When you see a claim for disability or life insurance benefits by a public school teacher, you might assume the claim is not governed by ERISA because of the governmental plan exception.

But don’t stop there. You need to see how the benefit was set up. If the benefit was funded through a union plan, ERISA might apply.

Here’s the case of Wilson v. Provident Life and Accident, __ F. Supp. 3d __, (W.D. Washington April 29, 2015) (“Where unions of public employees enter insurance agreements that are not a result of collective bargaining, the plans may be found to be nongovernmental [and therefore governed by ERISA].”).

FACTS: Public school teachers were eligible for life insurance benefits through a Plan independently created by a union, for the benefit of its employees, and government employees. The benefit was funded through a contract between the union and Unum/Provident. After a teacher’s claim for insurance benefits was denied, suit followed with assertion of state law bad faith claims. Unum removed the case, contending the claim was governed by ERISA. Plaintiff claimed, however, that ERISA did not apply because of the “governmental plan” exception to ERISA.

ISSUE: Whether a public school teacher’s life insurance benefit claim was governed by ERISA?

DISTRICT COURT HELD: YES

  1. One exception to application of ERISA is a governmental plan, defined as “a plan established or maintained for its employees…by the government of any State or political subdivision thereof.” Op. at 4.
  2. “It is undisputed that the WEA (union) is an ‘employee organization’ for ERISA purposes, and [the school district] is a political subdivision…” Op. at 4.  
  3. The school district employees “enrolled in a Group Plan that covered employees from multiple school districts and from the WEA, and was governed by [the WEA’s contract with Provident.]”
  4.  “Other courts have held that a private plan does not become a public plan merely through a public employer’s participation.” Op. 7, fn 4.  
  5. The Court finds that “the Group Plan is not a governmental plan…. The Group plan was not the result of collective bargaining, but the result of a separate negotiation between the WEA and Provident; the District merely ‘elected’ to participate in the Plan.” Op. at 8.
  6.  “Where unions of public employees enter insurance agreements that are not a result of collective bargaining, the plans may be found to be nongovernmental (and governed by ERISA).” Op. at 8.
  7.  The plan is governed by ERISA because “the Plan was independently created by the WEA for the benefit of its employees along with government employees [and the school districts played no direct role in the Plan’s creation.]” Op. at 10.