Butler v. Hartford Life and Accident Insurance Company, The

Background

Susan Butler alleged that she was entitled to benefits as the beneficiary of her late husband Patrick Butler's two life-insurance policies, with death benefits of $430,000 and $50,000. The policies were part of an employee welfare benefit plan sponsored and maintained by CBIZ, Inc. and governed by the Employee Retirement Income Security Act of 1974 (ERISA). CBIZ was identified as the plan sponsor and administrator; Hartford Life and Accident Insurance Company was the insurer and claims fiduciary with full discretion to determine eligibility and interpret the policy.

Patrick Butler stopped actively working on February 15, 2022, and later received short-term and long-term disability benefits. The court found that a disability continuation provision kept his life-insurance coverage in effect for one year after he stopped actively working, through February 15, 2023. The court found that he did not use available conversion or portability rights after that date, and that no other plan provision extended the coverage. It therefore concluded that he had no life-insurance coverage when he died on April 25, 2023.

Butler alleged that CBIZ told Patrick Butler he remained enrolled if he continued paying premiums and that CBIZ and Hartford accepted those payments. She also relied on benefit-election information that showed the coverage as participating and approved. Hartford denied Butler's claim, reasoning that the coverage had ended and that Patrick Butler had not exercised a conversion right. Butler appealed Hartford's decision, which Hartford upheld.

Claims and Motions

Butler asserted ERISA claims for benefits and for breach of fiduciary duty and equitable relief. She also asserted breach-of-contract, express-or-implied-contract, and quantum-meruit claims under state law. CBIZ and Hartford moved to dismiss.

State-Law Claims

The court held that Counts III through VIII were preempted by ERISA. ERISA broadly displaces state laws that have a connection with or refer to an employee benefit plan. Because Butler's state-law claims concerned the plan and sought the same relief as her ERISA claims, the court dismissed those counts in their entirety.

ERISA Benefits Claim—Count I

The court dismissed Count I as to both CBIZ and Hartford. As to CBIZ, the court held that CBIZ was not a proper defendant for Butler's claim to recover benefits under 29 U.S.C. § 1132(a)(1)(B), because the plan gave Hartford—not CBIZ—control over eligibility and interpretation of the plan.

As to Hartford, the court held that the plan's terms ended Patrick Butler's coverage on February 15, 2023, one year after he stopped actively working. The court rejected Butler's argument that a Minnesota statute providing 18 months of continuation coverage applied because the complaint did not allege that CBIZ terminated or laid off Patrick Butler. The court concluded that stopping work because of illness was not a statutory reduction in hours that constituted a layoff. It therefore dismissed Butler's benefits claim against Hartford.

ERISA Fiduciary-Duty Claim—Count II

The court denied CBIZ's request to dismiss Count II. Butler plausibly alleged that CBIZ acted as a functional fiduciary because it provided plan information, participated in enrollment, and handled employee premium payments. She also plausibly alleged that CBIZ gave misleading information about maintaining coverage, failed to provide accurate information about coverage termination and conversion rights, and maintained an inadequate system for tracking coverage and communicating with participants. At the motion-to-dismiss stage, the court treated those allegations as sufficient to state a fiduciary-duty claim.

The court dismissed Count II as to Hartford. It found that ERISA and the plan documents did not require Hartford to provide individual notices about conversion or portability rights, coverage expiration, or continuation provisions. It also found that Butler attributed the alleged misleading representations to CBIZ, not Hartford. The court further rejected Butler's theories of estoppel, reformation, and surcharge against Hartford. In addition, the court held that Hartford's alleged acceptance of premiums did not extend coverage that had ended under the plan.

Disposition

The court ordered that CBIZ's motion to dismiss was denied in part and granted in part as stated in the opinion. Hartford's motion to dismiss was granted.