United States District Court, D. New Jersey
CLYDE A. HERSHAN, Plaintiff,
UNUM GROUP CORPORATION, a Delaware corporation, Defendants.
WILLIAM J. MARTINI, District Judge.
Plaintiff Clyde Hershan has sued Defendant Unum Group (hereinafter, "Unum") for benefits under three disability policies. Hershan's Complaint consists of two counts: Count One is a claim under the Employment Retirement Income Security Act ("ERISA"), and Count Two is a state law breach of contract claim. This matter comes before the Court on Unum's motion to dismiss, which this Court subsequently converted into a motion for summary judgment. Unum contends that Hershan cannot prevail on his breach of contract claim because it is preempted by ERISA. Moreover, Unum moves to strike Hershan's demands for "generic damages" and a trial by jury. There was no oral argument. FED. R. CIV. P. 78(b). For the reasons set forth below, Unum's motion is GRANTED.
The following facts are undisputed unless otherwise noted. Hershan was previously employed as a radiologist at Sharlin Radiological Associates, PA (hereinafter, "Sharlin"). (Complt. at ¶1). Between 1983 and 1991, and while employed at Sharlin, Plaintiff purchased three disability policies (hereinafter, "the Policies") from one of Unum's predecessors, Provident Life Insurance (hereinafter, "Provident").
The Policies were subject to Salary Allotment Agreements (hereinafter, "the Salary Allotment Agreements") between Provident and Sharlin. (Fagan Decl. at ¶¶ 4-6). The Salary Allotment Agreements further provided that Hershan would receive a 15% discount on his premiums in exchange for Provident accepting policy premiums as billed to Sharlin. ( See MTD, Ex. 3 at 9). Moreover, Hershan does not dispute that he would not have received a 15% discount but for the Salary Allotment Agreements between Sharlin and Provident. (MTD, Ex.2, ¶5)
In a sworn declaration, a senior underwriter for Unum explained that Sharlin "would tender the premiums for Dr. Hershan's Policies, as well as the other Sharlin Radiological employees covered by the plan, directly to Provident Life." (Fagan Decl. at ¶8). Hershan recalls that he paid premiums either to Sharlin or Provident. Hershan explains that if premiums were paid to Sharlin, "[p]resumably payment...was transmitted by Sharlin to Provident." (Hershan Cert. at c). Additionally, when Provident received an overpayment on one of the Polices, it would issue a refund to Sharlin. (Fagan Decl. at ¶9).
Hershan believes that Sharlin ceased doing business on or about October 31, 2004. (Hershan Cert. at e). In February 2005, Hershan received a letter from Provident that offered him the opportunity to continue coverage under the Policies while retaining the 15% discount, notwithstanding the fact that premiums would no longer be paid through a Sharlin Risk Group. Hershan agreed and continued to receive coverage under the Policies as an individual. ( See MTD, Ex. 2-G). At that point Hershan began paying premiums on the Policies directly rather than through his employer.
Unum does not contest the fact that Hershan began paying premiums directly in 2005. However, it does take issue with Hershan's statement that Sharlin ceased operations on October 31, 2004. Unum argues that New Jersey did not suspend Sharlin's Professional Corporation Status until May of 2006. It also contends that Sharlin continued to have a profit sharing plan for its employees in 2007, further belying Hershan's claim that the Company dissolved in 2004. ( See Reply, Exs. 5-6).
In January 2010, Hershan suffered an accident when a "garage door struck his forehead, causing him to fall hard on his lower right back into the garage floor." (Complt. at ¶7). On January 13, 2012, Hershan applied to Unum for lifetime disability benefits under the Policies, submitting that his 2010 injury prevents him from performing his duties as a radiologist. (Complt. at ¶5). In the early summer of 2012, Unum began paying Hershan those benefits. ( Id. at ¶6). However, on June 26, 2013 Unum ceased paying Hershan disability benefits on the grounds that Hershan was no longer disabled under the Policies. ( Id. at ¶7). On August 14, 2014, Unum informed Hershan that it affirmed its June 26, 2013 decision to not pay Hershan benefits. ( Id. )
Contending that he is entitled to disability benefits under the Policies, Hershan filed this action in the Superior Court of New Jersey. Count One of the Complaint seeks relief under ERISA, whereas Count Two is a common law claim for breach of contract. Pointing out that Hershan's ERISA claim arose under federal law, Unum filed a timely notice of removal. ECF No. 1. On October 23, 2014, Unum moved to dismiss the breach of contract claim on the grounds that it was preempted by ERISA. Unum further moved to strike Plaintiffs' demands for a jury trial and "generic damages." See ECF No. 5. Pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, the Court converted Unum's motion to dismiss into a motion for summary judgment and afforded the parties an opportunity to submit additional materials in support of their positions. ECF No. 15.
II. MOTION FOR SUMMARY JUDGMENT
Federal Rule of Civil Procedure 56 provides for summary judgment "if the pleadings, the discovery [including, depositions, answers to interrogatories, and admissions on file] and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Turner v. Schering-Plough Corp., 901 F.2d 335, 340 (3d Cir. 1990). A factual dispute is genuine if a reasonable jury could find for the non-moving party, and is material if it will affect the outcome of the trial under governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court considers all evidence and inferences drawn therefrom in the light most favorable to the non-moving party. Andreoli v. Gates, 482 F.3d 641, 647 (3d Cir. 2007).
A. Are the Policies Governed by ERISA?
Unum contends that Hershan's breach of contract claim must be dismissed because it is preempted by ERISA. Unum can only prevail on this theory if it shows that the Policies are "welfare benefit plans" subject to ERISA's statutory framework. An employee welfare benefit plan governed by ERISA is a "plan, fund, or program...established or maintained by an employer... for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise... benefits in the event of sickness, accident, disability, death or employment..." 29 U.S.C. § 1002(1). Therefore, the Policies are governed by ERISA if they were obtained through: (1) a plan, fund, or program; (2) that is established or maintained; (3) by an employer; (4) for the purpose of providing ...