The opinion of the court was delivered by: B. Lynn Winmill Chief Judge United States District Court
MEMORANDUM DECISION AND ORDER
Before the Court is Defendant Prudential Insurance Company of America's Motion for Judgment on the Pleadings (Docket No. 34) against Plaintiff Becky Kelly. Prudential requests judgment on the pleadings dismissing all of Plaintiff's claims against Prudential. This Court finds that Plaintiff's Complaint does not allege that Lonnie Kelly was a participant in Prudential's life-insurance policy, and that Plaintiff therefore lacks statutory standing to bring an ERISA claim against Prudential. The Court also finds that Plaintiff's state law claims for negligence and breach of contract do not allege that Prudential had a duty to Plaintiff because the Complaint does not allege that Prudential actually provided life-insurance coverage to Lonnie Kelly. Accordingly, the Court will grant Prudential's motion. The Court also grants Plaintiff leave to amend the Complaint.
This case arises from a life-insurance plan that Becky Kelly's decedent, Lonnie Kelly, allegedly purchased and maintained through Rite Aid Corporation. Lonnie Kelly was employed with Rite Aid from October 1967 through April 22, 2000, and again from August, 1, 2001 until September 29, 2001. Lonnie Kelly stopped working because of a disability and continued to receive certain benefits through Rite Aid, including health insurance. Shortly after Lonnie Kelly's death on November 20, 2006, Lonnie Kelly's wife, Becky Kelly, inquired as to whether there were any death benefits from any life insurance on Lonnie Kelly's which may have been obtained through Rite Aid. Each of Rite Aid's insurers denied coverage, stating that Lonnie Kelly's coverage lapsed sometime in May 2001 because Lonnie Kelly failed to convert his group coverage to the individual coverage available to disabled/inactive employees.*fn1 Whether Lonnie Kelly was required to continue making premium payments to maintain life-insurance coverage is unclear, but Lonnie Kelly appears to have believed that a waiver applied to him and that he did not need to continue making premium payments to maintain his life-insurance policy.
During the period in question, 2000--2006, Rite Aid provided life insurance to its employees through three different insurers: Reliastar Life Insurance Company, Standard Insurance Company, and Prudential. According to the Complaint, each insurer provided life insurance during the following time periods.
* Reliastar Group Policy # 641689: at least January 2000 -- June 30, 2001
* Group Policy # 17092-5: July 1, 2001 -- June 30, 2005
* Group Policy # 641335-D: July 1, 2005 -- June 30, 2006
* Prudential Group Policy # G-44686: July 1, 2006 -- at least November 20, 2006.
Rite Aid offered two different types of life insurance. Rite Aid provided group life-insurance coverage equal to two times Lonnie Kelly's annual earnings.
Rite Aid also offered, and Lonnie Kelly took advantage of, supplemental life insurance that provided three times Lonnie Kelly's annual earnings. Lonnie Kelly's annual earnings before his disability were $70,720. Plaintiff alleges that Rite Aid and its insurers therefore owe her $353,600 in death benefits.
The parties do not appear to dispute that Lonnie Kelly maintained life-insurance coverage until November 22, 2000, at which time Lonnie Kelly's short-term disability benefits reached their limit. In order to continue receiving benefits through Rite Aid, Lonnie Kelly made contributions for long-term disability coverage. The Complaint alleges that although specific calculations were made regarding medical, dental, and long-term disability coverage, Rite Aid did not mention life-insurance coverage or the need to make payments for continued life-insurance coverage.*fn2 Lonnie Kelly's long-term disability coverage ended July 21, 2005.
It appears that Reliastar and Standard were also the insurers for Lonnie Kelly's other benefits. The Complaint alleges that both Reliastar and Standard accepted Lonnie Kelly's payments and provided benefits, but that neither mentioned life-insurance coverage, notified Lonnie Kelly of his right to convert to individual life-insurance coverage, or explained to Lonnie Kelly that a waiver of premium payments for his life-insurance policy did not apply. The Complaint alleges that Reliastar and Standard were responsible for ensuring that Lonnie Kelly received this information. The Complaint further alleges that, at least with respect to Standard, a grandfather clause is applicable that should have triggered a list of disabled employees to be covered by the then-new policies with Standard in 2001. Plaintiff admits that Standard required premium payments to maintain life-insurance coverage.
Regarding Prudential, the Complaint alleges that Prudential denied death benefits to Becky Kelly because Lonnie Kelly had not converted his group life-insurance policy to an individual life-insurance policy at the time his employment ended. The Complaint also alleges that Prudential does not have a copy of the conversion opportunity letter, but only a computer notation that the letter had been sent. Finally, the Complaint also appears to assume that Prudential had a grandfather clause that covered inactive employees.
Based upon these allegations, the Complaint claims that Prudential owes Plaintiff death benefits in the amount of $353,600, that Prudential breached ERISA fiduciary duties, that Prudential violated ERISA document disclosure obligations, Prudential negligently failed to advise Lonnie Kelly of his rights under the policy and affirmatively misrepresented that Lonnie Kelly had a waiver of premium and did not need to continue paying for ...