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
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).