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Kentucky Court Rules That St. Elizabeth Medical Center is Not Subject To the Church-Plan Exception Under ERISA

Ms. Julie Cruz submitted a claim for benefits in May 2021 to Standard Insurance Company under a group long-term disability (LTD) policy sponsored by St. Elizabeth Medical Center. Standard denied Ms. Cruz’s claim and Ms. Cruz commenced legal action against Standard.

The issue before the court was whether Ms. Cruz’s claim would fall under a conventional breach of contract state law or ERISA, a federal statute that creates a cause of action to enforce beneficiary rights under certain employment benefit plans.

However, excluded from the scope of ERISA are “church plans” which fall under the “church-plan exception.” This typically applies to plans maintained by churches or church associations for their employees. 29 U.S.C. § 1003(b)(2).

In 2017, the Supreme Court clarified that the “church plan” exception simply applies to plans established and maintained by (a) a church or association of churches or maintained by (b) an organization with the principal purpose of administering or funding the plan for a church or association of churches. Advoc. Health Care Network v. Stapleton, 137 S.Ct. 1652, 1656 (2017); 29 U.S.C. § 1002(33)(C).

Ms. Cruz’s LTD policy shows that St. Elizabeth “maintains” the plan as a sponsor. Despite St. Elizabeth being associated with the Catholic Church, the Court determined that St. Elizabeth is not a church or an associate of the church.

The Court further concludes that St. Elizabeth’s “principal purpose” is to provide healthcare according to their articles of incorporation. Therefore, the court ruled the church-plan exception under ERISA does not apply to Ms. Cruz’s claim.

Understanding when exceptions to ERISA apply is an important analysis when determining where to file your lawsuit and what type of law applies.

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