First Amended Complaint. Second, Shatkin Arbor meets the definition of “employer” for
purposes of establishing and maintaining an “cmployee welfare benefit plan” under the second
clement. Section 3(5) of ERISA defines “employer” as “any person acting directly as an
employer, or indirectly in the interest of an employer”, and Section 3(9) adds that the “term
‘person’ means an individual, partnership, joint venture, corporation, mutual company,
joint-stock company, trust, estate, unincorporated organization, association, or employee
organization.” See 29 U.S.C. §§ 1002(5), (9). In fact, in a case similar to Dwyer’s, another
court in this district concluded that a trading company acted as an employer that established and
maintained long term disability insurance under which a self-employed CBOT trader was a
participant. See, ¢.g., Ruttenberg v. United States Life Ins. Co., No. 01 C 8200, 2003 WL
21003719 at * 2-3 (N,D. Ill. May 1, 2003).

Shatkin Arbor also established and maintained the LTD Policy under which Dwyer brings
this lawsuit. Contracting with Unum for the LTD Policy, defining which groups are eligible
under the plan, performing the administrative functions as the plan administrator, and setting
limitations, such as the waiting period before plan eligibility, support the conclusion that Shatkin
Arbor has established and maintained the policy. See Brundage-Peterson, 877 F.2d at 510. In
addition, “[a]n employer who creates by contract with an insurance company a group insurance
plan and designates which employees are eligible to enroll in it is outside the safe harbor created

by the Department of Labor regulation.” Jd. at 51 1.) This is exactly what Shatkin Arbor has

' BRISA’s “safe harbor” regulation provides that an “employee welfare benefit plan”
shall not include a group or group-type insurance program offered by an insurer to employces or
members of an employec organization, under which:

(1) No contributions are made by an employer or employee organization;

4



In essence, Dwyer is seeking bencfits under the plan. Because the existence of Dwyer’s LTD
Policy is a critical factor in establishing liability under this claim and this court’s “inquiry must
be directed to the plan”, his first claim is preempted. See Ingersoll-Rand, 498 U.S. at 139-40. In
fact, Dwyer concedes “If this Court concludes that ERISA applies, the only count to be
preempted would be Count I.”

Count If is based on Section 155 of the Illinois Insurance Code, in which Dwyer alleges
that Unum’s actions amount to the vexatious refusal to pay benefits under his LTD Policy.
Dwyer argues that this claim is not preempted by ERISA, and if it is preempted, the “insurance
savings clause” applies. This court has previously rejected the same argument. See Lutheran
General Hosp., Inc. v. Massachusetts Mut. Life Ins. Co., No. 95 C 2504, 1996 WL 124449, at *4
(N.D.Ill. March 12, 1999) (“Section 155 does not regulate the substantive content of insurance
policies, but merely regulates the procedural aspects of claims processing by providing certain
remedies in the event of vexatious insurance practices”) (citation and quotations omitted). In
Lutheran General, this court concluded that because Section 155 does not regulate content, it
does not affect the transfer or spread of a policyholder’s risk and is not an integral part of the
policy relationship between the insurer and the insured, thereby failing the former “business of
insurance” consideration, See id. Dwyer has not given this court any reason to decide this issue
differently, whether under the guidance of the McCarran-Ferguson factors or the modified
considerations as explained by the Supreme Court in Kentucky Ass'n of Health Plans, Inc. v.
Miller, \23 S.Ct, 1471, 1479 (2003).

In fact, although the Seventh Circuit has not addressed this issue, other courts in this

district have also rejected this argument that claims brought under Section 155 of the Ilnois



LTD Policy. Because only participants, beneficiaries, or fiduciaries may sue under a plan
governed by ERISA, see 29 U.S.C. § 1132(a), it does not stand to reason that once Dwyer chose
to participate in this group plan governed by ERISA and gain benefits from it, he should be frec
from ERISA’s limitations because he claims he was not an employee of Shatkin Arbor.

Accordingly, the pertinent inquiry is whether Dwyer is a “beneficiary” or “participant” of
the LTD Policy under which he has brought this lawsuit. See Ed Miniat, Inc., 805 F.2d at 734,
A beneficiary is defined as “a person designated by a participant, or by the terms of an employec
benefit plan, who is or may become entitled to a benefit thereunder.” See 29 U.S.C. § 1002(8);
Metropolitan Life Ins, v. Johnson, 297 F.3d 558, 563 (7th Cir. 2002). A participant is an
“employee or former employee of an employer, or any member or former member of an
employce organization, who is or may become eligible to receive a benefit of any type from an
employee benefit plan which covers employees of such employer or members of such
organization, or whose beneficiaries may be eligible to receive any such benefit.” See 29 U.S.C.
§ 1002(7); Berger v, Xerox Corp. Ret. Income Guarantee Plan, 338 F.3d 755, 763 (7th Cir.
2003). For jurisdictional purposes, a “participant” or “beneficiary” includes anyone with a
colorable claim to benefits under the plan. See Berger, 338 F.3d at 763; Riordan y,
Commonwealth Edison Co., 128 F.3d 549, 552 (7th Cir. 1997).

By terms of the LTD Policy, Dwyer is a beneficiary and a participant under the plan.
Dwyer received disability payments and filed this lawsuit seeking continued payments under the
policy; therefore, he was entitled to bencfits under the plan. More importantly, by filing this
lawsuit Dwyer implicitly concedes that he has a colorable claim to benefits under the policy. See

Berger, 338 F.3d at 763; Riordan, 128 F.3d at 552.


done — contracted with Unum for a group plan and designated employees eligible to enroll.

It is undisputed that the Dwyer’s policy provides long term disability benefits fulfilling
the fourth element of an “employee welfare benefit plan.” Under the fifth element, the plan
provides for the eligible groups who may participate in the plan, including both permanent full-
time employees and traders in active employment. (Am. Compl. Ex. A, at 6, 14). Finally, the
LTD Policy delineates a participant’s rights under ERISA, (Am. Compl. Ex. A, at 46-49).
Accordingly, the LTD Policy is an “employee welfare benefit plan” governed by ERISA. The
court now turns to whether Dwyer was a beneficiary or participant under the plan.

2. Beneficiary & Participant
Dwyer contends that his claims are not governed by ERISA because he is not an
employee of Shatkin Arbor, but instead is self-employed. Dwyer’s status as an employee,
however, is not the determinative factor under the policy. The LTD Policy unequivocally sets
forth the groups eligible under the plan — permanent full-time cmployees and traders in active

employment. Dwyer was a trader in active employment, and thus eligible for coverage under

(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 ducs 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, or administrative services actually rendered
in connection with payroll deductions or dues checkoffs.

See 29 CER. § 2510.3-1()).



Lines, 463 U.S. 85, 98-99 (1983). A state law claim “relates to” an ERISA plan if it has a
connection with or reference to the plan. See id. at 96-97,

Although ERISA unequivocally states that it “shall supersede any and all State laws
insofar as they may now or hereafter relate to any employee benefit plan”, Congress has enacted
an “insurance savings clause” which provides that a state law is not preempted if it regulates
insurance. See 29 U.S.C. §1144(b)(2); Pilot Life Ins. Co, v. Dedeaux, 481 U.S. 41, 47-49 (1987).
In Filot Life, the Supreme Court set forth two considerations for determining if the insurance
savings clause applies to a state law. First, courts determine whether common sense suggests
that the law at issue regulates insurance. See id. at 47-48. Second, courts may consider the
“business of insurance” test from the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seg., which
consists of three factors: (1) whether the practice has the effect of transferring or spreading a
policyholder’s risk; (2) whether the practice is an integral part of the policy relationship between
the insurer and the insured; and (3) whether the practice is limited to entities within the insurance
industry, See id. at 48-49 (citations and quotations omitted). Recently, the United States
Supreme Court made a clean break from the McCarran-Ferguson factors in determining when a
state law regulates insurance. See Kentucky Ass’n of Health Plans, inc. v. Miller, 123 §.Ct. 1471,
1479 (2003). In doing so, the Court clarified the relevant requirements: (1) the state law must be
specifically directed toward entities engaged in insurance; and (2) the state law must substantially
affect the risk pooling arrangement between the insurer and insured. See id.

Under Count I, a claim for declaratory and injunctive relief, Dwyer alleges “Plaintiff is
legally entitled to receive monthly benefits under the Policy and is in need of this Court’s

protection because of defendant’s termination of benefits under the Policy.” (Am. Compl. 4 40).


Minute Order Ferm (06/97)

4 < (. United States District Court, Northern District of Illinois

vei: Maghteate Judge Blanche M, Manning than shed Tage

CASE NUMBER 03-1118 pate | DEC 91 72003
CASE Dwyer v. Unum Life Insurance
TITLE

[In the following box (a) indicate the party filing the motion, ¢.z., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented, |

MOTION:

DOCKET ENTRY:

ag oo Filed motion of [ use listing in “Motion” box ahove.]

(2) Oo Brief in support of motion duc

(3) Oo Answer briefto motion due___—_. Reply to answer briefduc

(4) oO Ruling/Hearing onset for at

(5) im Status hearing[held/continued to] [set for/re-sct for] on ___set for at

(6) o Pretrial conference|held/continued to] [set for/re-set for]on__——ssetfor__—at__.

(7) Oo Trial[set for/te-set for]on__at

(8) oO [Bench/Jury trial] [Hearing] held/continued to at.

(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to}
OOFRCP4(m) (OGeneral Rule 21 CI FRCP41(a)(1) 0 FRCP41(a)(2).

(10) [Other docket entry} Unum’s motion to dismiss is granted and Dwyer’s jury demand is stricken

{R. 13-, 13-2, 17-1, 17-2]. Dwyer's First Amended Complaint is dismissed without prejudice with leave to
file a Second Amended Complaint alleging causes of action under ERISA by December 18, 2003. Unum
shall until January 8, 2003 to answer or otherwise plead. No extensions will be granted. Unum’s first
motion to strike is denicd as moot. [R. 5-1]. Enter Memorandum and Order.

ql) : [For further detail see order attached to the original minute order.)

No notices required, advised in open court. Document’

‘Number

No notices required,

number of notions
a | Notices mailed by judge's staft, DEC o 1
Notified counsel by telephone. sl > 20 8

Docketing to mail notices.

Mail AQ 450 form.

Copy to judge/magistrate judge.

dare mailed notice
courtroom,

RTS deputy's
initials

Barkekimie rea;
central Clerk: ra ice alin, deputy muniats



(On JURY TRIAL

Dwyer’s request for a jury trial is stricken because there is no right to a trial by jury under
ERISA. See Mathews v. Sears Pension Plan, 144 F.3d 461, 468 (7th Cir. 1998) (conclusion
based on ERISA’s equitable antecedents).
Iv. CONCLUSION

For the foregoing reasons, Unum’s motion to dismiss is granted and Dwyer’s jury
demand is stricken [R, 13-1, 13-2, 17-1, 17-2]. Dwyer’s First Amended Complaint is dismissed
without prejudice with leave to file a Second Amended Complaint alleging causes of action
under ERISA by December 18, 2003. Unum shall until January 8, 2003 to answer or otherwise

plead. No extensions will be granted.

Blanche M, Manning
United States District Judge

pate; PF" 0} 2003 Sarde y Mua

il



Insurance Code fall under the “insurance savings clause.” See, e.g., Casey v. Unum Life Ins. Co.,
No. 01 C 5419, 2002 WL 31356453, at *3-5 (N.D.IIl. Oct. 17, 2002); Dobner v. Health Care
Serv. Corp., No. 01 C 7968, 2002 WL 1348910, at *4 (N.D. IIL. June 19, 2002); Cencula v. John
Alden Life Ins. Co., 174 F.Supp.2d 794, 799-800 (N.D.Il. 2001); Gawrysh v. CNA Ins. Cos., 978
F.Supp. 790, 793 (N.D.II. 1997), Therefore, ERISA preempts Dwyer’s claim based on Section
155 of the Illinois Insurance Code.

In Count IL, based on common Jaw fraud, Dwyer alleges “Defendants have refused to pay
the full benefits due to and owing Mr. Dwyer under the terms of the Policy.” (Am. Compl. { 64).
Again, Dwyer is seeking bencfits under the policy, albeit through a common law fraud claim.
Because the existence of Dwyer’s policy is an important factor in establishing liability under
Count IIT, and thus this court’s inquiry would include reviewing the policy, this claim “relates to”
an ERISA plan. See /ngersoll-Rand, 498 U.S. at 139-40. As such, ERISA preempts this
common law fraud claim.

Count IV is based on the Illinois Consumer Fraud and Deceptive Practices Act. The
Seventh Circuit has held that claims brought under the Consumer Fraud Act that relate to an
ERISA employee benefits plan are preempted. See Anderson v. Humana, Inc., 24 F.3d 889, 892
(7th Cir. 1994). In Anderson, the court reasoned that the Consumer Fraud Act does not regulate
the methods of pooling risks, and thus does not fall under the insurance savings clause. See id.
(Consumer Fraud Act does not regulate insurance within the meaning of ERISA); see also
Kentucky Ass'n of Health Plans, Inc.,123 §,Ct. at 1479 (state law must substantially affect risk

pooling to be deemed law that regulates insurance). Accordingly, ERISA preempts this claim.



Dwyer argues that because there are two categories of claimants, /.2., permanent fulltime
employees and traders in active employment, his claims are not subject to ERISA because the
LTD Policy contemplates multiple lines of coverage. Under the Summary of the Plan
Description, however, the policy has one policy number, one plan administrator, one taxpayer
identification number, and one ERISA plan number, and thus there is one policy for two groups
eligible to participate in the plan. (Am. Compl. Ex. A, at 43). Indeed, it is not uncommon for
insurance policies to have multiple groups eligible for coverage. See, e.g., Ruttenberg v. United
States Life Ins. Co., 2003 WL 21003719 at * 3 (four groups eligible under long term disability
plan).

Because Dwyer’s plan is an “employee welfare benefit plan” and Dwyer seeks disability
payments as a “participant” and “peneficiary”, ERISA governs his claims. As such, the court
tums to whether his Illinois state law claims are preempted by ERISA.

B. PREEMPTION

Section 514{a) of ERISA preempts “any and all State laws insofar as they may now or
hereafter relate to any employec benefit plan.” See 29 U.S.C. § | 144(a); see also Egelhoff'v.
Egelhoff ex. rel. Breiner, 532 U.S. 141, 146 (2001) (“this broadly worded provision is ‘clearly
expansive”). In construing ERISA’s preemption language, the United States Supreme Court has
held that a court must enforce Section 514(a) when its “inquiry must be directed to the plan” or
when a plaintiff's cause of action “conflicts directly with an ERISA cause of action.” See
Ingersoll-Rand, Co. v. McClendon, 498 U.S. 133, 139 (1990). The Supreme Court has further
determined that a state law may “relate to” an ERISA plan, and thus be preempted, even if such

law is of general application and has only an indirect effect on the plan. See Shaw v. Delta Air



5/155; (3) common law fraud; and (4) violations of the Illinois Consumer Fraud and Deceptive
Practices Act, 815 ILCS 505/10.
Ill. DISCUSSION

Unum argues that Dwyer’s LTD Policy was part of an “employee welfare benefit plan”
and Dwyer is a “beneficiary” or “participant” as defined by ERISA. As such, Unum contends
that ERISA preempts Dwyer’s state law claims. Dwyer, on the other hand, asserts that because
he is not an employee of Shatkin Arbor, the lack of an employment relationship takes his claims
out of ERISA’s purview.

A. ERISA

1. Employee Welfare Benefit Plan

Although Dwyer does not specifically dispute that his LTD Policy is an “employee
welfare benefit plan” under ERISA, the court must address this issue because ERISA only
applies to plans defined as such under the statute. See Ed Miniat, Inc. v Globe Life Ins. Group,
Inc., 805 F.2d 732, 738 (7th Cir. 1987). An insurance plan must consist of the following five
elements to be defined as an “employee welfare benefit plan” (1) a plan, fund, or program; (2)
maintained or established; (3) by an employer or by an employee organization, or by both; (4) for
the purpose of providing medical, surgical, hospital care, sickness, accident, death, disability,
unemployment or vacation benefits, apprenticeship or other benefits and programs; and (5) to
participants or their beneficiaries. See id.; 29 U.S.C. § 1002(1)(A). Courts construc the
definition of “employee welfare benefit plan” broadly, See Brundage-Peterson v, Compcare
Health Servs. Ins., Corp., 877 F.2d 509, 511 (7th Cir. 1989),

First, the parties do not dispute the plan at issue - Dwyer attached the LTD Policy to his



656, 657-58 (7th Cir. 2002). When considering a motion to dismiss, this court is restricted to
reviewing the pleadings, which consist of the complaint, any attached exhibits, and the
supporting briefs. See Thompson v. Iinois Dept. of Prof’! Regulation, 300 F.3d 750, 753 (7th
Cir. 2002). Dismissal is properly granted only if it is clear that no set of facts which the plaintiff
could prove consistent with the pleadings would entitle the plaintiff to relief. See Hickey, 287
F.3d at 657.
il. BACKGROUND

Assuming the truth of the facts as alleged in the First Amended Complaint, Dwyer, a
commodity trader at the Chicago Board of Trade (“CBOT”), sustained a back injury that
prevented him from returning to work full-time. Dwyer notified Unum of his condition and
timely filed a claim for benefits under his Long Term Disability Policy (“LTD Policy”). His
treating physician confirmed that, as a result of his injury, Dwyer was unable to perform the
duties of his occupation and was entitled to disability benefits. Unum issued the LTD Policy to
Shatkin, Arbor, Karlov & Co. (“Shatkin Arbor”). Dwyer alleges that Shatkin Arbor is a clearing
firm and not his employer. Dwyer also alleges that he is self-employed.

After filing his disability claim with Unum, Dwyer reccived disability payments under his
LTD Policy for 30 months. In September 2002, Unum terminated Dwyer’s disability payments
because the insurer concluded that electronic trading allowed Dwyer to be “gainfully occupied”
as defined by the policy. Based on Unum’s termination of his disability payments, Dwyer brings
four Illinois state law claims in his First Amended Complaint, including: (1) a claim for
declaratory, injunctive, and other relief for monthly disability benefits; (2) vexatious and

unreasonable delay in the handling of his claim under the Illinois Insurance Code, 215 ILCS



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
)
JOSEPH J. DWYER, )
)
Plaintiff, ) Case No. 03 C 1118
)
v. ) Judge Blanche M. Manning
)
UNUM LIFE INSURANCE COMPANY, )
OF AMERICA and UNUMPROVIDENT ) DOCKE TEN
CORPORATION, ) DEC
) 9 1 2099
Defendants. )
)
MEMORANDUM AND ORDER

In his First Amended Complaint, Plaintiff Joseph J. Dwyer brings this diversity action
alleging four Illinois state law claims premised on his entitlement to disability benefits under an
insurance policy issued by the defendants, Unum Life Insurance Company and UnumProvident
Corporation (collectively “Unum"). Unum filed this motion to dismiss pursuant to Federal Rule
of Civil Procedure 12(b)(6), contending that the exclusive means by which Dwyer may bring this
action is under the Employce Retirement Income Security Act of 1974 (“ERISA”), as amended,
29 U.S.C. § 1001 et seq., and therefore, Dwyer’s state law claims are preempted. In addition,
Unum moves to strike Dwyer’s request for a jury trial because claimants who seek benefits under
ERISA are not entitled to a trial by jury. For the following reasons, Unum’s motions are granted.
L STANDARD

In ruling on a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the
court must assume the truth of all facts alleged in the pleadings, construe all allegations liberally,

and view them in the light most favorable to the plaintiff. See Hickey v. O’Bannon, 287 F.3d

y