That is because the US Supreme Court agreed with a lower
court that independent contractors were considered
beneficiaries under ERISA, which typically preempts state
The US Court of Appeals for the Fifth Circuit last August rejected J L Hollis’s contention that he was not covered by ERISA because of his contractor status. The Circuit Court also threw out a $100,000 jury verdict against Provident Life and Accident Insurance Co., for its move to terminate Hollis’s benefits.
“Hollis’s independent contractor status does not preclude him from being a beneficiary,” the Fifth Circuit said. “Because Hollis is an ERISA beneficiary, his claims directly affect the relationship between traditional ERISA entities. Therefore, ERISA preempts Hollis’s state law claims against Provident for bad-faith denial of disability benefits.”
According to court records, Hollis was classified as an independent contractor of R M Hendrick Graduate Supply House, Inc., in 1991. Hollis not only participated in a company-sponsored disability plan run by Provident but also bought on his own a second disability policy from Paul Revere Insurance Co.
Hollis began getting disability payments from both companies until 1997 when Provident acquired Paul Revere and both insurers cut Hollis off because they said he was not totally disabled.
Hollis sued Provident and Paul Revere is a Mississippi state court, but the companies got the case transferred to US District Court for the Southern District of Mississippi where they asked the Hollis’ suit be thrown out because of conflicts with ERISA.
The District Court judge denied the insurers’ request. The case went to a jury, which awarded the $100,000 damages against Provident. Jurors found that Paul Revere was not liable.
The case is Hollis v. Provident Life and Accident Insurance Co., U.S., No. 01-1109, cert. denied 4/15/02.