Disability policy covering only employers not subject to ERISA jurisdiction

The U.S. District Court for the Southern District of New York remanded to state court for lack of subject matter jurisdiction a case brought by a disability-insured physician against his insurer for breach of contract and misrepresentation. Because the policy extended coverage only to the physician-owner of a medical practice and his partner, and not to their employees, it fell outside the jurisdiction of the ERISA statue.

Dr. Andrew McGowan Jr. owned a medical practice. He maintained disability insurance with U.S. Life Insurance Co. in the City of New York. McGowan sued U.S. Life in state court, alleging breach of contract, constructive trust and misrepresentation, and seeking recovery of insurance premiums and declaratory relief.

U.S. Life removed the action to federal district court. McGowan moved to remand the case to state court, contending that the policy at issue was not part of an ERISA-governed plan and that the district court therefore lacked subject matter jurisdiction.

The district court noted that ERISA grants federal courts subject matter jurisdiction of certain actions brought by employee benefits plan participants. Here, McGowan presented an affidavit asserting that no employees of his professional corporation were covered under his policies with U.S. Life and that the policies extended coverage only to himself and his physician partner in the corporation. U.S. Life did not challenge McGowan’s assertions.

The district court concluded that, based on the record, it lacked subject matter jurisdiction over the action. McGowan’s uncontroverted evidence indicated that the policy covered only owner-workers and thus fell outside ERISA’s ambit. While a plan that covers both owners and non-owner employees falls within ERISA, a plan covering only owners or partners fall outside the statue’s jurisdiction. Accordingly, the case was remanded to state court.

See McGowan v. U.S. Life Insurance Company in the City of New York, No. 06-7680 (S.D.N.Y. Jan. 24, 2007).

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Ron K. (Georgia)

I was on disability with a major insurance company for five years without any problems, upon a field rep’s visit to my home, I let him know that I was planning to try to go back to work. I did try to go back to work but with my severe sleep apnea and depression and several medications that made me very tired, the work day became impossible, when I let the case manager know that I couldn’t work without getting very tired and having to take a nap after a few hours on the job, he told me that the claim would be reexamined. I waited 9 months without any monthly benefit benefits being paid to me, the company gave me several excuses and I was in a real pickle, I researched disability attorney’s since I was in the insurance business and was told that the very best in the business for representation of my issues was a firm called Dell & Schaefer.

I reached out to the firm and was put in touch with an attorney named Steve Jessup, from that point forward, my problems seemed to fall off my shoulders and into the firms hands, I can’t explain in words what this firm did for me and my family.

Steve Jessup & Gregory Dell began working on my case immediately and I felt confident with every action they took. The insurance company as most wanted to settle my case for pennies on the dollar, but with the skill of the two attorneys, I was able to settle my case for a once in a lifetime lump sum payment from the disability insurance company that will take care of me and my family for life. All I can say is that these guys were like a machine grinding away in the trenches agains the insurance companies attorneys and getting me a great settlement. I would highly recommend this firm for anyone who felt like I did up against bad odds with a large insurance company and no where to turn to.

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