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Pentland v. Metropolitan Life Insurance Co.

United States District Court, D. Colorado

February 20, 2019





         Tony Pentland was an employee at Schlumberger and insured under a group life insurance plan administered by defendant Metropolitan Life Insurance Company (“MetLife”). Complaint, ECF No. 1 at ¶¶7-8. On March 30, 2017, Schlumberger terminated Mr. Pentland. Id. at ¶8. On April 11, 2017, MetLife sent a letter to Mr. Pentland informing him that he was eligible to convert $207, 000 in basic life coverage and $525, 000 in optional life coverage to an individual life insurance policy. Id. at ¶9. They gave him a conversion application to complete and suggested he contact a financial professional with Massachusetts Mutual Life Insurance Company to assist him with converting this coverage. Id. at ¶¶9-10. Mr. Pentland and his spouse received assistance from a financial services representative with the company, Robert Lucke, in completing the conversion application. Id. at ¶¶11-12. Mr. Pentland elected to convert $207, 000 in basic life coverage and $525, 000 in optional life coverage from the Schlumberger group plan to an individual policy. Id. at ¶12.

         MetLife issued Mr. Pentland a policy with Policy Number 217012877A, the “Individual Policy, ” with an effective date of May 1, 2017.[1] On June 7, 2017, the Pentlands paid MetLife $3, 391.84 as the first premium due under the Individual Policy. Id. at ¶15. The Pentlands continued to make timely premium payments for the Individual Policy through the date of Mr. Pentland's death on November 11, 2017. Id. at ¶18.

         After Mr. Pentland's death, Ms. Pentland submitted a claim for benefits under the Individual Policy. However, in a letter dated December 12, 2017, MetLife notified Ms. Pentland that it was rescinding the Individual Policy after a review of the terms of the Schlumberger Group Life, Accidental Death & Dismemberment, and Business Travel Accident Plan (the “Group Plan”). MetLife asserted that Mr. Pentland was still covered by the Group Plan at the time of his death, and therefore “the conversion to the individual policy was not necessary.” ECF No. 12, Ex. 2. MetLife refunded Ms. Pentland $11, 945.64 for the premiums paid on the Individual Policy. Id.; ECF No. 1 at ¶20. MetLife also payed Ms. Pentland the amount it concluded she was entitled to receive under the Group Plan: $326, 066.99. However, Ms. Pentland asserts that the Individual Policy was in effect on the date of Mr. Pentland's death, and as the sole, primary beneficiary of the Individual Policy, she is entitled to the value of the Individual Policy: $732, 000. ECF No. 1 at ¶¶14, 22, 23.

         In February 2018, Ms. Pentland filed a complaint in this court alleging breach of Colorado state law - specifically, breach of contract and tortious breach of duty of good faith and fair dealing. ECF No. 1. The basis for jurisdiction was diversity jurisdiction under 28 U.S.C. §1332. MetLife filed an answer, asserting that the Employee Retirement Income Security Act of 1974 as amended, 29 U.S.C. §§ 1001-1461 (“ERISA”), preempts Ms. Pentland's Colorado state law claims. At the scheduling conference held on June 11, 2018, I asked the parties to submit briefs as to whether Ms. Pentland's state law breach of contract and related claims arising under the Individual Policy are preempted by ERISA. ECF No. 11. Both parties submitted an opening brief, ECF Nos. 12, 13, and a response brief, ECF Nos. 15, 16. The parties jointly moved for an Order for Determination on the ERISA issue, ECF No. 17. I determine that ERISA preempts plaintiff's state law claims.


         Section 514(a) of ERISA provides that the statute preempts all state laws that “relate to any employee benefit plan.” 29 U.S.C. § 114(a). The Supreme Court has instructed that in determining the reach of ERISA preemption, “the purpose of Congress is the ultimate touchstone.” Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 8 (1987). The purposes of ERISA are described by the Supreme Court in Aetna Health Inc. v. Davila:

Congress enacted ERISA to protect . . . the interests of participants in employee benefit plans and their beneficiaries by setting out substantive regulatory requirements for employee benefit plans. . . . The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans. To this end, ERISA includes expansive pre-emption provisions, see ERISA § 514, 29 U.S.C. § 1144, which are intended to ensure that employee benefit plan regulation would be exclusively a federal concern.

542 U.S. 200, 208 (2004) (citing Alessi v. Raybestos-Manhatten, Inc., 451 U.S. 504, 523 (1981)) (internal quotation marks omitted). In sum, the Supreme Court has described the purpose of ERISA as twofold: the protection of employee interests and administrative ease for employers. See, e.g., Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 137 (1990).

         To determine whether ERISA preempts Ms. Pentland's state law claims in this case there are two questions I must answer. Because plaintiff asserts claims for benefits under the Individual Policy, the first question is whether the Individual Policy is subject to ERISA regulation as an ERISA plan. See Demars v. CIGNA Corp., 173 F.3d 443, 446 (1st Cir. 1999); Waks v. Empire Blue Cross/ Blue Shield, 262 F.3d 872, 875 (9th Cir. 2001). The Ninth Circuit has held that “[t]he answer is straightforward. . . . An employee benefit plan must cover at least one employee to constitute an ERISA benefit plan.” Waks, 262 F.3d at 875. I agree with the Ninth Circuit on this point: because Mr. Pentland's Individual Policy covered him as an individual and not as an employee of Schlumberger or any other employer, this policy is not itself an employee benefit plan under ERISA. The second question I must answer is whether the state law claims under the Individual Policy are so related to an employee benefit plan that they are preempted. See Waks, 262 F.3d at 875.

         Two cases from the Ninth Circuit are instructive on this second question: Waks, 262 F.3d 972, and Reynolds v. Metropolitan Life Ins., 685 Fed.Appx. 615 (9th Cir. 2017) (unpublished). In Waks, the plaintiff was initially insured under a group plan from her spouse's employer that was subject to ERISA regulation. When the employer ceased operations, the plaintiff applied for individual coverage pursuant to the conversion rights of the group policy. The insurance company, Empire, issued her an individual medical insurance policy. Id. at 874. When Empire subsequently denied an insurance claim under plaintiff's converted policy and she filed a complaint asserting state-law claims of breach of contract, Empire defended on the ground that claims under plaintiff's converted policy were preempted by ERISA. The Ninth Circuit held that “claims arising under a converted individual policy are not ‘related to' an ERISA plan for purposes of ERISA pre-emption.” 262 F.3d at 875

         On the other hand in Reynolds, the Ninth Circuit found that a dispute about an insured's converted life insurance policy was preempted by ERISA where the insured was seeking to file a claim both under an employee group life insurance plan and under her converted policy. The Ninth Circuit reasoned that the defendant insurance company necessarily had to consider a “one payment only” provision in the group plan covered by ERISA in deciding how to pay benefits under either policy. Therefore, claims under the converted policy were sufficiently related to the group plan to justify preemption.

         Cases from other circuits similarly distinguish between lawsuits involving benefits under a converted policy and lawsuits where a court must consider the conversion rights under an employee benefit plan to determine the existence of benefits under a converted policy. In general, courts have found that state law claims in the former situation are not preempted by ...

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