker’s claims failed,” Pappert stated, referring to the Court’s original April 27 decision.

Pappert next turned to Haymaker’s reconsideration motion, which he pointed out was due within 14 days after the original decision under current law, but was instead submitted 29 days afterwards.

However, the judge continued his analysis regardless.

“The purpose of a motion for reconsideration is ‘to correct manifest errors of law or fact or to present newly discovered evidence.’ Because she does not assert an intervening change in controlling law or the availability of new evidence, the Court assumes Haymaker relies upon the need to correct a clear error of law or fact or to prevent manifest injustice,” Pappert said.

Following this analysis, Pappert inferred from Haymaker’s reconsideration motion that she believed the Court erred in its interpretation of the Employee Retirement Income Security Act of 1974 (ERISA).

The lawsuit stated Bruce passed away on Nov. 25, 2014. Prior to his death, he was a member of the IBEW and insured by a $115,000 group life insurance policy, issued by Reliance to the IBEW for the benefit of its members. Haymaker designated his wife Sidney as the beneficiary under the policy.

The policy generally provides coverage for “a full-time salaried union employee or union member who has worked at least 350 hours per calendar quarter for one or more employers for 24 months in a row.” Further, the policy provides both a “Contribution Option” and a “Conversion Privilege” should the member fail to meet the 350-hour eligibility requirement.

The Contribution Option “allows a member who would otherwise lose coverage to continue that coverage for one additional quarter per calendar year by paying the value equivalent of 350 hours of work” (which may be waived by Trustee discretion), while the Conversion Privilege “affords a member, upon termination of coverage under the policy, the opportunity to convert to an individual policy without having to provide proof of good health.”

Bruce last worked 350 hours in the first quarter of 2013, and was no longer eligible for coverage under the policy after the first quarter of 2013, but Sidney alleges her husband was never notified that his coverage was terminated, or that he could exercise his Contribution Option or Conversion Privilege.

As Bruce did not exercise either of same within the timeframe set forth in the policy and the Trustees did not waive the payment requirement, Reliance ultimately determined he was ineligible for coverage under the plan.

Pappert next addressed the ERISA pre-emption at hand as it related to Section 532.7, a Pennsylvania constitutional statute which sets forth an insured’s notice privileges under their group life insurance policy.

“The Supreme Court of the United States established a two-prong test to determine whether a statute regulates insurance: (1) The state law must be specifically directed towards entities engaged in insurance; and (2) The state law must substantially affect the risk pooling arrangement between the insurer and the insured,” Pappert stated.

“In its original opinion, the Court relied on Terry v. Northrop Grumman Health Plan in holding that ERISA preempts Section 532.7 [of 40 Pa. Cons.],” Pappert added. “Haymaker contends that the Court should instead follow Meyers v. Metro. Life Ins. Co., where the Court found that ERISA did not preempt Section 532.7,” Pappert said. “The Court disagrees.”

Pappert explained that a statute “which may require an extension of the policy does not substantially affect the insurer-insured relationship” and Haymaker “failed to identify a clear error of law or fact, or that the Court made an error so apparent to the point of being indisputable.”

Pappert continued that even if the Court were to find ERISA’s pre-emption did not apply, Haymaker’s proposed seconded amended complaint would fail for two additional reasons.

“First, the statute provides that notice of an insured’s conversion privilege shall be given ‘at least 15 days prior to the expiration’ of coverage. Haymaker contends that her husband never received this notice,” Pappert said. “Second, the statute provides that in the event no notice is given to an insured at least 15 days before the termination of coverage, the insured is entitled to an “additional period.”

Pappert said the additional period in question would expire “15 days next after the individual is given such notice, but in no event shall such additional period extend beyond 60 days next after the expiration date of the period provided in such policy.”

“Haymaker’s amended complaint acknowledged: (1) That the policy provided a 31-day period within which to exercise a conversion privilege; (2) That coverage ceased on July 1, 2013; and (3) That her husband died on Nov. 25, 2014,” Pappert concluded. “At best, the statute would grant an additional 60 days on top of the period provided in the policy. Haymaker’s husband died well after the extended 91-day window. The Court accordingly denies Haymaker’s motion.”

The plaintiff is represented by John A. Gallagher of Gallagher Law Group in Berwyn.

The defendants are represented by Heather J. Austin of Wilson Elser Moskowitz Edelman & Dicker and Cassie Rachel Ehrenberg of Cleary Josem & Trigiani, both in Philadelphia.

U.S. District Court for the Eastern District of Pennsylvania case 2:15-cv-06306

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

Organizations in this Story

International Brotherhood of Electrical Workers
900 7th Street Northwest
Washington, DC 20001

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