Court Rules ERISA Does Not Preempt Reliance’s Government Maintained Disability Plan

In Hariri v. Reliance Standard Life Insurance Company, Roxy Hariri, a former California Deputy District Attorney filed suit against Reliance asserting “claims for breach of contract and breach of the covenant of good faith and fair dealing under California law.” Reliance filed for Summary Judgment on the sole ground that provisions of the Employment Retirement Income Security Act of 1974 (ERISA) preempt the application of California law and therefore, Hariri’s lawsuit should be dismissed.

The United States District Court for the Northern District Court of California disagreed with Reliance and denied its summary judgment motion. The Court granted the plaintiff’s cross-motion for partial summary judgment on the grounds that the insurance policy issued by Reliance was “established or administered” by the California state government and therefore exempt from the application of ERISA’s preemption provision.

ERISA’s Preemption Made Simple

ERISA is a federal law designed to protect the interests of participants in employee benefit plans. But, the federal ERISA statutes do not govern employee benefit plans that are “established or maintained” by a governmental entity. State law, not federal law, applies in those cases.

The only issue before the court was whether or not the Reliance disability plan under which plaintiff Roxy Hariri claimed to be covered was a governmental plan and therefore exempt from ERISA law or whether ERISA provisions preempted California state law.

In her employment as a Deputy District Attorney, Harari was a member of the Government Attorney’s Association (GAA). As a county employee, she was provided insurance, including long term disability (LTD) benefits, in which premium costs were shared by the county and the GAA. Through the years, changes were made as to carriers and who paid premiums.

In April 2014, Reliance denied Harari’s claim for insurance prompting her to file her lawsuit. Her claim for relief was brought under California law and Reliance then brought this action asserting ERISA preemption.

ERISA Does Not Preempt State Law When the Disability Policy is Established or Maintained by the State Government

Even though the GAA was the purchaser and policy holder, the court held that the governmental exemption from ERISA’s preemption provision applied for the following reasons:

  • The intent of Congress in enacting the governmental plan exemption was to “refrain from interfering with the manner in which state and local governments operate employee benefit systems.”
  • A governmental plan is one which is “established or maintained for its employees by a governmental body.”
  • In this case, the county continued to perform “all of the day-to-day administrative and claims processing activities…”
  • The county answered all questions about coverage.
  • The county provided the claims forms to claimants, including to Harari.
  • The county provided Reliance with payroll information of claimants, including Harari.

For all these reasons, the Court concluded that “The undisputed facts show that the County ‘maintained’ the LTD plan at issue in this case, and therefore the governmental plan exemption to ERISA preemption applies.” Accordingly, Hariri can continue to pursue relief under California breach of contract law.

This case was not handled by our law firm, but we believe it can be instructive to those who appear to be covered for LTD under a state government plan so that state law applies instead of ERISA. For questions about this, or any other question concerning your disability claim, call one of our attorneys at Dell & Schaefer. We offer a free case evaluation.