:: Ninth Circuit Applies “Time Of Death” Rule For Evaluating ERISA Participant Status Of Deceased Employee
In order to answer the questions before us we must first identify the relevant time for determining whether Miller was a “participant .†We have repeatedly held that whether a living party is a “participant†or “beneficiary†is determined as of the time the lawsuit is filed. . . . However, we have never identified the applicable time for evaluating the claims of a decedent’s estate and beneficiaries. Miller v. Rite Aid Corp., — F.3d —- 2007 WL 2948900 (C.A.9 (Or.)) (October 11, 2007)
In Miller v. Rite Aid Corp., the Ninth Circuit addressed the scope of ERISA preemption where the participant died before commencement of litigation. The case presents the interesting question, previously discussed on this site, where an employer has promised benefits only to find that the anticipated insurance coverage for the benefits is unavailable at the point of claim.
The Facts
Connie Miller (“Millerâ€) worked for Rite Aid for approximately 20 years. Rite Aid deducted amounts from Miller’s paycheck to pay for life insurance through a group plan “provided by ReliaStar Life Insurance Company (“ReliaStarâ€)” The evidence indicated that the benefit was approximately $150,000 with Miller’s children as beneficiaries.
In February 2001, Miller was diagnosed with terminal cancer and was placed on disability until her death on February 13, 2002. Rite Aid changed carriers on July 1, 2001. Miller was not eligible for coverage under the new carrier’s policy, Standard Insurance Company (“Standardâ€). As related by the court:
Miller was not enrolled in the Standard life insurance plan because she was not included in the list of employees exempt from the plan’s “active at work†requirement.
Thus, Miller had no coverage under the ReliaStar policy and no coverage under the Standard policy either at the time of her death.
The Allegations
Miller’s beneficiaries asserted claims against the carriers and Rite Aid after her death. After removal of the case to federal court, the case reduced itself to a claim against Rite Aid. The crux of their claim:
Appellants allege, without any details, that Rite Aid “offered, as part of the employment agreement [with Miller], that [Miller] would be provided with life insurance.†Appellants also allege that after Miller became terminally ill Rite Aid representatives assured her that she would continue to have life insurance through the time of her death. Miller allegedly repeated these assurances to her daughter. Appellants also allege that after Miller’s death Rite Aid representatives told her daughter that Miller had life insurance at the time of her death.
District Court Holds That The Common Law Claims Were Preempted
The district court agreed with Rite Aid that the plaintiffs’ state common law claims were preempted by ERISA. In the district court:
Rite Aid further argued that the Millers did not have valid common law or ERISA claims against it because ReliaStar provided instructions for converting the group policy to an individual policy, and because “Miller was not even eligible to receive life insurance through Rite Aid†due to the Standard policy’s “active at work†requirement.
The district judge granted summary judgment on the preemption ground and dismissed the action.
Was Miller A Participant In An ERISA Plan?
On appeal, the Ninth Circuit took issue with a fundamental question that was apparently overlooked by the district court. The Ninth Circuit framed the issue in this way:
Appellants, the Miller’s estate and her beneficiaries, may bring a civil suit under ERISA only if Miller was a “participant†in an ERISA plan at the relevant time. ERISA defines a “participant†as “any employee or former employee … who is or may become eligible to receive a benefit of any type from an employee benefit plan … or whose beneficiaries may be eligible to receive any such benefit.†29 U.S.C. § 1002(7).
The Test For “Participant” Status
The basic elements of participant status are simple to state, but often complex in application. The basic rule was set forth by the Court as follows:
The Supreme Court has interpreted this provision to mean that a party is a “participant†if he is an employee in, or reasonably expected to be in, currently covered employment, or if he is a former employee who has a reasonable expectation of returning to covered employment, or a “colorable claim†to vested benefits. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117 (1989).
A Question Of Timing
In the case before it, the Ninth Circuit had to fashion a rule that extended beyond its previous jurisprudence on the issue.
Miller was employed by Rite Aid until the time of her death, so to decide whether Miller was a “participant,†we must ask whether Miller was either covered by an ERISA life insurance plan at the relevant time, or whether she may have become eligible for benefits from such a plan at such time. In order to establish that Miller “may become eligible,†she “must have a colorable claim that (1) [she ] will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the future.â€
Previous caselaw dictated that participant status is to be evaluated at the time the lawsuit is filed. The Court opined:
In order to answer the questions before us we must first identify the relevant time for determining whether Miller was a “participant .†We have repeatedly held that whether a living party is a “participant†or “beneficiary†is determined as of the time the lawsuit is filed. . . . However, we have never identified the applicable time for evaluating the claims of a decedent’s estate and beneficiaries.
Time Of Death Versus Time Of Filing
The Court concluded that, in the case of a deceased employee, “it would seem to make more sense to look to the time of the employee’s death to determine whether he is covered by an insurance plan, although it is inconceivable that there could be any change in eligibility between the time of death and the time the suit is filed.” This will also be the applicable time for determining whether the decedent had a colorable claim to benefits.
No Claim To ERISA Benefits
Based upon the foregoing analysis, the Ninth Circuit held that Miller was not a participant in an ERISA plan. The Court stated that “[a]t the time of Miller’s death she did not qualify as a ‘participant’ in any ERISA life insurance plan because at that time she was not covered by any life insurance policy and she did not have a colorable claim to benefits under any plan.”
Likewise, her children were not ERISA beneficiaries. On this point, the Court held that:
Similarly, Miller’s children cannot bring a suit as “beneficiaries†of an ERISA plan, because Miller was not a participant in any plan. ERISA defines a beneficiary as someone designated by a participant, or “by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.†29 U.S.C. § 1002(8). Just as we look to the time of the employee’s death to determine whether he is a “participant,†we look to the time of death to determine whether the employee’s children are “beneficiaries.†The claim of Miller’s children to benefits under ERISA can be no greater than Miller’s claim.
Note: The Ninth Circuit concluded that the plaintiffs’ state law claims were not preempted “because Appellants are not participants in or beneficiaries of an ERISA plan.” The Court rejected the notion that Miller was a participant because of a conversion right in the Reliastar plan, stating that “converted plans are not ERISA plans”:
Such plans cover members as individuals, not as employees, and an employee benefit plan must cover at least one employee to constitute an ERISA benefit plan. Waks v. Empire Blue Cross/Blue Shield, 263 F.3d 872, 875-76 (9th Cir.2001).
Time Of Filing – Living Plaintiffs - In the case of living plaintiffs, the relevant cases (omitted above) are:
Chuck v. Hewlett Packard Co., 455 F .3d 1026, 1039 (9th Cir.2006); Schultz v. PLM Int’l, Inc., 127 F .3d 1139, 1141-42 (9th Cir.1997); Crotty v. Cook, 121 F.3d 541, 544-47 (9th Cir.1997); Curtis, 53 F.3d at 1027 (9th Cir.1995); Parker v. Bain, 68 F.3d 1131, 1138-39 (9th Cir.1995); Harris, 26 F.3d at 933; Olson v. Gen. Dynamics Corp., 960 F.2d 1418, 1422 (9th Cir.1991), cert. denied, 504 U.S. 986 (1992); Nishimoto v. Federman-Bachrach & Assocs., 903 F.2d 709, 714-15 (9th Cir.1990); Kuntz v. Reese, 785 F.2d 1410, 1411 (9th Cir.1986), cert. denied, 479 U.S. 916 (1986), abrogated on other grounds by Kayes v. Pac. Lumber Co., 51 F.3d 1449 (9th Cir.1995).
Retaliation Case Exception - The Ninth Circuit noted one exception to its “time of suit” rule for determining participant status, stating:
ERISA does not specify the relevant time, but we have deviated from our time-of-suit rule only once, when the employer’s termination of the employee threatened to undermine the enforcement of ERISA’s whistleblower provision, 29 U.S.C. § 1140, by an employee who was allegedly fired for challenging the decision to terminate the plan. McBride v. PLM Int’l, Inc., 179 F.3d 737, 742-43 (9th Cir.1999). In this case we do not need to create an exception to the standard rule because Rite Aid did not unlawfully single Miller out in a way that undermined her ability to bring an ERISA claim, or take any other action designed to undermine the enforcement of ERISA.
Rule Where Plaintiff Dies After Filing - If the plaintiff dies after filing suit, the period for determining ERISA status will be the time of filing suit. On this point, the court stated:
Of course, in the case of someone who dies after filing suit, the relevant time would be the time of the filing of the suit. The Third Circuit has held that to determine whether someone is a “beneficiary†for the purposes of adjudicating a claim that the employer did not provide life insurance plan documents, the party’s status should be evaluated at the time he requests such documents. Daniels v. Thomas & Betts Corp., 263 F.3d 66, 78 (3d Cir.2001). Daniels gave no reason for this rule, but adopting the analogous rule in this case-looking to the time the parties sought benefits-would not affect our holding. The Sixth and Seventh Circuits look to the time of filing of the suit, which is, as we have noted, for practical purposes the same as the time of death. See Morrison v. Marsh & McLennan Cos., Inc., 439 F.3d 295, 303-04 (6th Cir.2006); Neuma, Inc. v. AMP, Inc., 259 F.3d 864, 878 (7th Cir.2001).
Plan Interpretation As Measurement Of Damages - [A] party does not become a “participant†in a plan merely because the court will have to look to the terms of a terminated plan to determine the employer’s liability for failure to create a new plan. See Freeman v. Jacques Orthopaedic & Joint Implant Surgery Med. Group, 721 F.2d 653, 655-56 (9th Cir.1983) (“Even if [the employee] were to win his [state law] claim …. [the employee] would receive as damages what a participant would receive as a benefit under the plan. … He would not, however, become enrolled in the plan and become a participant.â€).
Observation - An argument not considered in the Miller case is whether the employer could have sponsored an ERISA plan for which the insurance policies were merely a funding medium. The Court viewed the employer as sponsoring distinct plans, i.e., the ReliaStar plan and the Standard plan. As previously noted, however, what constitutes an ERISA plan can be the source of dispute.
See also - The standing issues have many different aspects. For additional discussion, see:: Seventh Circuit Opinion Permits Suit By Former ESOP Participants – A Balanced View Of Standing To Sue ; :: Threading The Standing Needle: A Closer Look At Representative Claims By Plan Participants ;:: The Continuing Controversy Over Standing To Sue Under ERISA
