No Policy in Effect No Coverage
Employer provided life insurance under the Employee Retirement Income Security Act (“ERISA”) usually requires that the employee actually work for the employer before the employer provided life insurance benefit comes into effect. If you die before it comes into effect there is no policy and no coverage regardless of the hardship the lack of coverage places on the beneficiary.
In Pamela M. Morgan-Lapp v. Reliance Standard Life Insurance Co., Civil Action No. 18-1085, United States District Court for the Eastern District of Pennsylvania (February 14, 2019) Ms. Morgan-Lapp attempted to have the court compel coverage after the insurer refused to provide benefits because the deceased employee did not actually work before he died.
RELEVANT FACTUAL HISTORY
The Parties filed cross-motions for summary judgment requesting that the Court decide whether Plaintiff’s husband, Mr. Lapp, was covered by his employer-provided, ERISA-governed group life insurance policy (“Policy”) when he died. If Mr. Lapp was covered at the time he died, then Plaintiff is entitled to life insurance proceeds as the beneficiary of the Policy.
Thomas Jefferson University Hires Mr. Lapp; The Group Life Insurance Policy
On May 15, 2017, Thomas Jefferson University (“TJU”) hired Mr. Lapp. As a TJU employee, Mr. Lapp could receive certain employee benefits, including life insurance under a group life insurance policy issued by Defendant Reliance Standard Life Insurance Company.
Mr. Lapp’s Last Day In The Office; His Hospitalization and Death
On May 28, 2017, less than two weeks after TJU hired Mr. Lapp, Mr. Lapp fell ill and was admitted to Kennedy Hospital in New Jersey. Mr. Lapp remained at Kennedy Hospital and Thomas Jefferson Hospital until he died on July 13, 2017.
Plaintiff Mrs. Lapp Submits A Claim For Death Benefits Under The Policy; Defendant Denies Benefits; Defendant Affirms Decision On Appeal
After Mr. Lapp’s death, Plaintiff Mrs. Lapp filed a claim seeking death benefits under the Policy. Defendant denied Plaintiff’s claim. In denying Plaintiff’s claim, Defendant reasoned that Mr. Lapp was not covered by the Policy when he died on July 13, 2017 because he was not “actively at work” at any time after May 26, 2017, when Mr. Lapp was hospitalized. As Mr. Lapp was not performing the material duties of his job in the place where and manner in which it would normally be performed, Mr. Lapp was not actively at work when he died and, therefore, was not a member of an eligible class.
DISCUSSION
In short, the Court concluded that while Mr. Lapp may have met the eligibility requirements under the Policy, the Policy did not take effect on June 1, 2017 because Mr. Lapp was not actively at work that day or any day thereafter.
Mr. Lapp Was Not Actively At Work On The Day His Coverage Was To Begin; Therefore, Mr. Lapp’s Coverage Did Not Take Effect
Setting aside the question of whether Mr. Lapp’s failure to report to the office at any time after his hospitalization on May 28, 2017 rendered Mr. Lapp not “actively at work” in connection with his eligibility for benefits, the Court concluded that the Policy did not take effect for Mr. Lapp at any time before his death because not only was he not “actively at work” — that is, actually performing work on the day his coverage was scheduled to begin in the place and manner that such work normally is performed — Mr. Lapp also never returned to active work at any time before he died on July 13, 2017.
TJU hired Mr. Lapp on May 15, 2017 as an eligible Class 3 full-time TJU employee. As Mr. Lapp was hired in the middle of May, his coverage under the Policy was set to begin on June 1, 2017, as the “first of the month . . . next following the date the person becomes eligible” for benefits.
On June 1, 2017, the day on which his life insurance coverage was scheduled to begin, Mr. Lapp was unable to report for work, having been hospitalized just days earlier. Even the evidence extrinsic to the administrative record submitted by Plaintiff supports the conclusion that Mr. Lapp was not actively at work on June 1, 2017.
The Court rejected Plaintiff’s argument to the extent that it suggests that the term “actively at work” as defined in the Policy and as interpreted by Defendant — an ERISA plan administrator — is unreasonable because it is vague and ambiguous.
Having addressed the merits of Plaintiff’s ERISA claims by affirming Defendant’s administrative decision as reasonable, the Court had no choice but to dismiss Plaintiff’s claim for breach of contract because the claim was preempted.
It is well-established that in cases alleging the improper denial of benefits under an ERISA plan, claims such as “breach of contract” and “breach of the implied covenant of good faith and fair dealing” that “relate to the improper denial of benefits . . . . under the plan” are “expressly preempted.” Menkes v. Prudential Ins. Co. of Am., 762 F.3d 285, 296 (3d Cir. 2014).
In view of the deferential standard of review that the Court is obligated to apply in this ERISA case, the Court concluded — though not without distress over the unfortunate results — that Defendant’s interpretation of the Policy is reasonable and, therefore, Defendant’s decision to deny Plaintiff any life insurance benefits for the death of her husband is affirmed.
ZALMA OPINION
Federal Courts apply ERISA type policy disputes, as they apply disputes over National Flood Insurance Program policies, strictly. Unless the plan administrator violates the terms and conditions of the policy wording or acts improperly, the decision of the administrator will be upheld. In this case the court applied the clear language of the policy that Mr. Lapp was hospitalized and died before the policy vested and therefore his beneficiary is entitled, unfortunately, to recover nothing.
© 2019 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
THE HOMEOWNERS INSURANCE POLICY
HOW TO BUY AN APPROPRIATE HOMEOWNERS POLICY AND SUCCESSFULLY MAKE A CLAIM TO THE INSURER
Read about this and other insurance books by Barry Zalma at http://zalma.com/blog/insurance-claims-library/
Insurance is a contract between a person seeking insurance and an insurer. It is obtained 
