ERISA pre-empts breach of contract lawsuit against Reliance Standard Insurance Company, IBEW

By Nicholas Malfitano | May 4, 2016

U.S. District Court for the Eastern District of Pennsylvania  

PHILADELPHIA -- A federal court has dismissed 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 April 27 that 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.

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.

Sidney filed her complaint in November in response to the denial. However, the defendants contend her breach of contract and breach of fiduciary duty claims are preempted by the Employee Retirement Income Security Act of 1974 (ERISA).

Pappert said, “A plan qualifies [under ERISA] if, from the surrounding circumstances, a reasonable person can ascertain: (1) the intended benefits; (2) the class or classes of beneficiaries; (3) the source of financing; and (4) the procedures for receiving benefits. All four of these requirements can be found in Mr. Haymaker’s policy.”

The judge added it was up to the court to decide whether Sidney’s state law claims are precluded by ERISA’s pre-emption provision.

“Counts I and III allege breach of contract claims against the defendants. Specifically, Haymaker contends that the defendants failed to adhere to their contractual notice obligations, thereby causing the denial of $115,000 in benefits to which Mr. Haymaker was entitled,” Pappert wrote. “Since Haymaker’s claims allege that the defendants failed to adhere to their obligations under the policy -- and therefore “relate to” the plan -- they are clearly preempted by ERISA.”

Moreover, Pappert stated Counts II and IV of the complaint, which allege breach of fiduciary duty claims against the defendants, are “also preempted by ERISA given that said alleged breaches relate to specific provisions of the policy, which is governed by ERISA.”

“For the above reasons, Haymaker’s complaint is preempted by ERISA in its entirety,” Pappert said.

Pappert further stipulated further amendment of the complaint would be futile, given the preclusion of her claims under ERISA.

“Haymaker has not sought leave to amend her complaint for a second time to allege her claims under ERISA. In any event, amendment would be futile given that her claims also fail when construed to allege ERISA violations. Haymaker’s amended complaint is accordingly dismissed,” the judge wrote.

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

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

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