The Ninth Circuit recently held that ERISA does not preempt claims brought by individuals who are not participants of the ERISA plan at issue.
Claims Brought By Individuals Who Are Not Participants In ERISA Plan Are Not Preempted By ERISA
The Ninth Circuit recently held that ERISA does not preempt claims brought by individuals who are not participants of the ERISA plan at issue. See Miller v. Rite Aid Corporation (9th Cir. October 11, 2007). In Miller, the Ninth Circuit vacated the decision of the federal trial court and remanded the case for further proceedings.
Connie Miller had been employed by Rite Aid for many years at the time that she was diagnosed with terminal cancer. Prior to her diagnosis, she was covered by Rite Aid’s group life insurance plan. While she was on disability related to her cancer, Rite Aid changed group life insurance coverage. The new plan required individuals to be active at work in order to be eligible for coverage. Because she was on disability leave, Miller was not eligible for coverage under the new plan.
When Miller died, her children and beneficiaries filed suit against the former insurance company, the current insurance company, and Rite Aid, asserting numerous claims. The employment claims asserted against Rite Aid were for breach of employment contract (due to Rite Aid’s failure to provide life insurance benefits to Miller), and for negligently failing to ensure that Miller’s benefits would be preserved. Rite Aid filed a motion for summary judgment, arguing that the claims were preempted by ERISA. The District Court of Oregon granted Rite Aid’s motion and dismissed the action.
The Ninth Circuit vacated the District Court’s decision, holding that for ERISA to preempt the claim, Miller must have been a plan participant at the time of her death. Because she was not covered by any ERISA plan at the time of her death (which was the reason the claim was brought), the claims could not be preempted by ERISA.
Employers’ Bottom Line:
Canceling or changing insurance benefits or coverage can be risky business. It is essential that, when making this decision, employers consider all of the potential ramifications. Especially in this era of skyrocketing insurance costs, employers rightfully consider costs and “the bottom line” when making these decisions. However, employers also should consider the impact the changes have on employees, since that impact may prove equally, if not more, costly in the end. If you have any questions about this decision or any other aspect of employment law, please contact Helene Wasserman, the author of this Alert, at firstname.lastname@example.org or 213-237-2403, or the Ford & Harrison attorney with whom you usually work.
Helene is the host of the Employer Helpcast, which is a "one stop website" for both "nuts and bolts" employment law advice and insight into new legal developments affecting employers.