Court Holds Plaintiff’s State Claims Preempted by ERISA and Dismissed Complaint

In Lowe v. Lincoln Nat’l Life Ins. Co., Plaintiff suffered a stroke in May 2016 while working for Diversicare Healthcare Services, Inc. Diversicare provided its employees with long-term disability (LTD) benefits under a policy issued by The Lincoln National Life Insurance Company (Lincoln).

The stroke rendered Plaintiff unable to work. She was initially awarded benefits under the plan from November 6, 2016 to June 6, 2017. Lincoln then notified her that her benefits were terminated. Benefits were reinstated following Plaintiff’s submission of additional records pursuant to her administrative appeal. She then received benefits from June 6, 2017 to December 31, 2017. It appears benefits were again terminated and she again appealed.

While an additional appeal was pending, Plaintiff filed a lawsuit initially alleging five causes of action, but later amended her complaint to add two additional causes of action. The Amended Complaint against Lincoln alleged:

  1. Negligence.
  2. Negligent infliction of emotional distress.
  3. Outrage.
  4. Fraudulent misrepresentation.
  5. Violations of Kentucky’s Consumer Protection Act.
  6. Bad faith.
  7. Violations of Kentucky’s Unfair Claims Settlement Practices Act.

Meanwhile, Lincoln issued a favorable decision for Plaintiff whose benefits were reinstated. She was still receiving monthly benefits from Lincoln as of October 3, 2019, when the United States District Court for the Eastern District of Kentucky, Northern Division, Ashland, issued its decision dismissing Plaintiff’s complaint.

Lincoln’s Motion to Dismiss Under Federal Rule of Civil Procedure Rule 12(b)(6)

Lincoln filed a Motion to Dismiss Plaintiff’s civil lawsuit under Federal Rule of Civil Procedure Rule 12(b)(6) on the grounds that all of Plaintiff’s claims were preempted by the Employment Retirement Income Security Act (ERISA).

The Court first analyzed the standard it was required to apply in order to dismiss a case under Rule 12(b)(6). It concluded that “The Court must determine not whether plaintiff will ultimately prevail but whether the plaintiff is entitled to offer evidence to support his claims.” In doing this, the facts in the complaint must be construed in the light most favorable to the plaintiff. Since the Court concluded the claims were preempted by ERISA, Plaintiff was not entitled to present evidence to support her claims, so the case was dismissed.

ERISA Preemption

The parties agreed that the case was governed by ERISA. The policy referenced in Plaintiff’s Amended Complaint was the group LTD insurance policy issued by Lincoln to Diversicare, Plaintiff’s employer. The plan is an “employee welfare benefit plan governed by ERISA because it is funded by Diversicare and was for the purpose of providing benefits to its employees.”

The Court noted that under the provision of 29 U.S.C. section 1132(a)(1)(B), ERISA preemption provides that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.’ A key inquiry that must be made is “whether the cause of action is based on the terms of the ‘ERISA-regulated employee benefit plan’ itself as opposed to an independent legal duty.”

The Plaintiff argued that her claims “are beyond ERISA’s purview because she asserts violations of duties that are not related to ERISA or the Plan under which she receives benefits.” She relied on one case to support her claim, but that case was not a claim for disability, and did not involve a wrongful denial of disability benefits. The Court found the Plaintiff’s reliance on that case misplaced.

The Court noted that in this case “Plaintiff alleges a panoply of state law claims…” and determined that each of Plaintiff’s claims were based upon “Lincoln’s allegedly wrongful denial of benefits.”

Plaintiff’s own pleadings support this conclusion. She described her claims as arising from Lincoln’s rejection of her claim. She also alleged that Lincoln used unfair and false practices “to deny her long-term disability claim.” The Court then analyzed carefully each cause of action and explained which Sixth Circuit or Supreme Court case it was relying on to determine the specific claim was preempted.

The Court concluded that “As Plaintiff’s own allegations make clear, none of Plaintiff’s claims allege wrongdoing independent of Lincoln’s handling of her claim. Further, Plaintiff does not allege any relationship between Defendants and Plaintiff other than through the policy. This is an ERISA case. Plaintiff’s claims fall squarely within the scope of section 1132(a)(1)(B) and are preempted by ERISA.” The Court then granted Lincoln’s Motion to Dismiss.

If you have a disability claim or are thinking about filing such a claim for either STD or LTD benefits with your disability insurance company, contact one of our attorneys at Dell & Schaefer for a free consultation.