Benefits & ERISA Law

Fifth Circuit: AD&D Plans Exist, Therefore They Are?ERISA

By Suzanne Wynn

To be ERISA-qualified, a plan must: (1) exist;

5th Circuit Court of Appeals, Per Curium, Read v. Sun Life Assurance, No. 07-10945, March 7, 2008.

In an interesting opinion from the 5th Circuit in Read v. Sun Life Assur. Co. of Canada, No. 07-10945 (5th Cir., March 7, 2008), the Court held that the District Court for the Northern District of Texas properly granted summary judgment to the Sun Life Insurance Company, finding that the administrator’s decision to deny the accidental death and disability (AD&D) benefits was supported by substantial evidence. How the Court reaches that conclusion includes a stroll through finding that ERISA applies to an AD&D plan, applying the applicable discovery rules for an ERISA plan, and making a de novo review of the grant of summary judgment after taking a slight detour into a conflict of interest allegation.

Read’s husband was involved in a single car accident, and died as a result of the accident. A blood speciment taken from her husband registered a blood-alcohol concentration of .10 at the time of the accident, violating a Texas law which prohibits operating a motor vehicle with a blood alcohol concentration of .08 or greater. After his death, Read made a claim as the beneficiary of her husband’s AD&D policy, which had been provided as part of his employment with Unit Corporation.

A common provision in AD&D plans is to exclude coverage for self-inflicted injuries, injuries occuring while committing a criminal act, and injuries occurring while operating a motor vehicle while intoxicated. Unit Corporation’s AD&D plan contained these restrictions. Sun Life served as both the insurer and the claims administrator for Unit Corporation’s AD&D policy. Due to this restriction, Sun Life denied Read’s claim to the benefits under the AD&D policy. Read filed a lawsuit in Texas state court, and Sun Life removed it to federal court, claiming ERISA preemption.

For ERISA preemption to apply, the Court first had to determine that the AD&D policy was an ERISA plan. Read argued that it did not - that “the policy is instead a ‘garden variety, group life insurance policy purchased by Unit Corporation for its employees”. The Court stated that:

To be ERISA-qualified, a plan must: (1) exist; (2) fall outside the Department of Labor safe harbor provision; and (3) satisfy the primary elements of an ERISA “employee benefit plan” - that is, establishment or maintenance by an employer intending to benefit employees. E.g. Meredith v. Time Ins. Co., 980 F.2d 352, 355 (5th Cir. 1993).

The Court determined that the district court correctly decided that the AD&D policy was an ERISA plan as the source of the funding for the policy was the employer, the policy was established for the benefit of the employees, and the plan did not fall within the DOL’s safe-harbor provision because “Unit Corporation was obligated to pay premiums under the AD&D policy. See 29 C.F.R. section 2510.3-1(j).”

Once the Court found that ERISA applied, the rest of the opinion falls into place like dominos to affirm the district court’s grant of summary judgment in favor of Sun Life.

Technorati Tags: Pension Protection Act, PPA, Unit Corporation, Read, 5th Circuit, Sun Life, 2510.3-1(j), accidental death, AD&D, DOL, intoxicated, ERISA

Full post as published by Pension Protection Act Blog on March 11, 2008 (boomark / email).