Erisa and Disability Benefits Law Blog

In McNerney v. Safeway, Inc., 2006 WL 2506399 (W.D. Wash. Aug. 28, 2006), the plaintiff asserted a number of employment-related claims against the defendants (including apparently her employer), including gender and disability discrimination, hostile work environment, and retaliation.  McNerney also alleged that the defendants were liable for breach of contract, fraud, misrepresentation, and negligence with regard to her long-term disability insurance coverage.  She claimed that the defendants stopped making premium payments on her disability coverage without giving her notice.  She argued that the defendants lied to her about the purported lack of disability coverage and that she had no choice but to accept a severance agreement based on the defendants' misrepresentations.  

After the defendants removed the case to federal court, based on their argument that ERISA preempted her disability insurance claims, McNerney filed a motion to remand the case back to state court.  The federal court agreed with McNerney, analyzing the preemption issue as follows:

ERISA preemption is based on the following provision: “[e]xcept as provided in subsection (b) of this section, the provisions of this subchapter … shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by the statute.  29 U.S.C. § 1144(a).  None of the subsection (b) exceptions are at issue here.  With regard to this “related to” provision, the Supreme Court has clarified that state laws are not preempted if they have only a “‘tenuous, remote or peripheral’ connection with covered plans.” New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645, 661 (1995).  ERISA preemption analysis begins with the presumption that Congress did not intend to supplant state law.  Id. at 654.  In considering whether state law claims are preempted, this Court should focus on the “objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive.” Id. at 656.

Following Travelers, the Ninth Circuit analyzed the “relates to” criterion by determining whether a state law has a “connection with” or a “reference to” employee benefit plans.  Southern California IBEW-NECA Trust Funds v. Standard Industrial Electric Co., 247 F.3d 920, 925 (9th Cir.2001).  In determining whether a connection exists, the Ninth Circuit looks to the objectives of ERISA and the “nature of the effect of the state law on ERISA plans.”  Id.  The following factors were identified as significant to the determination as to whether a state law is “connected with” an ERISA plan: (1) whether the state law regulates the types of benefits; (2) whether the state law requires the establishment of a separate employee benefit plan to comply with the law; (3) whether the state law imposes reporting, disclosure, funding, or vesting requirements for ERISA plans; and (4) whether the state law regulates certain ERISA relationships, including the relationship between the ERISA plan and the employer. Operating Engineers Health and Welfare Trust Fund v. JWJ Contracting Co., 135 F.3d 671, 678 (9th Cir.1998); quoting Aloha Airlines, Inc., v. Ahue, 12 F.3d 1498, 1504 (9th Cir.1993).

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The state law claims of breach of contract, fraud, misrepresentation, and negligence regarding the long term disability insurance are in no way related to or connected with the terms of the benefit plan itself.  None of the four factors enumerated above is present; the state law claims here do not in any way implicate the funding, disclosure or regulation of the benefits plan. In considering the claims, the Court need not even look at the disability insurance plan itself.  Plaintiff simply claims that defendants improperly and without notice stopped deducting the payments to fund her coverage, and then lied or misrepresented the status of her coverage.  These claims have only a “tenuous, remote or peripheral' connection” with the terms of the disabilty insurance plan.  Travelers Insurance Co., 514 U.S. at 661. These are thus not within the scope of state laws which Congress intended to supplant by ERISA.  Id. at 654.  Indeed, the objective of the ERISA statute to provide coverage for employees is furthered by application of the state's tort and contract laws here. Id. at 656. These claims are thus not preempted.