Facts

Plaintiff Michele P. Sconiers is a former employee of defendant Morgan Stanley & Co. Plaintiff was insured under Morgan Stanley Disability Plan, an employee welfare benefit plan governed by ERISA. Morgan Stanley served as the plan administrator and as fiduciary of the plan. Defendant First Unum Life Insurance Company of America was the claims fiduciary and payor of benefits under the plan. Plaintiff claimed that she was insured under the 2006 insurance policy.

On June 22, 2007, plaintiff became disabled by medical conditions including hypoperfusion syndrome, fibromyalgia, severe immunodeficiency, and severe adrenal deficiency, which resulted in pain in her abdomen, muscles, joints and bones. She also allegedly suffered from irritable bowel syndrome, dizziness, and nausea, sever fatigue, sever migraine headaches, and chronic hormonal imbalances. Treatment of these symptoms required plaintiff to take powerful medications with side effects, which became her totally disabled. She could no longer perform her job at Morgan Stanley, and allegedly will forever be unable to perform the duties of her former occupation.

Plaintiff timely applied for benefits under the 2006 policy. In November 2007, Unum approved a monthly disability benefit to plaintiff of $5,000 per month.

Plaintiff's disability benefits were eventually terminated on the grounds that her disability was a mental condition that was foreclosed by the plan's 24-month mental illness limitation. After her administrative appeals were denied, she filed a lawsuit under ERISA against her former employer, the plan and First Unum for recovery of her benefits, equitable relief, and injunctive relief based on violation of the California Insurance Code.

The complaint alleged she was not only entitled to a recovery of her individual benefits under Section 502(a)(1)(B), but she also sought relief for other plan participants on the basis that First Unum and the plan engaged in improper practices to deny benefits.

PLAINTIFF'S CONTENTIONS:
Plaintiff alleged that the benefits were incorrect because they were calculated using her base wages under a 2007 policy instead of her total compensation under a 2006 policy.

DEFENDANTS' CONTENTIONS:
First Unum argued that ERISA preempted plaintiff's claim under state law that provides there could be no limit or refusal to insure "solely because of ... a mental impairment."

Result

The court rejected First Unum Insurance Company of America's argument that the equitable relief claim had to be dismissed because the participant could not assert both an equitable relief claim under Section 502(a)(3) and an individual benefit claim under Section 502(a)(1)(B). The court said it would be premature to dismiss the Section 502(a)(3) claim because it was unclear if the participant had a sufficient remedy under Section 502(a)(1)(B). In denying the insurance company's motion to dismiss, Judge William Alsup said the participant was seeking recovery not only of her individual benefits under ERISA, but also on behalf of all plan participants alleging improper claims practices.