The question before the court in this matter is whether a claim for benefits under a policy of disability insurance is governed by ERISA. The plaintiff had purchased an individual policy of insurance; however, the application for benefits indicated that premiums would be paid through Oxford Investment Group, Inc. which was paying premiums on other Unum policies. However, Garon was a principal and an officer of Real Estate Interests, Inc. (REI), which merely did business with Oxford. However, Oxford and REI were separate entities, and Garon reimbursed Oxford for the cost of the premiums. Nonetheless, Oxford received a 15% discount on all policies billed on the same billing statement. In 1996, however, Garon began remitting payment directly to Unum; and in 2005, Unum was asked to sent him separate invoices to his office at REI which began in 2006. In 2009, Garon submitted a claim for benefits.
The court began by laying down the law, explaining that the existence of an ERISA plan is a question of fact "to be answered in light of all the surrounding circumstances and facts from the point of view of a reasonable person." Langley v. DaimlerChrysler Corp., 502 F.3d 475, 479, (6th Cir. 2007). The burden is on the insurer to prove, as an affirmative federal defense, the facts necessary to establish that state law claims are preempted as a matter of law. Kanne v. Connecticut General Life Ins. Co., 867 F.2d 489, 492 (9th Cir. 1988). Moreover, since the matter was brought before the court by Unum on a motion for summary judgment, "the Court considers the evidence in determining whether Plaintiff raises a genuine issue of material fact, with facts and inferences construed in the light most favorable to Plaintiff." Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 373 (6th Cir. 2009) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). For a plan to be governed under ERISA as a "welfare benefit plan," it must be "any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both." 29 U.S.C. § 1002(1). An employee is defined in Section 1002(6) as "any individual employed by an employer."
Under those criteria, the court determined the plaintiff was not an employee of Oxford and that there was no organizational affiliation between REI and Oxford. Moreover, "Plaintiff never received a paycheck from Oxford, nor was he supplied tax forms from Oxford. There was no employment contract between Plaintiff and Oxford, and Oxford could not hire or fire Plaintiff from his position at REI or supervise his work." Absent any time of employment relationship with Oxford, the court found an ERISA plan could not exist. The court also rejected Unum's assertion as to the applicability of Parke v. Provident Life & Accident Ins. Co., Case No. Civ-09-865-W (W.D. Ok. Dec. 6, 2010), in which a plaintiff who created a fictitious company to obtain a group insurance policy was estopped from arguing that ERISA did not apply to his policy. Finding no similarity to that case, the court dismissed Unum's argument, particularly since the application for benefits named Plaintiff's employer as REI, not Oxford, so there was no inducement to Unum to issue coverage believing that Plaintiff was participating in a plan sponsored by Oxford. Because the court found that Plaintiff was not a participant in an employer-sponsored plan, the court declined to examine whether the plan itself falls within ERISA's safe harbor regulation, 29 C.F.R. §2510.3-1(j).
Discussion: The safe harbor regulation provides that an"employee welfare benefit plan" shall not include a group or group-type insurance program offered by an insurer to employees or members of an employee organization, under which:
(1) No contributions are made by an employer or employee organization;
(2) Participation in the program is completely voluntary for employees or members;
(3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and
(4) The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.
Arguably, Garon should have also fallen within the scope of that regulation, even if he otherwise could have been characterized as a "beneficiary" of a plan set up by Oxford. The argument was evidently not made by the insurer, but under Ruttenberg v. United States Life Insur.Co. in the City of New York, 413 F.3d 652 (7th Cir. 2005), a non-employee who was able to participate in an organization's disability plan was deemed a "beneficiary" of that plan because the plan described Ruttenberg as eligible for coverage.