ERISA Archives - McKennon Law Group

Statutes of Limitations for ERISA Claims: Critical Deadlines That Claimants Should Know

The Employee Retirement Income Security Act of 1974 (“ERISA”) governs most of the American public’s employee benefit plans, insurance, and pension benefits. It applies to most medical insurance, disability insurance, life insurance, and pension benefits held by Americans. Unfortunately, disputes over entitlement to benefits arise frequently. Even after engaging in lengthy administrative appeals, the disputes are often left unresolved. The claimant’s only recourse is to file a lawsuit. But, a plan participant must be cautious because, if they wait too long, they may lose the right to sue and be forever barred from obtaining their benefits. The most important deadline to sue over a denied claim is called the statute of limitations. Understanding the applicable statute of limitations for an ERISA claim is thus important.

When seeking benefits under a plan governed by ERISA, the two most important types of claims are claims under 29 U.S.C. Section 1132(a)(1)(B) to obtain improperly denied benefits and claims under 29 U.S.C. Section 1132(a)(3)(B) for breach of fiduciary duty and equitable relief. These two kinds of claims are very different. One seeks to have the court rule that the claim for benefits was improperly denied under the terms of the ERISA plan at issue. The other seeks to establish that the claimant was harmed because the defendant breached its legal duties in some other manner and is therefore entitled to equitable relief. Both types of claims have been addressed elsewhere in related blogs on our website. This article will instead focus on how the two claims have distinctly different statute of limitation .

ERISA does not provide a statute of limitations for claims under Section 1132(a)(1)(B). Instead, courts apply the limitations period provided by the most analogous state statute: a breach of contract claim. See Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Ins. Program, 222 F.3d 643 (9th Cir. 2000) (en banc). In California, that is four years. Other states may differ.

The statute of limitations is to be contrasted with the ERISA plan’s stated contractual limitations provision that also must be complied with. Most employee benefit plans contain a provision that differs from a traditional statute of limitations. In California, California Insurance Code section 10350.7 sets the time as “90 days after the termination of the period for which the insurer is liable” in disability plans. In Heimeshoff v. Hartford Life and Accident Insurance Co., 571 U.S. 99 (2013), the Supreme Court upheld such provisions. The Supreme Court determined that a contractual limitations provision is enforceable unless there is “a controlling statute to the contrary” or the period is unreasonable. Heimeshoff, 571 U.S. at 102, 105-06. Contractual limitations periods of a mere 180 days after the claim denial have been held to be reasonable. See Sargent v. S. Cal. Edison 401(k) Savings Plan, 2020 WL 6060411, at *6 (S.D. Cal. 2020)

Importantly, when denying an appeal for benefits under an ERISA plan, the claims administrator is required to provide notice of the relevant contractual limitations period. See Santana-Diaz v. Metropolitan Life Ins. Co., 816 F.3d 172, 182-83 (1st Cir. 2016). In Santana-Diaz, the First Circuit Court of Appeals ruled that the failure to provide notice of a contractual limitations period in a denial letter rendered it unenforceable to that particular claimant. See id.

Statute of limitations for breach of fiduciary duty claims under 29 U.S.C. Section 1132(a)(3)(B) are more complicated than those for breach of plan benefits. They are controlled by a federal statute: 29 U.S.C. Section 1113. It provides as follows:

No action may be commenced under this subchapter with respect to a fiduciary’s breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of—

(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or

(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation;

except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.

Section 1113 states that a plan participant or beneficiary cannot bring a claim for breach of fiduciary duty later than either six years after the last action that constituted part of the breach of fiduciary duty, or three years after the claimant had actual knowledge of the breach, whichever is earlier. This can produce complicated and unjust situations. What if the breach occurred a decade before the harmed person learned of it? Section 1113 contains a fraud or concealment exception that stops the statute of limitations from beginning to run under certain circumstances. If the defendant actively tried to conceal their breach, then the statute of limitations is tolled until the date of discovery of the breach or violation. However, the exception’s application under other circumstances is less clear. In Barker v. American Mobile Power Corp., 64 F.3d 1397, 1402 (9th Cir. 1995), the Ninth Circuit addressed this issue. The court considered the fraud or concealment exception and found that the plaintiffs in that case had failed to invoke the exception because they failed to allege that defendants “committed specific acts of fraud or concealment.” Id. However, the court also acknowledged that:

Substantial authority indicates, however, that the exception applies only when the defendant himself has taken steps to hide his breach of fiduciary duty. Other circuits have held that the “fraud or concealment” exception in the statute incorporates the common law doctrine of “fraudulent concealment.” See Larson v. Northrop Corp., 21 F.3d 1164, 1172-3 (D.C.Cir.1994); Radiology Ctr., 919 F.2d at 1220; Schaefer v. Arkansas Medical Soc’y, 853 F.2d 1487, 1491 (8th Cir.1988). Under that doctrine, a statute of limitations may be tolled only if the plaintiff “establishes ‘affirmative conduct upon the part of the defendant which would, under the circumstances of the case, lead a reasonable person to believe that he did not have a claim for relief.’” Volk v. D.A. Davidson & Co., 816 F.2d 1406, 1415 (9th Cir. 1987) (emphasis added) (quoting Gibson v. United States, 781 F.2d 1334, 1345 (9th Cir. 1986), cert. denied, 479 U.S. 1054, 107 S.Ct. 928, 93 L.Ed.2d 979 (1987)); see Greenwald v. Manko, 840 F.Supp. 198, 203 (E.D.N.Y. 1993)

Id. at 1402. In short, the courts of appeal are inconsistent when determining whether a defendant must commit affirmative acts to conceal the improper conduct or whether conduct that simply prevents the claimant from knowing that they have a claim is sufficient. The need to isolate the underlying conduct that constitutes the violation further complicates these circumstances and is particularly problematic for the average plan participant.

This raises an additional question: Do contractual limitations periods affect claims for breach of fiduciary duty? The courts have yet to reach a consensus on this issue. Heimeshoff addressed improper denial of benefits claims. Its application to breach of fiduciary duty claims is the issue debated by the courts. Some courts have held that a contractual provision applies to a breach of fiduciary duty claim. Others have rejected that position. As of 2020, “In the seven plus years since Heimeshoff was decided, four of the eight courts that have considered this narrow issue have held that § 1113 controls.” Falberg v. Goldman Sachs Group, Inc., 2020 WL 7695711, at *4 (S.D.N.Y. 2020). Of note, however, other cases have simply ruled in a manner that implicitly holds that the contractual limitations period does not apply. See, e.g., Clark v. Provident Life, 2016 WL 11744945 (C.D. Cal. 2016); Zelhofer v. Metropolitan Life Ins. Co., 2017 WL 1166134 (E.D. Cal. 2017). The majority position is that statute of limitations provisions in a plan document do not control breach of fiduciary duty claims.

Statute of limitations and contractual limitations periods can be very complicated in their application. Whereas a claimant is supposed to be informed of the applicable deadline, claims administrators never inform claimants about the applicable statute of limitations for breach of fiduciary duty claims. At times, they also fail to address the applicable statute of limitations for an improper denial of benefits claim. The wisest course of action is to seek the assistance of experienced ERISA lawyers like McKennon Law Group PC as soon as the claim has been denied, if not beforehand. Key deadlines can be missed, and, once missed, there is little that even a skilled attorney can do to help.

Understanding the Timing Requirements for an ERISA Claim

Why Timing Matters for an ERISA Claim and What Timelines You May Need to Consider

The Employment Retirement Income Security Act of 1974 (ERISA) provides specific requirements for how most group employee benefits plans are administered. Plans that may fall under the purview of ERISA include retirement/pension, health insurance, disability insurance, life insurance, and accidental death & dismemberment insurance. ERISA protections help reduce issues related to insurance bad faith and ensure employees receive the benefits they were promised as part of their compensation packages. The ERISA regulations set out certain important timelines that insurers and claims administrators must follow. Understanding the various timelines that relate to such claims can help ERISA plan participants avoid some common issues that might increase their chance of denial or a loss in court if they need to take the matter that far.

Are There Statutes of Limitations for ERISA Claims?

Whether or not ERISA claims are subject to an applicable statute of limitations is a complex consideration. The statute of limitations for ERISA claims varies depending on the type of claim. For breach of fiduciary duty claims under ERISA, the statute of limitations is generally six years from the date of the last action that constituted a part of the breach or violation, or three years from the date the plaintiff had actual knowledge of the breach or violation, whichever is earlier (29 U.S.C. § 1113). In cases involving fraud or concealment, the statute of limitations is extended to six years from the date of discovery of the breach or violation (29 U.S.C. § 1113).

For ERISA claims that do not involve fiduciary breaches, courts typically apply the most analogous state statute of limitations. For example, claims for denial of benefits under ERISA Section 502(a)(1)(B) are often treated as breach of contract claims, and the applicable statute of limitations is determined by the applicable state law governing contract actions.

The ERISA plan at issue will normally have a contractual limitations period that is the same or shorter than the applicable state law statute of limitations discussed above. If it is shorter, then a claimant would also have to meet this deadline in addition to the applicable statute of limitations period. This limitations period is typically three years from the date a notice of claim must be made under the plan. If you are not sure what the deadlines for filing ERISA claims are in your case, it may be a good idea to consult with an ERISA benefits attorney who can help ensure you file on time.

Must Your Insurance Company Operate on Certain Timelines?

Yes, ERISA timelines are dictated by the law and by the plan. Typically, plans must provide decisions about claims within a specific period of time, such as 45 days. They cannot simply ignore a claim and hope that you forget about it. However, plans can drag out the process of paying a claim by asking for additional documentation or requesting an extension. In most cases, the plan has to provide a reason for these requests, though it might simply be that it needs more time to gather or review information. The exact timeline for claims will depend on the type of coverage you have and the details of your plan agreement.

Deadlines for ERISA-Related Appeals

If your ERISA claim is denied, you can typically appeal it and must appeal it prior to filing a lawsuit. However, you must file the appeal by the relevant deadline. Again, the deadline will differ depending on the type of claim you are dealing with and the details of your plan. Commonly, appeals deadlines are 60 to 180 days from when a denial is issued or received. A lawyer experienced in dealing with ERISA cases can help you understand what the deadline is for your appeal. They can also help you gather information during that time to ensure the strongest appeal possible.

Under ERISA, a participant has at least 180 days following receipt of a notification of an adverse benefit determination to file an appeal concerning disability insurance claims. If the final day of the 180-day period falls on a Saturday, Sunday, or legal holiday, the deadline is extended to the next business day. For disability benefits, the plan must resolve a claimant’s appeal within 45 days, with one 45-day extension available for if the insurer can establish special circumstances exist for the extension. The deadline for filing an administrative appeal on a denied accidental death insurance claim is 60 days from the date of the written denial. Missing an administrative appeal deadline is as fatal to a claim as the passing of a statute of limitations with very few exceptions.

Timeline for Filing a Lawsuit After an ERISA Claim Denial

In most cases, you must go through all administrative options regarding an ERISA claim before you can file a lawsuit in the matter. This means filing a timely claim, filing a timely appeal if that claim is denied, and exhausting all appeal options. Once you do that, you may have an option to file a lawsuit if you believe you can demonstrate that the insurance company improperly denied your claim. An ERISA lawyer can help you understand what type of case you may be able to build for a lawsuit. Typically, these suits are governed by a three-year statute of limitations.

Working With an Attorney to Meet ERISA Deadlines

Timeliness is critical to success when dealing with ERISA claims. An experienced legal team can help you meet deadlines and adhere to important timelines with your ERISA claims. Some ways a legal team can help include:

Ensuring you understand the timelines in question. ERISA claims can be complex, and the information about deadlines you might find online can be confusing. Because so much depends on your individual plan and type of claim, it is important to ensure you are working with the right facts.
Helping you build your case. Whether you have a few days or a few months before a timeline, an experienced ERISA attorney can help you build a case and complete the necessary paperwork and filings to ensure your claim or lawsuit is filed within deadlines.
Supporting you throughout the process. Filing a claim or lawsuit is often just the beginning of your journey with an ERISA claim. An experienced legal team provides support for you throughout the process to reduce some stress and burden at a time when you are likely facing other stresses in life. A legal team can gather documents and information on your behalf, depose witnesses to learn important information for your case, review filings and claims paperwork, and negotiate with insurance companies.

If you are dealing with an ERISA claim or believe you are not being treated fairly by an insurance company or employer benefits plan, our team can help. Contact McKennon Law Group PC to set up an appointment and find out how our team fights for you.

Understanding the Economics of an ERISA Disability Case

The article outlines the economic implications of ERISA disability cases for both claimants and plan administrators. Claimants face lost wages and financial distress due to their inability to work, affecting them and their families. Plan administrators incur administrative expenses in managing claims, reviews, and appeals. ERISA was enacted to protect employee benefit plan participants, adding complexity and economic considerations to disability insurance cases.

ERISA was enacted to protect the interests of employee benefit plan participants and their beneficiaries. Along with pension plans, ERISA also governs disability and life insurance plans offered by employers. Navigating an ERISA disability case can be complex and fraught with economic considerations that affect both the claimant and the plan administrator, and thus may have significant implications for both parties. Claimants and plan administrators alike can be heavily affected by various costs.

For claimants, costs include:

Medical Expenses: Claimants often face significant medical expenses related to their disabilities. These costs can include ongoing treatments, medications, rehabilitation, and other healthcare services. The financial burden of these expenses can be overwhelming, making the need for disability benefits even more critical.

Legal Fees: Pursuing benefits through an ERISA claim often requires legal assistance. Attorney fees can vary widely, but they are typically structured as contingency fees, meaning the attorney is compensated only if the claimant wins their case. Consider that disability benefits already amount to only a portion of a claimant’s income before attorney fees are paid.

Lost Wages: The primary purpose of disability benefits is to replace lost income due to an inability to work. Claimants may face immediate financial distress, particularly if they are unable to return to their previous employment. This loss can affect not only individual claimants but also their families, adding to the emotional and financial strain.

Costs for plan administrators include:

Administrative Expenses: Employers and insurers managing ERISA plans incur administrative costs, which include processing claims, conducting reviews, managing appeals. These costs can be significant, particularly for larger organizations that handle numerous claims.

Legal Fees and Settlements: When a claim is disputed, employers may incur legal fees defending against claims. If a case escalates to litigation, costs are incurred. Additionally, settlements represent a financial liability, particularly if they involve long-term benefit payments.

Impact on Insurance Premiums: High volumes of claims can lead to increased premiums for employers, affecting their overall financial health. Insurance providers may raise rates or adjust their underwriting practices in response to higher claim rates, impacting the employer’s bottom line.

Recoveries for claimants may involve the following:

Monthly Disability Benefits: For successful claimants, ERISA disability benefits can provide a vital source of income. The monthly payments can replace a significant portion of lost wages, offering financial stability during a challenging period.

Lump-Sum Settlements: In some cases, claimants may negotiate a lump-sum settlement. This approach can provide immediate financial relief and allow claimants to plan for future expenses. However, it is essential to weigh the pros and cons, as a lump-sum settlement may be less than the total value of ongoing benefits, even when considering net present value.

Back Benefits and Interest: Claimants may also be entitled to back benefits, along with interest, covering the period from when they became disabled to when the claim is approved. This can provide a substantial financial boost, especially if the claimant has been waiting for approval for an extended period.

Recovery of Attorney’s Fees and Costs: For successful claimants, they may recover the attorney’s fees and costs they incurred from the insurers who denied their claims. This will typically allow the disability claimants to keep all or most of their disability benefits (depending on the fee agreement they have with their attorneys). Experienced disability attorneys such as McKennon Law Group PC often collect attorney’s fees and costs when they achieve success in their ERISA disability cases.

The economics of an ERISA disability case is multifaceted, involving direct costs for claimants, administrative expenses for employers, and long-term financial implications for both parties. Understanding these economic dynamics is crucial for effective navigation of the ERISA landscape. Claimants must weigh the potential benefits against the costs, while employers should consider the broader implications of their disability policies. In this complex environment, informed decision-making can help both claimants and employers achieve favorable outcomes. If you or a loved one have made an ERISA claim for disability benefits or are considering doing so, and if you are looking for the best disability lawyers in California, the experienced attorneys at McKennon Law Group PC can help you navigate these complexities. Reach out to McKennon Law Group PC for a free consultation.

What Surveillance/Investigation Tactics to Expect From Disability Insurers

Is Your Disability Insurer Watching You?

When you file a disability claim with your insurance company requesting that it pay you monthly disability benefits, it will take all necessary steps to try to disprove your claim. If, for example, you assert that you cannot work due to sickness or injury that causes your inability to work in your occupation or any other occupation, the insurance company may try to show that this is not the case because of the activities you engage in regularly. To do that, the insurance company may engage in surveillance tactics without your knowledge to watch your daily activities.

Insurers who conduct surveillance do not automatically engage in bad-faith conduct. They have a right to protect their bottom line and shareholders by conducting reasonable investigation of claims. Nonetheless, it is important to understand what tactics the insurance company might use and how to protect your rights and your claim.

Physical Surveillance by an Investigator

Disability insurers normally hire undercover private investigators who film you during the day and night. These individuals must adhere to privacy laws, which means they cannot take videos or pictures of you at certain times and in certain locations, such as inside your home, without your permission. However, they can generally capture video and photographs of you outside or in public, and they can record their own observations about what you do and when you do it. Video surveillance is conducted mostly at and around your home and will include your travel to locations near your home when you travel away from it.

Surveillance and Invited Investigations at Your Home

Insurers often conduct surveillance of your home and sometimes they set up a visit to your home to ask you questions. If you invite this person into your home, they have access to your private areas that can be seen from the area in which you invited them. Anything they note while inside the home can be documented for use in an insurance case.

This may not seem like it is very important, but something the representative sees in or around your home while he or she is there might call into question your entire disability claim. For instance, if you are the only person who lives in the home and you have claimed that you cannot work due to physical disabilities and limited mobility, the insurance company might question why its representative saw a mountain bike that seemed recently used in your home.

Video Evidence Can Be Damning to Your Claim or It Can Assist in Proving It

Insurance companies can and often do use video evidence from surveillance as evidence against your case or claim, especially if the matter goes to court. The insurance company might try to gather video footage from traffic cameras or other sources that show you doing things that seem to indicate you would have no trouble working or that your disability or injury is not as serious as you claim. In some cases, insurance companies might try to subpoena video evidence from other cameras, including personal cell phones.

Social Media Investigations

If you use or own social media accounts, these can and will be investigated by your disability insurer to determine if anything you post (whether written or photographic) is inconsistent with your disability claim and the representations you make about your claim. Your own Facebook, Instagram, X, or TikTok account could give your insurance company evidence they might use against you. Some insurance companies engage in social media investigations, which means they hire trained professionals to monitor your accounts.

This is an important consideration, as you must be careful what you share online. You cannot just ensure you keep your photographs and other information to “friends only,” either, as nothing on the internet is completely private.

Consider a hypothetical case where a disability claimant is dealing with extreme back pain and cannot work. However, through the use of medication, days of rest before and after, and help from others, she is able to attend an important family event, where she is seen walking, bending and sitting without any noticeable pain. A disability insurer might try to use pictures and videos to deny your claim, though the pictures do not tell the entire story of what those few hours might have cost the individual after the event is over.

If you use social media platforms, you may also want to select settings that keep people from tagging you in pictures and posts. This helps reduce the chance that others might add information or images to your profile that are damaging to your case. McKennon Law Group PC believes that these types of investigations are so important that it provides all of its disability clients with a Social Media Questionnaire and Warnings document they are required to complete.

Background Checks and General Research

Insurance companies also conduct background checks and research into your life before and after any injury or disability. Investigators may look for information about your previous jobs, where you have lived in the past, who you have lived with, and what your interests and hobbies are. All of this information can inform the rest of their research or the strategy they take in surveilling you in the future.

For example, if background research shows that someone was an avid hunter or hiker, investigators may be on the lookout for evidence that the individual is engaging in these activities despite their claimed disability.

How a Disability Lawyer Can Help

Knowing that an insurance company or investigator might be watching you—literally and figuratively—can be stressful. That is a stress you certainly do not need to pile on in an already stressful time, but it is important to understand what actions might weaken your case and how to protect your rights, privacy, and case.

An experienced disability attorney can help with all of that. At McKennon Law Group, PC, we work hard to protect our clients from bad-faith insurance actions. We also provide guidance throughout your claim and case process so you can live more confidently knowing you are working in the best interests of your case.

In a Win for McKennon Law Group PC’s Client, the Ninth Circuit Rules that Plan Fiduciaries With ERISA Plan Eligibility Duties Are Liable When They Mistakenly Collect Insurance Premiums for Ineligible Plan Participants and Do Not Investigate Submitted Eligibility Information

Most employee benefits are governed by a federal law called the Employee Retirement Income Security Act of 1974 (“ERISA”), including life insurance, disability insurance, accidental death insurance, health insurance, pensions, and other benefits offered by employers to their employees through their employee benefit plans. Sometimes the plan’s sponsor (which is usually the employer), plan’s administrator, and/or an insurance company (if the plan’s benefits are funded by an insurance policy), mistakenly charge, deduct from the employee’s paycheck, and accept his premiums for insurance of which he or his family is ineligible under the plan’s terms. This can lead to dire financial results if the employee relies to his detriment on the fiduciary’s mistake.

For example, a prevalent practice exists in the group life insurance industry where the employers charge, and the insurers accept, premiums from their plan participants without verifying their eligibility for the coverage (until after the participant dies and his or her beneficiary makes a claim). Then, the insurer investigates the claim and sometimes determines that the employee had been paying premiums, often for years, for coverage for which he or his family members were ineligible. The insurer thus denies the claim based on ineligibility, and it returns the employee’s mistakenly collected insurance premiums without paying the valuable life insurance claim. The glaring problem in this all-too-common scenario is that, by then, it is too late for the employee to secure alternate life insurance coverage. His loved one is already dead. The Department of Labor recently condemned “This egregious practice” because it “left grieving families without the life insurance for which their loved ones had paid.” It vowed to “take appropriate action against any insurance company that collects regular premium payments from plan participants, and later plays a game of ‘gotcha’ to wrongfully deny benefits based on technicalities like ‘insurability’ after the participant passes away.” See DOL News Release, 4/19/23, found at https://www.dol.gov/newsroom/releases/ebsa/ebsa20230419.

The Department of Labor’s policy statement begs the question: Is an ERISA plan sponsor (employer) or administrator liable when they mistakenly collect premiums from an ineligible plan participant? That is a complicated question under ERISA fiduciary duty law. Until the very recent decision from the Ninth Circuit Court of Appeals in Keith McIver v. Metropolitan Life Insurance Company, et al., No. 23-55306, 2024 WL 4144075 (9th Cir. Sept. 11, 2024), the answer was unclear. The courts had usually found that when an ERISA plan entity made a mistake in calculating and collecting premiums due, without more, it engaged in a “ministerial” function, not a fiduciary one, because no discretion or judgment was required. So held the Ninth Circuit of Appeals in Bafford v. Northrup Grumman Corp., 994 F.3d 1020 (9th Cir. 2021), but in a slightly different context (pension benefit calculation errors). Going forward, however, the answer is a resounding yes in certain circumstances. That is, thanks to the McIver decision, employers, plan sponsors, and plan administrators who mistakenly collect premiums from an employee perform a fiduciary function and breach fiduciary duties if: (1) The plan documents ascribe to them the duty to make eligibility decisions (or those duties are delegated to them and they perform them in practice); (2) They fail to investigate the plan participant’s eligibility within a reasonable time of accepting his premiums; and (3) When a dependent participant that was once eligible becomes ineligible based on her divorce (or other dependent status change), the employee must provide sufficient notice of their divorce in accord with the plan documents to trigger the employer’s, sponsor’s, and administrator’s fiduciary duties.

In McIver, the McKennon Law Group PC obtained a favorable decision for one of its ERISA plan life insurance clients. The Ninth Circuit clarified and drastically expanded the scope of ERISA plan sponsor’s/employer’s and administrator’s fiduciary duty liability in these ways, i.e., when they mistakenly collect dependent life insurance premiums for an ineligible plan participant. It did so without any representation by the plan sponsor, administrator, or insurer to the employee or his family that their dependent life insurance coverage was in place (besides their continued premium deductions after notice of divorce). That is a fair result because ERISA plan sponsors/employers, administrators, and insurers are often fiduciaries of plan participants and their beneficiaries. As fiduciaries, they have a duty to act solely in the interest of the plan’s participants and beneficiaries for the exclusive purpose of providing them their benefits, and with care, skill, prudence, and diligence. See 29 U.S.C. § 1104(a)(1). That duty includes a duty to investigate suspicions that one has concerning the plan. See McIver, 2024 WL 4144075, at * 2, citing Barker v. Am. Mobile Power Corp., 64 F.3d 1397, 1403 (9th Cir. 1995). With these very high duties of loyalty and prudence and to investigate suspicions, why would a court allow a plan sponsor or administrator to mistakenly collect premiums for an ineligible plan participant (like a former dependent of the employee in McIver’s case), without investigating her eligibility within a reasonable time of accepting the premiums, and after receiving notice of the employee’s divorce from his former spouse, to the employee’s financial detriment with no consequence (especially because an employee’s divorce for most ERISA plans makes his former spouse ineligible for ongoing dependent life insurance coverage because she is no longer a dependent).

McIver is significant because it changed the landscape of ERISA fiduciary duty law on these types of issues in a favorable way for ERISA plan participants. Our client, Keith McIver (“Keith”), worked for The Boeing Company for 31 years. Early on, he enrolled in Boeing’s group ERISA life insurance plan. As a Boeing employee, he was eligible to obtain life insurance for himself and his dependents, including his legal spouse, Bonnie McIver (“Bonnie”). He enrolled and paid Boeing insurance premiums for decades to cover him and his then wife. Boeing deducted dependent premiums from his paycheck biweekly for many years before he divorced, and for several months after he divorced. Unknown to him, Bonnie’s insurance terminated when they divorced because, under the life insurance plan’s terms, only his “legal spouse” qualified for Boeing’s dependent life insurance coverage, not an ex-wife. However, because Boeing continued to deduct the premiums from his paycheck for 11 months after he notified Boeing and its plan administrator, Employee Benefits Plan Committee (“EBPC”), of his divorce, he mistakenly thought Bonnie was still covered. He thought Boeing would stop accepting his premiums if his ex-wife was not entitled to the coverage.

Boeing, and the insurance company that funded the plan’s benefits, Metropolitan Life Insurance Company (“MetLife”), did not investigate Bonnie’s ongoing eligibility for the insurance until several months after Keith had notified Boeing and EBPC of their divorce. They waited for several months to investigate her continued eligibility, until after she died, and after he had made a claim for dependent life insurance benefits. In the interim, Boeing continued to charge and deduct his premiums for the dependent coverage (incorrectly). Then, when it was too late for Keith to obtain alternative life insurance on Bonnie, after she had died, MetLife told Keith that Bonnie’s coverage had ended when they divorced and, therefore, MetLife would not pay his dependent life insurance claim as her beneficiary.

McKennon Law Group PC filed a lawsuit against Boeing and EBPC for breach of fiduciary duty on Keith’s behalf. We alleged in the lawsuit that they owed our client fiduciary duties of prudence and loyalty and to investigate his ex-wife’s continued, post-divorce eligibility (within a reasonably proximate time after Boeing took his premiums for the dependent coverage and he notified them of his divorce). That Boeing and EBPC breached these fiduciary duties when Boeing, after our client notified both of them of his divorce, continued to charge and collect premiums from him for several months for his ex-wife’s dependent life insurance coverage, that had terminated on divorce, without timely investigating her eligibility. That because EBPC had broad duties assigned to it under the group life insurance plan documents to make eligibility decisions (which EBPC assigned to Boeing), including after a marital status change, they had a duty to prudently and timely investigate her continued eligibility, reasonably proximate to the time that they received notice of his divorce and took his post-divorce notice premiums. But Boeing and EBPC did not timely investigate or decide Bonnie’s ongoing eligibility (despite these plan duties), after Keith notified them of his divorce in accord with the plan documents. Instead, Boeing mistakenly charged him dependent premiums for several months without investigating whether Bonnie was still eligible (when she was not eligible), in breach of the Boeing defendants’ fiduciary duties of prudence, loyalty, and to investigate her continued eligibility.

Boeing and EBPC filed a motion to dismiss the lawsuit. They argued that they did not owe or breach any fiduciary duties to Keith (by mistakenly collecting his dependent life insurance premiums). Specifically, that Boeing performed a ministerial not fiduciary function that involved no judgment or discretion when its payroll department mistakenly collected his premiums for coverage for which he had enrolled. We opposed Boeing’s and EBPC’s motion to dismiss, but the federal district court granted it and dismissed the case with prejudice. The court (and the Boeing defendants) incorrectly relied on the Ninth Circuit Court of Appeals’ decision in Bafford, 994 F.3d 1020. Bafford held that an ERISA plan benefit calculation mistake that involves no discretion is not a fiduciary function. The court analogized the Boeing payroll department’s conduct to Bafford. It held that the Boeing defendants did not use any discretion when Boeing mistakenly charged Keith premiums for Bonnie’s dependent coverage and, therefore, did not owe or breach any fiduciary duties to him. That collecting his post-divorce notice premiums was just a ministerial mistake, not a fiduciary function.

We appealed the adverse trial court’s decision to the Ninth Circuit on Keith’s behalf, and we won the appeal. The employer Boeing and its plan administrator EBPC again argued that Bafford controlled the outcome of the case because their error in collecting premiums was a ministerial mistake. The Ninth Circuit rejected this argument, emphasizing that because Boeing and EBPC had assigned or delegated duties under the plan to determine eligibility, and because Keith sent them his Qualified Domestic Relations Order (“QDRO”) that stated he was divorced, they performed fiduciary functions and breached fiduciary duties when they mistakenly collected Keith’s premiums for his dependent Bonnie’s coverage (without first investigating and deciding her continued eligibility within a reasonable time after they received his post-divorce notice premiums). The court clarified that Bafford did not apply to Keith’s case, and it held that the operative Complaint plausibly alleged that the employer and plan administrator performed fiduciary functions and breached fiduciary duties under these circumstances.

In short, the Ninth Circuit agreed with Keith’s position that it just is not fair for an ERISA plan entity, who has duties assigned to it in the plan documents to decide eligibility, to mistakenly collect insurance premiums from an ineligible plan participant without timely deciding whether or not she is eligible. That an employer, sponsor, or administrator of a group life insurance plan with plan eligibility decision duties cannot continue to charge premiums for dependent life insurance coverage (that had terminated on divorce), for months after they received notice of the divorce, without making an eligibility decision. The appellate court agreed that such plan fiduciaries act inequitably and breach fiduciary duties of prudence, loyalty, and to timely investigate when they wait to decide eligibility until after the insured dies and the beneficiary makes a claim for her life insurance benefits. And only then say, when it is too late to secure alternate life insurance, “sorry,” you don’t have the coverage that you have been paying premiums to us for months. But here are your ill-gotten premiums back.

The appellate court reversed the district court’s Federal Rules of Civil Procedure 12(b)(6) dismissal of the case and remanded it back to that court to decide at trial whether Keith can prove the allegations he made in his operative Complaint. Specifically, the Ninth Circuit Court of Appeals found:

If the facts alleged in the Second Amended Complaint are true, Boeing and EBPC performed fiduciary functions when they continued to charge, deduct, and collect dependent life insurance premiums from Keith after they received notice via his QDRO stating that he was divorced.

If the facts alleged in the Second Amended Complaint are true, Boeing and EBPC breached fiduciary duties owed to Keith by failing to investigate Bonnie’s ongoing eligibility for dependent life insurance coverage after he submitted, and they received, notice via the QDRO stating that they were divorced.

Therefore, Keith’s Second Amended Complaint allegations are sufficient to defeat Boeing’s and EBPC’s motion to dismiss Keith’s breach of fiduciary duty claim against them. And, therefore, the appellate court reversed the district court’s decision to dismiss them from the lawsuit.

Key Take Away

The Ninth Circuit McIver Court clarified and expanded ERISA plan participant’s rights, as well as employer’s, plan sponsor’s, and plan administrator’s fiduciary duties (which will also apply to group life insurers under the correct circumstances), particularly in the context of premium collection errors for dependent life insurance after notice of a divorce. ERISA fiduciary duty law is quite complex. Whether an employer, plan sponsor, plan administrator, or insurer performed a fiduciary function in a specific case requires careful analysis by an expert.

Federal District Court Finds Matrix’s Denial of a Long-Term Disability Claim to be Arbitrary and Capricious Where the Denial Did Not Strictly Comply With ERISA Requirements and Failed to Provide Sufficient Explanation for the Denial

Many cases address the critical issues surrounding the denial of long-term disability (LTD) benefits under the Employee Retirement Income Security Act of 1974 (ERISA), and many explore the procedural and substantive requirements that insurers must follow when adjudicating disability claims, including the necessity for thorough and transparent explanations for claim denials. One such case is Halleron v. Reliance Standard Life Ins. Co., 2024 WL 3585139 (W.D. Ky. July 30, 2024). This case also examines the administrative remedies claimants must exhaust before seeking judicial review, and the circumstances under which a court may find that such remedies have been effectively exhausted even without an appeal. The broader implications of this case highlight the importance of understanding one’s rights and the legal standards governing disability benefits.

Dr. Halleron, a physician, performed physical exams, met and interacted with patients, providers, and pharmacies, and was involved in establishing and following procedures and protocols for her practice. Unfortunately, she was diagnosed with POTS — postural orthostatic tachycardia syndrome. The symptoms of POTS – dizziness, fatigue, joint pain, and syncope — rendered Dr. Halleron unable to perform her job, so she stopped working and submitted a claim for disability benefits to her disability insurer, Reliance Standard Life Insurance Company. Dr. Halleron’s short-term disability (“STD”) claim was denied based on POTS being a pre-existing condition; however, Dr. Halleron also made a claim for LTD benefits, which was not barred by a pre-existing condition exclusion.

Matrix reviewed Dr. Halleron’s LTD claim and denied it because she did not meet the policy definition of “Totally Disabled.” Matrix’s denial was brief and lacked detail about how Dr. Halleron failed to meet the policy standard for disability. Dr. Halleron sued Matrix. Matrix argued that the suit should be dismissed because Dr. Halleron failed to exhaust administrative remedies, as she did not appeal Matrix’s initial LTD claim denial.

The District Court in Kentucky considered whether Dr. Halleron exhausted her administrative remedies without appealing Matrix’s denial of her LTD claim. The court determined that Dr. Halleron exhausted her administrative remedies without submitting an appeal. The court found that Matrix’s determination notice did not strictly comply with ERISA claims regulations; specifically, the determination did not discuss the decision and explain any disagreement with or choice not to follow the view of the claimant’s treating physician.

The court reasoned that Matrix’s denial letter did not address the assessment of Dr. Halleron’s condition by her treating physician or that physician’s conclusion that Dr. Halleron would require disability benefits and work modifications for the rest of her life. Matrix’s denial was substantively merely one paragraph and did not provide a sufficient analysis of Dr. Halleron’s medical records as required by ERISA. The court explained that:

The claims regulations, inter alia, require adverse benefit determination notices to discuss the decision and explain any disagreement with or choice not to follow the views of the claimant’s treating physician. 29 C.F .R. § 2560. 503-1(g)(1)(vii)(A) (i). Matrix’s determination that Dr. Halleron is not disabled did not address Dr. Perrotta’s assessment of Dr. Halleron’s condition or her conclusion that Dr. Halleron required disability benefits and work modifications for the rest of her life. (LTD Admin. R. 93-94). Accordingly, ERISA regulations deem Dr. Halleron’s administrative remedies exhausted and allow Dr. Halleron immediate access to judicial review. (Emphasis added).

The court also concluded that both the STD and LTD denials were arbitrary and capricious because they were not the product of a deliberate, principled reasoning process. The court cited the Sixth Circuit’s opinion in Elliott v. Metropolitan Life Insurance Co., 473 F.3d 613, 617 (6th Cir. 2006), which held that a reasoned judgment about a claimant’s capability must rely on medical evidence that assesses the claimant’s physical ability to perform job-related tasks and because Matrix merely concluded that POTS was a pre-existing condition without explanation.

Based on these findings, the court remanded Dr. Halleron’s claim back to Matrix to perform a full and fair review of bother her STD and LTD claims as required by ERISA.

The court’s determination in this case highlights the importance of understanding the claims process and your rights as a claimant. Whereas Matrix attempted to brush off Dr. Halleron’s claims without providing sufficient analysis or explanation, Dr. Halleron did not accept Matix’s improper denials, but found legal counsel and asserted her rights under ERISA. Specifically, while a claims administrator or insurer may try to convince a claimant that she is not entitled to disability benefits, the claimant should not take such determinations at face value. ERISA requires claimants to exhaust administrative remedies, but in a case like this where the insurer or administrator does not provide enough information for the claimant to understand what is required for a successful appeal, the claimant may have a successful argument that the case is ripe for litigation even without going through the administrative motions of submitting such an uninformed appeal.