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Letourneau v. Life Insurance Company of North America

United States District Court, Sixth Circuit

November 5, 2013

TIMOTHY LETOURNEAU, Plaintiff,
v.
LIFE INSURANCE COMPANY OF NORTH AMERICA d/b/a CIGNA GROUP INSURANCE, Defendant.

MEMORANDUM OPINION AND ORDER

KAREN K. CALDWELL, Chief District Judge.

This matter is before the Court on Plaintiff Timothy Letourneau's motion to remand this matter to state court. (DE 13). Letourneau asserts several state law claims against Defendant, Life Insurance Company of North America d/b/a Cigna Group Insurance ("LINA").[1] LINA removed this matter to federal court alleging that Letourneau's claims are regulated by the Employee Retirement Income Security Act of 1974 ("ERISA"). Because both the short term disability plan ("STD") and long term disability plan ("LTD") at issue in this matter are governed by ERISA, Letourneau's motion to remand to state court is denied. (DE 13).

I. BACKGROUND

Letourneau was employed at Kmart, through Kmart Corporation/Sears Holding Management Corporation, [2] where he was automatically enrolled in STD coverage and elected to enroll in LTD coverage. (DE 1-3, 13-5, 13-8). Sometime in 2011, Letourneau applied to receive STD and LTD benefits through Kmart's insurance provider, LINA. LINA denied Letourneau's claim. (DE 1-3). Letourneau appealed the denial of benefits, and LINA informed Letourneau of his rights to bring legal action under ERISA following the "adverse benefit determination on appeal." (DE 1-3). Letourneau filed suit against LINA in Wayne County, Kentucky Circuit Court. (DE 1-3). LINA removed this matter to this Court, and Letourneau subsequently filed a motion to remand to state court. (DE 1-1, DE 13-1).

II. ANALYSIS

A district court must conduct a three-step analysis in determining whether a program is governed by ERISA. Thompson v. Am. Home Assur. Co., 95 F.3d 429, 434 (6th Cir. 1996). First the court must ascertain whether the program is excluded from ERISA under the "safe harbor" provision. Id. at 434-35. Second, the court must determine whether a particular program constitutes a "plan" within the meaning of the Act by inquiring whether, "from the surrounding circumstances, a reasonable person [could] ascertain the intended benefits, the class of beneficiaries, the source of financing, and procedures for receiving benefits." Id. at 435 (internal quotations omitted). Third, the court must determine "whether the employer established or maintained' the plan with the intent of providing benefits to its employees." Id. (internal citations omitted). The Court has examined both the LTD and STD plans according to this three-step process.

A. The STD Plan is governed by ERISA.

1. Step One: Safe Harbor Provision

An insurance policy is excluded from ERISA under its safe harbor provision if the plan meets all four of the following criteria:

(1) the employer makes no contribution to the policy; (2) employee participation in the policy is completely voluntary; (3) the employer's sole functions are, without endorsing the policy, to permit the insurer to publicize the policy to employees, collect premiums through payroll deductions and remit them to the insurer; and (4) the employer receives no consideration in connection with the policy other than reasonable compensation for administrative services actually rendered in connection with payroll deduction.

Id. (citing 29 C.F.R. ยง 2510.3-1(j)) (emphasis added).

Kmart's STD program does not fall within ERISA's safe harbor provision because it was fully funded by the employer and employee participation was not voluntary. (DE 13-5, 13-8). As the Kmart benefits pamphlet indicates, "STD coverage continues to be paid for entirely by the company [Kmart]. You [the employee] do not pay anything for STD coverage." (DE 13-5). Because Kmart clearly contributes to the policy, it is therefore not exempt from ERISA under the safe harbor provision. Helfman v. GE Group Life Assur. Co., 573 F.3d 383, 391 (6th Cir. 2009) (holding that "if an employer contributes to any employee's payment of premiums, ERISA must apply to the entirety of the particular insurance program").

Letourneau does not contest that he was automatically enrolled in the STD plan or that Kmart contributed to it. (DE 14; 13-1). Instead, he points to a provision of the employee handbook, which states that the Sears employee STD plan is a "payroll practice exempt from ERISA." (DE 15). That particular portion of the handbook, however, does not apply to Letoureau or other Kmart employees. The handbook clearly states, "Field and Distribution Center associates of Kmart Corporation are not eligible for the Sears Holding STD Program, and should instead refer to the next section of the Handbook entitled Kmart Disability Income Plan (Kmart Associates) for short-term disability benefit information." (DE 6-1) (emphasis added). The employee handbook calls the Kmart STD plan a ...


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