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U.S. Court In Connecticut Holds Individual Conversion Policy Was Not Pre-Empted By ERISA


HLD, v. 32, n. 5 (May 2004)

U.S. Court In Connecticut Holds Individual Conversion Policy Was Not Pre-Empted By ERISA

Plaintiff John Crawley participated in his employer's benefit plan, which was governed by the Employee Retirement Income Security Act (ERISA), and insured by defendant Oxford Health Plans, Inc. Plaintiff quit his job and elected to continue his medical insurance coverage under the "continuation coverage" provision of the Consolidated Omnibus Budget Reconciliation Act (COBRA). Plaintiff applied for an individual conversion policy after his COBRA coverage expired. Defendant converted plaintiff's policy pursuant to the terms of the employer's plan.

In March 2003, plaintiff sued defendant in state court claiming defendant had wrongfully terminated his coverage for his alleged failure to pay a premium in September 2002. Defendant removed the case to federal court on the ground plaintiff's claim was pre-empted by ERISA. Plaintiff moved to remand and argued ERISA did not apply to his individual policy.

The U.S. District Court for the District of Connecticut granted plaintiff's motion to remand the case back to state court. Plaintiff argued his individual policy did not come within ERISA's definition of an "employee welfare benefit plan" and thus was not governed by ERISA. Defendant argued plaintiff's individual plan arose from his former employer's welfare benefit plan and thus had a direct relationship to an ERISA plan. The only reason it issued the conversion policy, said defendant, was that it was required to do so by the terms of plaintiff's former employer's plan. Plaintiff argued once he converted to an individual policy, the employer plan was no longer implicated because plaintiff had a direct relationship with defendant.

The court looked to the purpose of ERISA and determined that it "was meant to protect employers from the burdens of multiple and perhaps inconsistent state regulations." Once plaintiff obtained the conversion policy, his former employer was no longer involved in the administration of the policy, and none of the purposes of ERISA are implicated. The court noted that the circuits have split on the issue of the employer's role being the controlling factor, but found that the majority of the circuits held that a conversion policy is independent of the employer's policy when the employer is no longer involved in the administration of the plan and the conversion policy does not in any way burden the employer. The court concluded that plaintiff's policy did not implicate ERISA, and therefore the court granted plaintiff's motion to remand the case to the state court.

Crawley v. Oxford Health Plans, Inc., No. 3:03cv734 (D. Conn. Mar. 12, 2004).

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