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Spain v. Prudential Insurance Co. of America

February 22, 2010


The opinion of the court was delivered by: J. Phil Gilbert United States District Court Judge


This matter comes before the Court on the motion for judgment on the pleadings and for summary judgment filed by defendant The Prudential Insurance Company of America ("Prudential") (Doc. 9). Plaintiff Vanessa Spain, guardian of the estate of Alexandrea Elise Healy, has responded to the motion (Doc. 10), and Prudential has replied to that response (Doc. 17).

I. Facts

Stephen Ray Healy, father of Alexandrea Elise Healy, was employed by Continental Tire North America, Inc., a subsidiary of Continental Automotive, Inc. ("Continental"). As a part of Healy's benefits package, Healy was given basic accidental death insurance coverage of $40,000 under a plan ("Plan") underwritten by Prudential. Continental endorsed the Plan, automatically enrolled all of its full-time, non-union hourly employees in the Plan and paid all premiums for those employees.

On March 19, 2008, Healy died after his truck was swept by water off a road into a creek. Once in the creek, Healy and two passengers in the car were forced by rising, frigid floodwaters to climb on top of the truck. At one point, both of Healy's passengers jumped into the floodwaters to retrieve a purse one of them had dropped in the water and were having difficulty getting back to the truck.. Healy jumped in to save them, but he and one of his passengers eventually drowned.

Spain, Alexandrea's mother and guardian, filed a claim on Alexandrea's behalf for accidental death benefits under the Plan. Prudential denied the claim on January 20, 2009, on the ground that Healy's death fell into the following exclusion: "A Loss is not covered if it results from . . . Being legally intoxicated or under the influence of any narcotic unless administered or consumed on the advice of a Doctor." Plan at 41-42. Prudential found that at the time of his death Healy was legally intoxicated and under the influence of Xanax, a prescription drug not prescribed by Healy's doctor. The denial letter informed Spain that she had a right to appeal the decision within 180 days of receiving the denial letter.

Spain did not appeal. Instead, in August 2009, she filed this lawsuit in the Circuit Court of the Second Judicial Circuit, Jefferson County, Illinois. She alleges Illinois state law claims against Prudential for breach of the accidental death insurance contract and bad faith failure to pay an insurance claim. Prudential removed the case to federal court on the basis of original federal question jurisdiction under 28 U.S.C. § 1331. It believed federal question jurisdiction was created by Spain's assertion of a claim for benefits that can only be brought under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq.

Prudential filed this claim arguing that Spain's state law claims are preempted by ERISA and that any ERISA claim should be dismissed for failure to exhaust administrative remedies.

Spain argues that her claim may not be governed by ERISA*fn1 , that she was not required to exhaust her administrative remedies under the Plan and that, even if she were required to exhaust, she should be excused because exhaustion would have been futile.

II. Analysis

A. Preemption by ERISA

Federal Rule of Civil Procedure 12(c) governs Prudential's request for judgment on the pleadings as to Spain's state law claims based on preemption by ERISA. In ruling on a Rule 12(c) motion, the Court considers the complaint, answer and any written instruments attached to those pleadings, accepts all well-pleaded allegations in the complaint as true and draws all inferences in favor of the plaintiff. See Pisciotta v. Old Nat'l Bancorp, 499 F.3d 629, 633 (7th Cir. 2007); Forseth v. Village of Sussex, 199 F.3d 363, 368 (7th Cir. 2000). Judgment on the pleadings is appropriate "[o]nly when it appears beyond a doubt that the plaintiff cannot prove any facts to support a claim for relief and the moving party demonstrates that there are no material issues of fact to be resolved." Moss v. Martin, 473 F.3d 694, 698 (7th Cir. 2007); accord Buchanan-Moore v. County of Milwaukee, 570 F.3d 824, 827 (7th Cir. 2009). The Court now turns to the issue of ERISA preemption.

Congress enacted ERISA "to safeguard employees from the abuse and mismanagement of funds that had been accumulated to finance various types of employee benefits." Massachusetts v. Morash, 490 U.S. 107, 112-13 (1989) (citing Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 15 (1987)). To achieve this goal, "[i]t sets forth reporting and disclosure obligations for plans, imposes a fiduciary standard of care for plan administrators, and establishes schedules for the vesting and accrual of pension benefits." Morash, 490 U.S. at 113. ERISA covers welfare benefit plans, including accidental death insurance plans. See 29 U.S.C. § 1002(1); 29 C.F.R. § 2510.3-1(a)(2); Morash, 490 U.S. at 113; see, e.g., Mers v. Marriott Int'l Group Accidental Death & Dismemberment Plan, 144 F.3d 1014, 1017 (7th Cir. 1998).

To achieve uniform nationwide standards for employee benefit plans, ERISA contains a broad preemption provision that forecloses certain state law claims ...

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