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Dillon v. Metropolitan Life Insurance Co.

June 7, 2010

KAREN E. DILLON, PLAINTIFF,
v.
METROPOLITAN LIFE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Sidney H. Stein, U.S. District Judge.

OPINION & ORDER

This action arises from a group life insurance policy issued by defendant Metropolitan Life Insurance Company ("MetLife") to the late husband of plaintiff Karen E. Dillon. Mr. Dillon was eligible to receive that group term life insurance policy due to his employment by non-party Parker Hannifin Corporation. In the last weeks of Mr. Dillon's life, under the impression that Mr. Dillon had been terminated by Parker Hannifin, Mrs. Dillon attempted to "convert" that group policy into an individual one. Shortly thereafter, upon Mr. Dillon's death, MetLife paid out pursuant to the group policy which remained valid because, despite Parker Hannifin's representations, Mr. Dillon was never actually terminated by Parker Hannifin and his coverage under the group policy had never been cancelled.

Plaintiff does not dispute that MetLife's payment pursuant to the group policy was correct. Instead, she argues that her attempt to convert the group policy into an individual one created a second, additional policy, and therefore that she should be entitled to recover under both the group policy and the individual one. MetLife has refused to pay anything beyond its obligations under the group policy.

Dillon initially commenced this action in New York Supreme Court, New York County, alleging breach of contract and seeking a declaratory judgment respecting the validity of the individual policy. Defendant then removed the action to this Court contending that because the group plan is governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., the complaint raises a federal question. See 28 U.S.C. 1441(a).

Dillon now seeks to remand this action to New York Supreme Court, arguing that the complaint turns not on the group policy, which she does not dispute is governed by ERISA, but instead raises claims respecting the second, individual policy which she asserts is not governed by ERISA. Because the Court finds that this action turns primarily on plaintiff's rights arising from the group plan-specifically her right to convert that plan to an individual one and the consequences of such a conversion-it concludes that the complaint raises a federal question and therefore denies the motion to remand.

I. BACKGROUND

Unless otherwise noted, the following facts are taken from the complaint:

A. The Parties

Karen E. Dillon is a New York resident and the widow of Jack F. Dillon, a former employee of the Parker Hannifin company. (Compl. ¶¶ 1, 3.) Mrs. Dillon is the legal representative of her late husband's estate. (Id. ¶ 1.)

Metropolitan Life Insurance Company is a New York corporation. At all times relevant to the complaint, MetLife issued group term life insurance to eligible employees at the Parker Hannifin company, including the late Jack F. Dillon. (Id. ¶¶ 2, 5.)

B. Dillon's Group Life Insurance Policy

This action centers on a group term life insurance policy issued to Mr. Dillon by MetLife during his employment at Parker Hannifin. As an eligible employee, Mr. Dillon was entitled to a $50,000 group term policy and was allowed to purchase additional insurance, which he did. In total, Mr. Dillon held $837,000 in life insurance under the group policy for which he paid a monthly premium of $172.35. (Id. ¶¶ 5, 16.) Plaintiff was named as the primary beneficiary under the policy. (Id. ¶ 6.)

Defendant contends-and plaintiff does dispute-that the group policy was issued by MetLife pursuant to an "employee benefit plan" as defined by ERISA. (Aff. of Patricia Curran Reinhardt dated Oct. 15, 2009 "Reinhardt Aff." ¶ 2; Pl.'s Mem. of Law at 2.) As such, Parker Hannifin was the plan "sponsor" and MetLife administered the plan, namely issuing policies and handling claims made pursuant to the plan in accordance with the requirements of the plan terms and ERISA. (Id.) Pursuant to the terms of that policy and consistent with the requirements of ERISA, if a covered employee became ineligible due to termination or for any other reason, that employee had a right to "convert" the group policy into an individual policy. (Reinhardt Aff. ¶ 4; Compl. ¶ 10.)*fn1

According to the complaint, in March 2008, Dillon was diagnosed with what would prove to be terminal cancer. His last day of work at Parker Hannifin was March 24, 2008. He was placed on long-term disability the same day. (Id. ΒΆΒΆ 7-8.) Several months later, as the seriousness of Mr. Dillon's condition became apparent, plaintiff began corresponding with Parker Hannifin regarding the group life insurance policy. (Id.) During the course of those conversations, plaintiff contends she was informed that her husband had been "terminated" by Parker Hannifin six months after he was placed on long-term disability-i.e., as of September 24, 2008-and that ...


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