UMALI v. CIGNA HEALTH AND LIFE INSURANCE COMPANY
2:14-cv-07376
D.N.J.Apr 30, 2015Background
- Decedent was covered by a group term life Policy issued to a group trust; his employer Fresenius was a subscriber and Plaintiff Shirley Umali is the designated beneficiary.
- On October 23, 2013 Decedent applied to increase supplemental coverage by $308,000 (from $185,000 to $493,000); Defendants approved the application on November 21, 2013.
- The application stated coverage would not take effect unless the insured was "actively at work" on the effective date; Defendants assert the Increased Death Benefit had an effective date of January 1, 2014.
- Decedent stopped working on disability December 5, 2013, was approved for short-term disability effective December 6, 2013, and died February 10, 2014.
- Defendants paid basic benefits and the pre-increase supplemental amount ($185,000) but denied the $308,000 increase because Decedent was not in active service on the effective date; Plaintiff exhausted administrative appeals and sued under state statutes and breach of contract.
- The district court dismissed the complaint without prejudice for failure to state a claim, held ERISA preempted certain claims, and granted leave to amend to assert an ERISA claim within 30 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Increased Death Benefit became effective despite Decedent not being "actively at work" on the effective date | The policy/solicitation did not specify an effective date for the increase and Plaintiff contends she is entitled to the increased benefit | The application required active service on the effective date; the Increased Death Benefit never became effective because Decedent was on disability before the effective date | Held: Complaint fails to allege the Increased Death Benefit ever became effective; no entitlement to the increased amount was plausibly pleaded |
| Whether state-law claims and breach of contract claims survive given ERISA | Plaintiff asserts violations of N.J. Stat. Ann. § 17B:27-72 (subsections l, i, k) and § 17B:27-73 plus breach of contract | Defendants argue ERISA governs the plan and preempts state-law claims and common-law contract claims for denial of benefits | Held: ERISA preempts the breach of contract claim and the § 17B:27-73 claim; the court dismissed those counts accordingly |
| Whether the Policy complies with N.J. Stat. Ann. § 17B:27-72 (subsections l, i, k) | Plaintiff alleges statutory violations that would support additional recovery | Defendants point to Policy provisions: an Extended Death Benefit with Waiver of Premium (exceeds § 17B:27-72(l)) and a conversion provision consistent with subsections (i) and (k) | Held: Policy complies with subsections (l), (i), and (k); Plaintiff did not plausibly allege entitlement to more than already received |
| Whether leave to amend to add an ERISA claim should be permitted | Plaintiff seeks leave to add an ERISA claim to recover benefits | Defendants oppose on futility grounds because plaintiff did not allege the increased benefit became effective | Held: Court grants one final opportunity to amend (liberal amendment standard) but directs that any amended complaint plausibly allege that the increased benefit became effective or otherwise assert a viable ERISA claim |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility standard for complaints)
- Warth v. Seldin, 422 U.S. 490 (accept factual allegations as true at pleading stage)
- Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266 (ERISA preempts state-law and contract suits for denial of benefits)
- In re Burlington Coat Factory Secs. Litig., 114 F.3d 1410 (leave to amend should be freely given absent undue factors)