Neil Silverman v. Unum Group, Unum & The Paul Revere Life Insurance Company

Summary

The court held that a long-term disability insurance plan covering only three shareholder co-owners of a corporation is an ERISA employee welfare benefit plan, because the regulatory exemption for owner-only plans applies only to sole owners or owners and their spouses. Consequently, the plaintiff's state law claims for breach of contract and breach of the implied covenant of good faith and fair dealing were preempted by ERISA, and the safe harbor provision did not apply because the employer paid the entire cost and endorsed the plan. The court granted the defendants' motion to dismiss but allowed the plaintiff leave to amend the complaint to assert claims under ERISA.

Holdings

1. The plan is an ERISA plan because Plaintiff is an employee under ERISA. The ERISA regulation 29 C.F.R. § 2510.3-3 excludes from employee status only owners of corporations wholly owned by one individual or that individual and spouse; it does not exclude shareholder co-owners.
2. Plaintiff's state law claims are preempted by ERISA because they relate to an ERISA employee welfare benefit plan.
3. The plan does not qualify for the safe harbor exclusion because the employer paid the entire cost of the plan (failing the first criterion) and the employer endorsed the plan (failing the third criterion).

Questions Presented

1. Whether the long-term disability insurance policy is an ERISA plan, specifically whether Plaintiff is an 'employee' under ERISA when the plan covers only shareholder co-owners.
2. Whether Plaintiff's state law claims are preempted by ERISA.
3. Whether the plan qualifies for the 'safe harbor' exclusion from ERISA coverage.

Disposition

other