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England v. Hartford Financial Group, Inc.

United States District Court, W.D. Kentucky, Bowling Green Division

May 17, 2017



          Greg N. Stivers, Judge.

         This matter comes before the Court on Defendant Hartford Financial Group, Inc.'s Motion to Dismiss (DN 7). For the following reasons, the Court will hold Defendant's Motion to Dismiss (DN 7) in abeyance and Plaintiff will be granted thirty days to amend her Complaint.

         I. BACKGROUND

         Plaintiff Velma England (“England”) alleges that she applied for disability benefits under a disability insurance policy and that Defendant Hartford Life and Accident Company[1](“Hartford”) improperly terminated said benefits. (Notice Removal Ex. A, ¶¶ 1-7, DN 1-2 [hereinafter Compl.]). Policy No. GLT-206375 (“the Policy”) was issued by Hartford to England's employer, Johnson Controls, Inc. (“Johnson Controls”), as part of employee welfare benefit plan (“the Plan”). (Compl. ¶ 3). England began receiving LTD benefits on September 17, 2002. (Compl. ¶ 4).

         On September 2, 2015, Hartford terminated England's LTD benefits. (Compl. ¶ 5). England filed this action in the Metcalfe Circuit Court on or about August 5, 2016, claiming that the failure to pay benefits is actionable under the Kentucky Unfair Claims Settlement Practices Act (“KUCSPA”), KRS 304.12-230. (Compl. ¶ 7). England sought past and future benefits, interest, punitive damages, and attorneys' fees. (Compl. ¶ 8). Hartford subsequently removed the case to this Court on the basis of preemption by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461. (Notice Removal, DN 1).


         This Court has “original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331.


         A complaint must include a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). It must also contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly v. Bell Atl. Corp., 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “[A] formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Moreover, the Court “is not bound to accept as true unwarranted factual inferences, or legal conclusions unsupported by well-pleaded facts.” Terry v. Tyson Farms, Inc., 604 F.3d 272, 276 (6th Cir. 2010).


         Hartford contends that England's state law claims are preempted by ERISA, and therefore, moves to dismiss the Complaint. (Def.'s Mem. Supp. Mot. Dismiss 4-8, DN 7-1). England argues that a ruling on Hartford's Motion to Dismiss would be premature. (Pl.'s Resp. Def.'s Mot. Dismiss 3-4, DN 8). Although England “expects that it will probably be so” she asserts that there is no evidence in the record to determine if the Policy is regulated under ERISA. (Pl.'s Resp. Def.'s Mot. Dismiss 3-4).

         A. Existence of ERISA Plan

         ERISA regulates employee benefit plans established by employers or organizations that represent employees, known as “employee welfare benefit plans.”[2] 29 U.S.C. § 1003(a). Hartford attached the Policy as an exhibit to its Notice of Removal. (Notice Removal Ex. B, at 22, DN 1-3 [hereinafter Policy]). In determining whether a plan is an employee welfare benefit plan, a court must undertake a three-step factual inquiry. Thompson v. Am. Home Assur. Co., 95 F.3d 429, 434 (6th Cir. 1996). First, the court applies “the so-called ‘safe harbor' regulations established by the Department of Labor to determine whether the program was exempt from ERISA.” Id. (citing Fugarino v. Hartford Life & Accident Ins. Co., 969 F.2d 178, 183 (6th Cir. 1992)). The “safe harbor” regulations exclude a plan from ERISA coverage if: (1) the employer does not make any contribution to the policy; (2) employee participation in the policy is 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) no consideration is received by the employer “in connection with the policy other than reasonable compensation for administrative services.” Id. at 435 (citing 29 C.F.R. § 2510.3-1(j)).

         Only if a plan meets all four criteria is it excluded from ERISA coverage. Id. (citing Fugarino, 969 F.2d at 183). An examination of the Policy reveals that the “safe harbor” regulations do not exclude the Plan from ERISA coverage because, at a minimum, it is clear from the Policy that Johnson Controls contributes to the policy. (Policy 22 (“Sources of Contribution -- The Employer pays the premium for the insurance, but may allocate part of the cost ...

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