SEPTEMBER 2014 BAD FAITH CASES: COURT GIVES PARTIES 60 DAYS TO DO DISCOVERY TO DETERMINE IF POLICY FALLS WITHIN SAFE HARBOR TO ERISA PREEMPTION (Philadelphia Federal)

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In Van Arsdel v. Liberty Mutual Insurance Company, the insurer sought dismissal of state law claims, including bad faith, based upon ERISA pre-emption.  The insured responded that there were questions of fact as to whether ERISA covered the insurance at issue or whether it fell under ERISA’s Safe Harbor Provisions.  To qualify for the Safe Harbor provision, an employee welfare benefit plan must satisfy each of the following criteria:

(1) No contributions are made by the employer or employee organization; (2) Participation in the program is completely voluntary for employees or members; (3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and (4) The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.

The court gave the parties 60 days to conduct discovery on the issue, and to then submit summary judgment motions if appropriate.

Date of Decision:  September 5, 2014

Van Arsdel v. Liberty Mut. Ins. Co., CIVIL ACTION NO. 14-2579,  2014 U.S. Dist. LEXIS 123856 (E.D. Pa. September 5, 2014) (Smith, J.)

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