Judge Rules ERISA Does Not Govern Plan Insuring Sole Employee

Judge Charles Eskridge of the Southern District of Texas ruled Tuesday that the employee health plan of an individual who unintentionally shot themselves while at work is not governed by the Employee Retirement and Income Security Act (ERISA), effectually remanding the matter to state court.

The plaintiff, who is the sole owner and employee of an automobile repair shop, said in the original complaint that they kept a gun at the business for protection. After the accidental self-inflicted injury resulting from “attempting to remove a stuck bullet,” the judge explained, the plaintiff filed a claim with the defendant, Life Insurance Company of North America, for medical and disability benefits. Defendant Matt Reiter, an employee of third-party work-related injury claims administrator Salus Claims Management, denied the plaintiff’s claim, “asserting that using or cleaning a gun wasn’t within the covered scope of employment,” and then denied an appeal by the plaintiff, according to the judge.

The plaintiff filed their complaint, alleging violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act, as well as claims of fraud, breach of contract, and breach of the duty of good faith and fair dealing. The defendants argued to remove to a district court, asserting that the plaintiff’s claims were preempted by ERISA because the plaintiff is a “working owner” of the auto shop, implying that because the individual is both the owner and an employee, ERISA ought to govern the plan. They also called into question whether the plaintiff actually was the sole employee of the auto shop.

Judge Eskridge disagreed with the defendants, claiming there is “no compelling argument” that the plaintiff is not the sole proprietor of the business and therefore sole beneficiary of the occupational benefits plan in question. According to the Fifth Circuit, “(a)n owner of a business is not considered an ‘employee’ for purposes of determining the existence of an ERISA plan; in other words, ERISA does not govern a plan whose only fully vested beneficiaries are a company’s owners.”

The plaintiff “is thus considered here to be not only the owner and sole employee of J&A Paint and Body Shop, but also the only participant in the subject plan,” according to the judge. “As such, ERISA doesn’t govern it.”

The plaintiff is represented by Doyle Law Firm. The defendants are represented by Paul M. Hood PC and Wilson Elser.