Michael Nathans v. UNUM Life Insurance Company of America

• Court: District Court, C.D. California
• Decided: July 20, 2021
• Docket: 2:20-cv-04977
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 CV 20-4977-RSWL-MRW x 12 MICHAEL NATHANS, ORDER re: Plaintiff’s 13 Plaintiff, Motion for Summary 14 v. Adjudication [20] 15 UNUM LIFE INSURANCE 16 COMPANY OF AMERICA, 17 Defendant. 18 19 Plaintiff Michael Nathans (“Plaintiff”) brings this 20 Action [1] against Defendant Unum Life Insurance Company 21 of America (“Defendant”), alleging state law claims for 22 breach of contract and breach of the implied covenant of 23 good faith and fair dealing. The Action arises out of 24 Plaintiff’s claim for benefits under a disability 25 insurance policy issued by Defendant. Currently before 26 the Court is Plaintiff’s Motion for Summary Adjudication 27 (the “Motion”), in which Plaintiff seeks a determination 28 1 that the subject disability policy is governed by

2 California law, not ERISA.

3 Plaintiff argues threefold in his Motion: (1) his 4 original policy was either not part of an ERISA plan or 5 met the “safe harbor” criteria for exemption from ERISA 6 coverage; (2) his removal from a group plan rendered 7 ERISA inapplicable; and (3) his policy’s lapse and 8 subsequent reinstatement rendered ERISA inapplicable. 9 See generally Pl.’s Mem. in Supp. of Mot. for Summ. 10 Adjudication (“Mot.”), ECF No. 20-1; Pl.’s Reply in 11 Supp. of Mot. for Summ. Adjudication, ECF No. 22. The 12 Court finds Plaintiff’s second argument both compelling 13 and dispositive. Having reviewed all papers submitted 14 pertaining to this Motion, the Court NOW FINDS AND RULES 15 AS FOLLOWS: the Court GRANTS the Motion. 16 I. BACKGROUND 17 A. Factual Background 18 1. Background 19 In 1994, Plaintiff worked in the offices of law 20 firm Duran Loquvam, Lehman & Roberts (“DLL&R”). Pl.’s 21 Statement of Uncontroverted Facts (“Pl.’s SUF”) ¶ 1, ECF 22 No. 20-2. The parties dispute whether Plaintiff was a 23 lessee of office space at DLL&R or an employee of DLL&R. 24 Id. ¶ 1; Statement of Genuine Disputes of Material Facts 25 & Def.’s Statement of Undisputed Facts (“Def.’s Resp. to 26 SUF”) ¶ 1, ECF No. 21-2. While Plaintiff worked in the 27 office of DLL&R, one of the DLL&R partners, John Duran, 28 suggested to Plaintiff that he speak to insurance agent 1 Thomas Isenhour. Pl.’s SUF ¶ 1; Def.’s Resp. to SUF ¶

2 1. Plaintiff thereafter submitted an application to

3 Defendant for disability insurance. Pl.’s SUF ¶ 2; 4 Def.’s Resp. to SUF ¶ 2. The application included 5 various coverage options under the heading “INDIVIDUAL 6 DISABILITY PLANS.” Pl.’s SUF ¶ 3; Def.’s Resp. to SUF ¶ 7 3. 8 Upon completion, the application bore Plaintiff’s 9 name and requested that Plaintiff be included on the 10 DLL&R FlexBill arrangement (the “FlexBill”). Pl.’s SUF 11 ¶ 2; Def.’s Resp. to SUF ¶ 2. Plaintiff also indicated 12 in the application that the “employer” would pay the 13 premiums. Pl.’s SUF ¶ 4; Def.’s Resp. to SUF ¶ 4. 14 Paragraph 6 of the application’s agreement provided, 15 “[p]ayment of all premium is my responsibility as owner 16 of the policy. If my employer . . . collects, pays or 17 forwards any part of the premium for this policy, they 18 act as my agent and not as agent for [Defendant]. If 19 [Defendant] does not receive premium as due, the policy 20 will lapse.” Decl. of Corinne Chandler (“Chandler 21 Decl.”) Ex. A, at 290, ECF No. 20-3. 22 In April 1994, Defendant approved Plaintiff’s 23 disability coverage. Pl.’s SUF ¶ 7; Def.’s Resp. to SUF 24 ¶ 7. The premiums were discounted fifteen percent, and 25 insurance agent Thomas Isenhour made a fifty percent 26 commission. Pl.’s SUF ¶ 7; Def.’s Resp. to SUF ¶ 7. 27 Defendant issued to Plaintiff policy number LAD 282504 28 with an effective date of March 30, 1994. Pl.’s SUF ¶ 1 8; Def.’s Resp. to SUF ¶ 8. Defendant’s file contains

2 one check from DLL&R for Plaintiff’s first premium

3 payment, and there is nothing in Defendant’s records 4 indicating whether DLL&R continued to pay those 5 premiums. Pl.’s SUF ¶ 5; Def.’s Resp. to SUF ¶ 5. 6 While the parties do not dispute that DLL&R paid the 7 premiums, they dispute whether Plaintiff reimbursed 8 DLL&R for the premiums. Decl. of Michael Nathans in 9 Supp. of Pl.’s Mot. (“Nathans Decl.”) ¶ 5, ECF No. 20-4; 10 Def.’s Resp. to SUF ¶ 5. 11 DLL&R principal Mr. Loquvam sent a letter dated 12 December 14, 1994, to Defendant, requesting that 13 Plaintiff be removed from the FlexBill. Chandler Decl. 14 Ex. A, at 274; Def.’s Undisputed Facts (“Def.’s SUF”) ¶ 15 19, ECF No. 21-2. Defendant wrote to Plaintiff, 16 offering to continue his coverage separately. Pl.’s SUF 17 ¶ 11; Def.’s SUF ¶ 11. Thus, despite being removed from 18 the FlexBill within eight months of the policy’s 19 effective date, Plaintiff maintained his coverage under 20 the same policy and was thereafter billed directly. 21 Pl.’s SUF ¶ 11; Def.’s Resp. to SUF ¶ 11. Plaintiff 22 paid non-discounted premiums directly to Defendant. 23 Decl. of Fagan ¶ 19 Ex. 5; Def.’s SUF ¶ 20. 24 DLL&R disbanded around the year 2000, and Defendant 25 destroyed files related to the FlexBill in 2007 pursuant 26 to its document retention policy. Pl.’s SUF ¶ 11; 27 Def.’s Resp. to SUF ¶ 11. 28 1 2. Policy Lapse 2 Plaintiff’s policy lapsed on June 7, 1997, for

3 nonpayment of premiums. Pl.’s SUF ¶ 12; Def.’s Resp. to 4 SUF ¶ 12. The policy contained a reinstatement 5 procedure—so long as the application was filed within 6 six months of the first overdue payment—under which a 7 policyholder had to (1) submit a reinstatement 8 application with evidence of insurability, (2) submit 9 the full amount of the overdue premium, and (3) obtain 10 approval of the application from Defendant. Chandler 11 Decl. Ex. B, at 7; Def.’s Resp. to SUF ¶ 13. 12 The reinstatement provision provided that, if 13 Defendant approved the reinstatement request, the date 14 of coverage would be that of the approval date. Pl.’s 15 SUF ¶ 13; Def.’s Resp. to SUF ¶ 13. Moreover, “[i]f 16 reinstated, the policy would only provide benefits for a 17 disabling injury that occurred after the reinstatement 18 of the policy” and “for a disabling sickness that was 19 first diagnosed or treated more than 10 days after 20 reinstatement.” Pl.’s SUF ¶ 13; Def.’s Resp. to SUF ¶ 21 13. 22 After Plaintiff submitted a reinstatement 23 application and a check to Defendant’s individual 24 disability department, Defendant approved coverage in 25 January 1998. Pl.’s SUF ¶¶ 14-15; Def.’s Resp. to SUF 26 ¶¶ 14-15. 27 /// 28 /// 1 3. Disability Claim & Termination of Benefits

2 Plaintiff claimed disability in 2018. Pl.’s

3 SUF ¶ 17; Def.’s Resp. to SUF ¶ 17. Plaintiff’s 4 benefits application included an “Attorney 5 Questionnaire,” which instructed as follows: “For Group- 6 sponsored policies – the employer should complete this 7 form,” and “For Individual policies – the insured should 8 complete this form.” Chandler Decl. Ex. A, at 31; 9 Def.’s Resp. to SUF ¶ 17. Plaintiff completed the form 10 and was approved for benefits in 2019. Pl.’s SUF ¶¶ 17, 11 19; Def.’s Resp. to SUF ¶¶ 17, 19. 12 Sometime in 2020, Defendant unsuccessfully 13 attempted to contact Plaintiff’s physician. Pl.’s SUF ¶ 14 23; Def.’s Resp. to SUF ¶ 23. Defendant subsequently 15 terminated the benefits in May 2020 and asserted for the 16 first time that ERISA applied to the claim. Pl.’s SUF ¶ 17 23; Def.’s Resp. to SUF ¶ 23. 18 B. Procedural Background 19 Plaintiff filed his Complaint [1] on June 4, 2020. 20 After the parties stipulated [9] to a fourteen-day 21 extension of time to answer, Defendant filed its Answer 22 [10] on July 15. On March 9, 2021, Plaintiff filed this 23 Motion [20]. Defendant filed its Opposition [21] on 24 March 16, and Plaintiff replied [22] on March 23. 25 II. DISCUSSION 26 A. Legal Standard 27 The standard that applies to a motion for summary 28 judgment is the same as that which applies to a motion 1 for partial summary judgment. See Fed. R. Civ. P.

2 56(a). Federal Rule of Civil Procedure 56(a) states

3 that a “court shall grant summary judgment” when “the 4 movant shows that there is no genuine dispute as to any 5 material fact and the movant is entitled to judgment as 6 a matter of law.” A fact is “material” for purposes of 7 summary judgment if it might affect the outcome of the 8 suit, and a “genuine” issue exists if the evidence is 9 such that a reasonable factfinder could return a verdict 10 for the nonmovant. Anderson v. Liberty Lobby, 477 U.S 11 242, 248 (1986). The evidence, and any inferences based 12 on underlying facts, must be viewed in the light most 13 favorable to the nonmovant. Twentieth Century-Fox Film 14 Corp. v. MCA, Inc., 715 F.2d 1327, 1328-29 (9th Cir. 15 1983). In ruling on a motion for summary judgment, the 16 court’s function is not to weigh the evidence, but only 17 to determine if a genuine issue of material fact exists. 18 Anderson, 477 U.S. at 255. 19 B. Discussion1 20 ERISA preempts state law that “relate[s] to any 21 employee benefit plan.”2 29 U.S.C. § 1144(a). 22 1 Both parties filed evidentiary objections. Because the 23 Court does not rely on the evidence to which the parties object, the Court OVERRULES those objections as moot. 24 25 2 ERISA defines an employee benefit plan to include, among other things, “any plan, fund, or program . . . established or 26 maintained by an employer or by an employee organization . . . through the purchase of insurance . . . medical, surgical, or 27 hospital care or benefits.” 29 U.S.C. § 1002(1); Stuart v. UNUM 28 Life Ins. Co. of Am., 217 F.3d 1145, 1149 (9th Cir. 2000). 1 Plaintiff asserts his claims under a disability policy

2 that, according to Plaintiff, is not subject to ERISA

3 regulation. He points to three distinct moments at 4 which ERISA was rendered inapplicable to the subject 5 policy: the inception of his policy (the “Initial 6 Policy”), the removal of his policy from the FlexBill 7 (the “Removed Policy”), and the reinstatement of his 8 policy following lapse (the “Reinstated Policy”). Mot. 9 1:10-17, 14:17-23. Because the Removed Policy is 10 dispositive, the Court limits its analysis accordingly. 11 The undisputed facts establish that DLL&R requested 12 the removal of Plaintiff’s policy from the FlexBill, 13 Defendant sent Plaintiff a letter that offered to 14 continue coverage separately, and Plaintiff thereafter 15 remitted payment for non-discounted premiums directly to 16 Defendant. Plaintiff paid those premiums pursuant to a 17 contract exclusively between Plaintiff and Defendant. 18 Chandler Decl. Ex. B, at 1-33; Def.’s Resp. to SUF ¶ 8. 19 Courts have held that ERISA does not preempt state law 20 claims brought under similar policies. See, e.g., Jilka 21 v. Unum Grp., No. 18-cv-02952-JD, 2019 WL 1221058, at *2 22 (N.D. Cal. Mar. 15, 2019) (finding ERISA inapplicable to 23 plaintiff’s policy where the insurer sent plaintiff a 24 letter asking if he wanted to continue coverage and, 25 after electing to so continue, plaintiff thereafter paid 26 the premiums independent of his employer); DiNicola v. 27 Unum Life Ins., No. 2:17-cv-01437 SVW (AJWx), 2017 WL 28 6940531, at *3 (C.D. Cal. Sept. 12, 2017) (holding that 1 ERISA did not preempt Plaintiff’s claims where the

2 disability policy was “independent of the ERISA benefits

3 from [the employer] and [did] not place any burdens on 4 the plan administrator or the plan”); May v. Paul Revere 5 Life Ins. Co., No. 5:13CV28, 2013 WL 4099997, at *5 6 (N.D.W. Va. Aug. 12, 2013) (holding that ERISA did not 7 preempt plaintiff’s claims in “the unique situation 8 where insurance is dropped by the employer and resumed 9 through an offer by the insurer”); Eberlein v. Provident 10 Life & Accident Ins. Co., No. 06-cv-02454-REB-MJW, 2008 11 WL 791944, at *6-7 (D. Colo. Mar. 20, 2008) (concluding 12 that plaintiff’s policy was not subject to ERISA where 13 plaintiff obtained an individual policy as part of an 14 employee benefit plan and was subsequently offered 15 ongoing coverage by the insurer under the individual 16 policy). 17 Although the Ninth Circuit’s decision in Waks v. 18 Empire Blue Cross/Blue Shield, 263 F.3d 872 (9th Cir. 19 2001), is not squarely decisive, the court’s reasoning 20 is instructive here. In Waks, the Ninth Circuit held 21 that ERISA does not preempt claims arising under a 22 converted policy—that is, an individual policy based on 23 conversion rights in a group plan. 263 F.3d at 875-76. 24 To be sure, Plaintiff’s Removed Policy does not arise 25 from conversion rights like the policy in Waks. As one 26 court recognized, however, policies like the one at bar 27 “much more closely resemble[] a ‘converted policy’” than 28 continuation coverage and are therefore not sufficiently 1 “related to” an ERISA plan. See Jilka, 2019 WL 1221058,

2 at *2 (citing Waks, 263 F.3d at 875) (noting that, where

3 plaintiff elected to separately maintain individual 4 coverage after the employer ceased payment of premiums, 5 “[plaintiff’s] policy much more closely resembled a 6 ‘converted policy’ . . . that was no longer subject to 7 ERISA”). This is because, as articulated in Waks, 8 “[t]he contract under the [Removed P]olicy is directly 9 between the insurer and insured. It is independent of 10 the ERISA plan and does not place any burdens on the 11 plan administrator or the plan.” Waks, 263 F.3d at 876. 12 In opposition, Defendant advances the purported 13 maxim, “once ERISA, always ERISA.” Kerton, 2005 WL 14 3440716, at *4. But Defendant fails to contextualize 15 this phrase. Indeed, the court in Kerton recognized an 16 important qualification to the “once ERISA, always 17 ERISA” notion based on a reading of Waks: “‘once ERISA 18 always ERISA,’ even if the policy continues after 19 termination of the employment relationship, unless the 20 policy is converted to an individual policy.” Kerton, 21 2005 WL 3440716, at *4 (emphasis added). There was no 22 reason for the Kerton court to consider the existence of 23 an individual policy because the plaintiff claimed 24 benefits under the original group plan. Id. 25 Other cases that Defendant cites are 26 distinguishable because those courts confronted the 27 existence or nonexistence of an ERISA plan, not the 28 relationship between the ERISA plan and the plaintiff’s 1 policy. See Peterson v. Am. Life & Health Ins. Co., 48 2 F.3d 404, 407-08 (9th Cir. 1995) (holding that

3 plaintiff’s policy, which was part of a group ERISA 4 plan, remained subject to ERISA after the only covered 5 employee was transferred to a different policy); see 6 also Finkelstein v. Guardian Life Ins. Co. of Am., No. C 7 07-01130 CRB, 2007 WL 1345228, at *4-5 (N.D. Cal. May 8, 8 2007) (holding that ERISA preempted plaintiff’s policy 9 despite the employer’s dissolution and plaintiff’s 10 status as the sole insured under the subject policy); 11 Kerton, 2005 WL 3440716, at *4 (holding that plaintiff’s 12 disability policy was an ERISA policy despite the 13 termination of plaintiff’s employment and the insolvency 14 of the employer); Judith Miller, M.A., LMFCT v. 15 Provident Life & Accident Ins. Co., No. CV99- 16 9464ABCRNBX, 2000 WL 1341480, at *4 (C.D. Cal. Sept. 5, 17 2000) (stating “that an insurance policy that was part 18 of an established ERISA plan is governed by ERISA even 19 if the plan is no longer maintained as an ERISA plan by 20 the employer”). While Defendant may be correct that 21 changes in the employment relationship or payment 22 structure are not alone sufficient to strip the plan of 23 ERISA’s governance, the character of the plan is 24 immaterial here. Critically, even assuming that the 25 DLL&R FlexBill constituted an ERISA plan, Plaintiff’s 26 Removed Policy constituted independent coverage not 27 28 1 sufficiently “related to” such a plan.3 2 Further bolstering the Court’s conclusion is that

3 courts routinely evaluate ERISA preemption with the 4 backdrop of the “two central objectives of ERISA 5 regulation: protection of employee interests, and 6 administrative ease for employers.” Waks, 263 F.3d at 7 875 (citations omitted). Neither of these objectives is 8 implicated here, as DLL&R had no connection with the 9 Removed Policy and has been defunct since 2000. Indeed, 10 “in this case ERISA preemption would be an absurd result 11 because there is no ERISA plan and no administrator. . . 12 . State law therefore cannot impose conflicting 13 requirements on any employer or ERISA plan 14 administrator.” Id. at 876; see also Demars v. CIGNA 15 Corp., 173 F.3d 443, 450 (1st Cir. 1999) (“[W]hat 16 matters for ERISA purposes is . . . the nature of the 17 employer’s ongoing administrative and financial ties to 18 the policy. If no such ties exist, the policy should 19 not be subject to ERISA regulation.”). 20 III. CONCLUSION 21 It is undisputed that Defendant removed Plaintiff’s 22 policy from the FlexBill in 1994. Following an offer 23 24 3 Given the Court’s holding that the subject policy is not governed by ERISA, the Court need not address the parties’ 25 arguments concerning Plaintiff’s Reinstated Policy. If the Reinstated Policy constituted new coverage, as argued by 26 Plaintiff, ERISA would be rendered inapplicable under the above analysis. If the Reinstated Policy constituted a continuation of 27 the coverage under the Removed Policy, the Court’s determination 28 that the Removed Policy is not subject to ERISA controls. 1 from Defendant to maintain coverage separately,

2 Plaintiff paid non-discounted premiums directly to

3 Defendant under a contract exclusively between Plaintiff 4 and Defendant. Under these facts, the Court GRANTS 5 Plaintiff’s Motion for Summary Adjudication on the issue 6 of ERISA’s inapplicability to Plaintiff’s policy. 7 IT IS SO ORDERED. 8 9 DATED: July 20, 2021 _______/_s/_ R_on_a_ld_ S_.W__. L_e_w___________ HONORABLE RONALD S.W. LEW 10 Senior U.S. District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28