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ERISA Plan Establishes Federal Jurisdiction Not Validity of Life Insurance

Blogs, Erisa

The court in Fulton v. West Coast Life Insurance Co., No. 2:09-cv-2015, 2010 WL 2010790 (W.D.Tenn. May 19, 2010) recently rejected a life insurance beneficiary’s attempt to use the insurer’s removal of the case based on ERISA to either prevail on the merits, or to obtain an order of remand.

The dispute involves an employer’s purchase of life insurance benefits upon one of its employees, David Fulton (“Fulton”). The company arranged for Fulton to complete an application for a non-tobacco unrated policy, and the company paid the first quarter’s premium. However, as part of the insurer’s medical examination, Fulton tested positive for cotinine, indicating that he was a tobacco-user. Fulton died of a heart attack approximately a month later.

The insurer, West Coast Life, denied the claim for benefits based on Fulton’s misrepresentation in the application, and/or his failure to meet the policy’s requirements. Fulton’s beneficiary then sued West Coast Life in state court.

Following West Coast Life’s removal of the state court action, Fulton’s beneficiary contended that “by asserting ERISA as a basis for the Court’s jurisdiction, Defendant concedes that the life insurance policy applied for on April 14, 2008 was valid and enforceable at the time of Fulton’s death.” Id. at *2.

Alternatively, Fulton’s beneficiary asserted that “if the Court accepts Defendant’s position that it never issued a life insurance policy, then the Court must remand the case to state court because Plaintiff’s claims would not be completely pre-empted by an ERISA plan. Id. at *2.

The court rejected this sophistry, and held as follows:

Establishing the existence of an ERISA plan for jurisdictional purposes, however, is separate and distinct from establishing an entitlement to benefits under the contested plan. Whether the Conditional Receipt Agreement entitles Plaintiff to benefits extends beyond the Court’s jurisdictional analysis and involves genuine issues of material fact, which are not appropriate for summary judgment at this time.

Id. at *5.