United States District Court, D. South Carolina, Columbia Division
Michael Hendrix, Individually and as Personal Representative of the Estate of Amy Sue Hendrix, Plaintiff,
Resource Real Estate Management, Inc., d/b/a Resource Residentialand Unum Life Insurance Company of America, Defendants.
This matter is before the court for a review of Defendant Unum Life Insurance Company of America’s (“Unum”) Motion and Memorandum in Support of ERISA Preemption (ECF Nos. 13, 13-1) pursuant to this court’s ERISA Specialized Case Management Order of March 12, 2015 (ECF No. 5). Plaintiff Michael Hendrix (“Plaintiff”) filed a Response in Opposition to Defendant’s Motion, (ECF No. 16), to which Defendant filed a Reply (ECF No. 17). For the reasons explained below, this court finds that ERISA governs Plaintiff’s causes of action, that ERISA preempts Plaintiff’s causes of action, and that removal to federal court was proper. Defendants’ Motion (ECF No. 13) therefore is GRANTED.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Michael Hendrix, Individually and as Personal Representative of the Estate of Amy Sue Hendrix, filed suit in the Court of Common Pleas for Lexington County alleging causes of action for breach of contract, bad faith failure to pay insurance benefits, liability for attorney’s fees under S.C. Code Ann. § 38-59-40 (2015), liability for attorneys’ fees under S.C. Code Ann. § 38-63-90 (2015), and negligence and recklessness.
Plaintiff alleges in his Complaint that he applied for a life insurance policy from Defendant Resource Residential and paid for the policy with paycheck deductions. (ECF 1-1 at 7-8.) Plaintiff states that Defendant Unum eventually issued the policy, for which he was a listed beneficiary. (Id.) Plaintiff explains that Defendant Resource Residential’s premium deduction created a binding insurance contract, as did Defendant Unum’s issuance of the policy. (Id.)
When the policy decedent died, Plaintiff submitted a claim to Defendants, who denied coverage. (Id.) After Plaintiff sued in state court to recover under the policy, Defendants removed the case to this federal court on March 12, 2015. (ECF No. 1.) Defendants, supporting its claim for removal, argue that this case is a civil action concerning the laws of the United States- specifically, the Employee Retirement Income Security Act of 1974 (“ERISA”), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq. (2012). (ECF Nos. 1, 13-1 at 2.) Defendants argue, alternatively, that the action is one appropriate before the court under diversity jurisdiction. (Id.)
On April 15, 2015, Plaintiff responded to the Court’s Specialized Case Management Interrogatories and took the position that ERISA does not preempt his state law causes of action. (ECF No. 11.) Defendant Unum filed a Motion and Memorandum in Support of ERISA Preemption (ECF Nos. 13, 13-1) now before this court. Plaintiff Michael Hendrix (“Plaintiff”) filed a Response in Opposition to Defendant’s Motion (ECF No. 16), to which Defendant then filed a Reply (ECF No. 17).
The primary issue before the court is whether ERISA governs the policy such that removal was proper and Plaintiff’s state law causes of action are preempted.
II. LEGAL STANDARD
A. ERISA Coverage
ERISA applies to employee benefit plans that an employer “engaged in commerce or in any industry or activity affecting commerce” establishes or maintains. 29 U.S.C. § 1003(a) (2012).
ERISA defines a benefit plan as:
Any plan, fund, or program which was heretofore or is hereinafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise (a) medical, surgical, or hospital care or benefits . . .
(Id.) In Custer v. Pan American Life Ins. Co., 12 F.3d 410 (4th Cir. 1993), the Court of Appeals for the Fourth Circuit sets forth the test to determine if ERISA governs a policy plan. The Fourth Circuit has stated:
[f]or ERISA to apply, there must be (1) a plan, fund or program, (2) established or maintained, (3) by an employer, employee organization, or both, (4) for the purpose of providing a benefit, (5) to employees or their beneficiaries.
Custer, 12 F.3d at 417 (citations omitted). The Fourth Circuit further observed in Custer that “the establishment of a[n] [ERISA] plan may be accomplished through the purchase of insurance, ” id. (citing 29 U.S.C. § 1002(1)), and that “[t]he existence of a[n] [ERISA] plan may be determined from the surrounding circumstances to the extent that a ‘reasonable person could ascertain the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits.’” Id. (quoting Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir. 1982)). But the Fourth Circuit also clarified:
[T]he purchase of every insurance policy does not automatically establish a welfare benefit plan under ERISA. The Department of Labor has issued regulations stating that if the employer merely facilitates the purchase of a group insurance policy paid for entirely by the employees, the employer is not establishing a plan. There must be some payment and manifestation of intent by the employer or employee organization to provide a benefit to the employees or the employees' beneficiaries. . . . .
Id. at 417 (citations omitted).
These regulations that the Fourth Circuit referenced preclude certain group insurance programs from ERISA coverage ...