Edwards v. Guardian Life Ins

Case: 24-60381 Document: 72-1 Page: 1 Date Filed: 06/20/2025

United States Court of Appeals

for the Fifth Circuit

____________ United States Court of Appeals

Fifth Circuit

FILED

No. 24-60381 June 20, 2025

____________

Lyle W. Cayce

Clerk

James R. Edwards,

Plaintiff—Appellant,

versus

Guardian Life Insurance of America,

Defendant—Appellee.

______________________________

Appeal from the United States District Court

for the Northern District of Mississippi

USDC No. 1:22-CV-145

______________________________

Before King, Jones, and Oldham, Circuit Judges.

Andrew S. Oldham, Circuit Judge:

After Pamela Edwards died of cancer, her widower sought payment

on her life insurance policy. Guardian Life Insurance denied his claim. Jimmy

Edwards then sued the insurer in federal court. The district court granted

Guardian’s motion for partial summary judgment. We reverse and render

judgment for Edwards.

I

Pam Edwards owned and operated a beauty salon in Starkville,

Mississippi called Allure Salon. She was diagnosed with cancer in 2019 and

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underwent radiation, chemotherapy, and surgery thereafter. Tragically,

Pam’s cancer never went into remission, and she died on May 27, 2022.

Upon Pam’s death, insurance agent Debbie Jaudon informed her

husband, Jimmy, that Pam had a life insurance policy from Guardian. She had

purchased the policy in 2007, as she “wanted to be sure that she had

something to leave to her husband.” ROA.160. Pam dealt exclusively with

Allure’s finances, so Jimmy was unaware of the policy until Jaudon informed

him of its existence.

Jaudon then requested a life claim form from Guardian. But Guardian

claimed the policy had been cancelled before Pam’s death. The insurer

argued that Pam bought a group policy to cover multiple Allure employees.

But in November 2019, Allure’s coverage dropped to one (Pam)—thus

triggering Guardian’s contractual right to cancel it.

That was news to Jaudon, Pam’s insurance agent, because she never

received a notice of cancellation. How so? Guardian says that in September

2020, it “temporarily suspended its practice of terminating plans that had

dropped to one participant due to the COVID 19 pandemic that was

impacting the entire globe.” Red Br. at 6. Guardian later renewed its normal

cancellation practices and terminated Pam’s coverage on January 15, 2022. It

nevertheless remains a mystery why Guardian never notified Jaudon of the

cancellation.

Jimmy Edwards sued Guardian in the Northern District of

Mississippi. 1 He brought various claims under Mississippi common law, and

argued that in the alternative, ERISA entitled him to recover benefits under

_____________________

1

Jimmy Edwards passed away during the pendency of this case. Accordingly, the

court granted a motion on June 20, 2025 to substitute his son and the executor of his estate,

James R. Edwards, as appellant. See Fed. R. App. P. 43(a)(1).

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the plan. Guardian moved for partial summary judgment, arguing ERISA

governed the plan and preempted Edwards’ common-law claims. The

district court granted Guardian’s motion. Jimmy timely appealed.

II

As a threshold matter, we find that ERISA applies to the Allure

policy. ERISA governs “any employee benefit plan if it is established or

maintained by any employer engaged in commerce or in any industry or

activity affecting commerce.” 29 U.S.C. § 1003(a)(1). The mere purchase of

an insurance policy does not immediately establish that ERISA applies. See,

e.g., Shearer v. Sw. Serv. Life Ins. Co., 516 F.3d 276, 279 (5th Cir. 2008).

Instead, to decide whether a policy qualifies as an employee benefit plan, “we

ask whether a plan: (1) exists; (2) falls within the safe-harbor provision

established by the Department of Labor; and (3) satisfies the primary

elements” of such a plan: “establishment or maintenance by an employer

intending to benefit employees.” Meredith v. Time Ins. Co., 980 F.2d 352, 355

(5th Cir. 1993). Failure to satisfy any of these elements means ERISA does

not apply. Ibid.

The parties mainly dispute whether Allure had employees—a

question that implicates the first and third Meredith prongs. See House v. Am.

United Life Ins. Co., 499 F.3d 443, 450 (5th Cir. 2007) (explaining that

whether a participating business has employees speaks to “the determination

of the existence of an employee welfare benefit plan” (emphasis added));

Meredith, 980 F.2d at 355–56 (locating it in “step three” while

acknowledging the “circ[ularity]” of the inquiry). Employee benefit plans

under ERISA do not include those “[p]lans that cover only sole owners or

partners and their spouses.” Raymond B. Yates, M.D., P.C. Profit Sharing

Plan v. Hendon, 541 U.S. 1, 21 (2004). So ERISA would not apply if Allure

never had employees, making Pam the only covered member. Independent

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contractor status is a question of law that this court reviews de novo. Penn v.

Howe-Baker Eng’rs, Inc., 898 F.2d 1096, 1101 (5th Cir. 1990).

Because ERISA does not define “employee,” federal courts apply

federal common law to determine whether an individual qualifies. Nationwide

Mut. Ins. Co. v. Darden, 503 U.S. 318, 323–24, 323 n.3 (1992). This multi-

faceted inquiry “incorporate[s] traditional agency law principles.” Id. at 323.

No single factor is dispositive, but the test places “special emphasis on the

issue of control.” Penn, 898 F.2d at 1102. Additional factors include:

[T]he skill required; the source of the instrumentalities and

tools; the location of the work; the duration of the relationship

between the parties; whether the hiring party has the right to

assign additional projects to the hired party; the extent of the

hired party’s discretion over when and how long to work; the

method of payment; the hired party’s role in hiring and paying

assistants; whether the work is part of the regular business of

the hiring party; whether the hiring party is in business; the

provision of employee benefits; and the tax treatment of the

hired party.

Darden, 503 U.S. at 323–24 (quoting Cmty. for Creative Non-Violence v. Reid,

490 U.S. 730, 751–52 (1989)).

On the limited record below, the Darden factors indicate Allure’s

salon technicians were employees. Pam owned the salon building and

equipment, so she controlled where the technicians worked and their means

of doing so. See id. at 323. She also controlled when and how long they worked

by setting salon hours. Ibid. Allure paid their insurance premiums, which

entitled it to favorable tax treatment. Ibid. Clients paid gross receipts to

Allure, and Pam subsequently paid her employees from the Allure business

account. Finally, Allure was in business and the technicians’ work

constituted its normal business. See id. at 324. Considering “all of the

incidents of the relationship,” Darden, 503 U.S. at 324 (quotation omitted),

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we find that Allure’s workers were employees, so a plan exists and ERISA

applies.

III

Satisfied that ERISA applies, we turn to Guardian’s policy and

Jimmy’s claim for benefits. Under the terms of its policy, Guardian

maintained its “right to cancel . . . any coverage hereunder” when “less than

two employees are insured.” ROA.303. That right vested when Pam

Edwards became the sole participating employee effective November 1, 2019.

Because Guardian could cancel the plan at any time and for any reason, its

discretionary authority would normally permit the cancellation here under

the generous abuse of discretion standard. See Corry v. Liberty Life Assur. Co.

of Bos., 499 F.3d 389, 397 (5th Cir. 2007); Holland v. Int’l Paper Co. Ret. Plan,

576 F.3d 240, 246 (5th Cir. 2009) (describing standard as requiring merely

“evidence . . . that clearly supports the basis for its denial” (quotation

omitted)); ROA.111–113 (showing Allure’s plan with only one member).

But insurers can waive their discretionary cancellation rights under

ERISA. The waiver inquiry “focus[es] on the unilateral action of the insurer

in failing to raise at the outset a known” right. Pitts ex rel. Pitts v. Am. Sec. Life

Ins. Co., 931 F.2d 351, 357 (5th Cir. 1991). We have held that an insurer that

accepted premiums for five months “after learning beyond all doubt that

[Plaintiff] was the only employee remaining on the policy” waived its right to

cancel. Ibid.

We hold that Guardian waived its right to cancel Pam Edwards’s plan

by continuing to accept premium payments from Allure for 26 months after

its cancellation right vested. Guardian’s cancellation right vested on

November 1, 2019. There is a conspicuous 10-month gap between that date

and when Guardian started “temporarily suspending” plan cancellation in

September 2020 due to COVID. See Red Br. at 6. Between the plan becoming

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eligible for termination and its cancellation, Guardian accepted 26 months’

worth of premiums. And Guardian’s delay in cancellation prejudiced Pam

because she was unable to conduct business over the last ten months of her

life due to her mental and physical deterioration. Guardian cannot now avoid

its obligation to Jimmy Edwards after accepting Allure’s premiums for 26

months. Cf. Rhorer v. Raytheon Eng’rs and Constructors, Inc., 181 F.3d 634,

645 (5th Cir. 1999) (reversing district court’s grant of summary judgment

because “a reasonable jury could conclude that Raytheon knowingly waived

its right to enforce” certain insurance requirements after it “accepted

premiums from Mr. Rhorer for several months”).

* * *

According to Guardian, most of its delay in canceling Allure’s ERISA

plan was caused by the insurer’s non-cancellation policy during the COVID

pandemic. Guardian asks us to recognize this “generous accommodation” as

“laudatory.” Red Br. at 48 & 6 n.1. But we disagree that requiring Guardian

to pay Jimmy’s claim “epitomizes the adage that ‘no good deed goes

unpunished.’” Id. at 48. To the contrary: Requiring Guardian to pay Jimmy’s

claim after it pocketed 26 months of Allure’s premiums epitomizes a

different adage: “You get what you pay for.”

For the foregoing reasons, we REVERSE the district court’s

judgment and RENDER judgment for James Edwards.

6