ERISA Archives - Page 46 of 56 - McKennon Law Group

Ruling Limits Insurance Company’s Ability to Collect SSDI Overpayments

When and under what circumstances an insurer paying long-term disability benefits may collect retroactive benefits paid to an ERISA plan participant under the Social Security Act has been the source of conflicting opinions over the years. The most recent pronouncement: a long-term disability plan administrators must “specifically identify a particular fund” from which it will be reimbursed in order to seek to recover of alleged overpayment of disability benefits. So held the Southern District of California in its recent plaintiff-friendly decision in Wong v. Aetna Life Insurance Company, 2014 U.S. Dist. LEXIS 135661 (S.D. Cal. 2014). Through its decision in Wong, the district court reaffirmed that simply because an ERISA governed long-term disability plan’s language provides for recovery of an award of back-dated SSDI benefits does not mean that an insurance company may seek reimbursement from an insured’s general assets. Instead, the onus is on the insurer to specifically identify specific funds, separate from a plan participant’s general assets, on which it may place an attachment.

In Wong, the plan a participant was initially granted benefits under her ERISA governed long-term disability plan. However, the plan administrator, Aetna, repeatedly denied and then reinstated her benefits. After the third denial, the plan participant filed an appeal with Aetna, which was subsequently denied. However, while she was still on claim, Aetna had advised her to apply for Social Security benefits, which was eventually approved and the Social Security Administration also agreed to back-date her award for over a year. However, very soon after being approved for the award, Aetna contacted the plan participant and asserted that it was entitled to reimbursement of the retroactive SSDI benefits she received.

Following Aetna’s demand for reimbursement, the plan participant filed an ERISA action seeking benefits owed to her. Aetna in turn filed a counterclaim seeking recovery for the retroactive social security benefits received by the plan participant. First, as to the plan participant’s claim, the court concluded that it was unreasonable and an abuse of discretion for Aetna to terminate the plan participant’s benefits. Second, and more significantly, the court held that Aetna may not retroactively attach the plan participant’s social security benefits because it failed to meet the necessary criteria for seeking overpayment. In reaching its holding, the court explained that there are “at least three criteria” that a plan administrator must satisfy in order to recover the overpayment:

First, there must be a promise by the beneficiary to reimburse the fiduciary for benefits paid under the plan in the event of a recovery from a third party. Second, the reimbursement agreement must specifically identify a particular fund, distinct from the beneficiary’s general assets, from which the fiduciary will be reimbursed. Third, the funds specifically identified by the fiduciary must be within the possession and control of the [beneficiary]. (internal quotations omitted).

Here, as in most plans, the first criteria is satisfied because, as the plan participant did not dispute that she contracted to reimburse overpayment of benefits to Aetna. However, the court held that Aetna did not satisfy second criteria. The court focused on the fact that the Social Security Act provides that “none of the moneys paid or payable or rights existing under this [Social Security] subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process.” As such, although Aetna attempted to do so, the court found that Aetna could not identify the SSDI benefits as themselves a particular fund because they had already been paid. Furthermore, Aetna did not dispute that the long-term disability benefits had already been spent by the plan participant. As such, the court held that Aetna is not permitted to attach the plan participant’s SSDI benefits because it could not identify a fund distinct from her general assets that permits such an attachment.

This decision demonstrates that simply because a plan participant contracted to reimburse an insurer for an overpayment does not mean that the plan has an unfettered ability to seek recovery of overpaid benefits. Indeed, especially in the case of retroactive social security benefits, the insurance company may well be unable to meet its burden of identifying particular fund from which it can properly be reimbursed. Plan participants and beneficiaries can take some solace from this decision.

Ninth Circuit Expands the Availability of Equitable Remedies in ERISA Cases, Approving Surcharge as a Viable Remedy

Since the Supreme Court’s decision in Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134 (1985), the courts have grappled with the issue of the extent to which equitable remedies are available under the Employee Retirement Income Security Act (“ERISA”). One of the most interesting and beneficial for plan participants is the issue of the equitable remedy of surcharge under ERISA. Recently, the Ninth Circuit withdrew an earlier decision regarding the availability of the equitable remedy of surcharge in ERISA, and issued a new ruling consistent with the holdings of other Circuit courts. The new ruling, Gabriel v. Alaska Electrical Pension Fund, 2014 DJDAR 16590 (9th Cir. 2014), is much more favorable to ERISA claimants and makes clear that surcharge, a form of equitable relief, is available to ERISA claimants under 29 U.S.C. section 1132(a)(3). Further, the Court also set forth the requirements that a claimant must meet to qualify for other forms of equitable relief, including equitable estoppel and reformation.

The specific facts of the Gabriel matter are unimportant, and ultimately the Ninth Circuit ruled that the district court was correct in holding that the plaintiff was not entitled to the payment of the pension funds that he sought because his rights to those funds never vested. The Ninth Circuit also remanded one aspect of the case to the District Court, but virtually instructed the lower court to deny that claim as well. However, the ruling is important because, by making the equitable remedy of surcharge available to ERISA claimants, the Ninth Circuit aligned itself with the Fourth, Fifth, Seventh and Eighth Circuits in expanding the rights of ERISA claimants.

In the ruling, the Ninth Circuit explained that in Cigna Corp. v. Amara, 131 S. Ct. 1866 (2011), the United States Supreme Court made it clear that because ERISA section 1132(a)(3) allows a claimant to seek “appropriate equitable relief,” those remedies traditionally viewed as equitable were available.

Thus, for example, a claim of “appropriate equitable relief” may include “the reformation of the terms of the plan, in order to remedy the false or misleading information” provided by a plan fiduciary. The Ninth Circuit then explained:

A plaintiff may obtain reformation based on mistake in two circumstances: “if there is evidence that a mistake of fact or law affected the terms of [a trust] instrument and if there is evidence of the settlor’s true intent”; or (2) “if both parties [to a contract] were mistaken about the content or effect of the contract” and the contract must be reformed “to capture the terms upon which the parties had a meeting of the minds.” Skinner, 673 F.3d at 1166. Under a fraud theory, a plaintiff may obtain reformation when either (1) “[a trust] was procured by wrongful conduct, such as undue influence, duress, or fraud,” or (2) a “party’s assent [to a contract] was induced by the other party’s misrepresentations as to the terms or effect of the contract” and he “was justified in relying on the other party’s misrepresentations.” Id.

Next, the Ninth Circuit explained that equitable estoppel is another form of equitable relief available to ERISA claimants. Under the remedy of equitable estoppel, a fiduciary is held to what it promised and the claimant is entitled to the benefit consistent with that promise. However, in ERISA cases, enforcing equitable estoppel is not as simple as demonstrating that a promise for certain benefits were made; other conditions apply. For example, “a federal equitable estoppel claim in the ERISA context [cannot] contradict written plan provisions.”

Accordingly, a plaintiff may not bring an equitable estoppel claim that “would result in a payment of benefits that would be inconsistent with the written plan,” or would, as a practical matter, result in an amendment or modification of a plan, because such a result “would contradict the writing and amendment requirements of 29 U.S.C. §§ 1102(a)(1) and (b)(3).”

…

For the same reason, “oral agreements or modifications cannot be used to contradict or supersede the written terms of an ERISA plan.” (Citations omitted.)

In addition, the court explained that in order to meet the traditional equitable estoppel requirements, the ERISA claimant must also demonstrate “(1) extraordinary circumstances; (2) that the provisions of the plan at issue were ambiguous such that reasonable persons could disagree as to their meaning or effect; and (3) that the representations made about the plan were an interpretation of the plan, not an amendment or modification of the plan.” (Internal quotations and citations omitted.)

Finally, with respect to the equitable remedy of surcharge, an equitable remedy in which the claimant is placed in the position he or she would have been in but for the fiduciary’s breach of duty, the Ninth Court reversed its previous, now-withdrawn, decision and noted that Amara allows a claimant to obtain relief by surcharge. The Ninth Circuit explained that in order to prevail on a claim surcharge remedy, after Amara, the claimant is not required to show detrimental reliance, only that the plan or claim fiduciary breached its fiduciary duty owed to the injured claimant. In other words, all that is needed is harm and causation.

While the plaintiff in Gabriel may not ultimately obtain the benefits he was seeking, this was another plaintiff-friendly ruling from the Ninth Circuit.

Too Little Time – Court Finds ERISA Plan’s Contractual Limitation Period Unreasonably Short and Unenforceable

One hundred days is not a reasonable amount of time to give a plan participant to file a lawsuit under the Employee Retirement Income Security Act of 1974 (“ERISA”). This was the conclusion reached by the United States District Court Southern District of California in its recent decision in Nelson v. Standard Insurance Company, 2014 U.S. Dist. LEXIS 119179 (S.D. Cal. Aug. 26, 2014), which held that a contractual limitation contained in an ERISA-governed group long-term disability policy’s limitation period is unreasonable and unenforceable because the time period may have ran prior to the end of the administrative review process and because it provided the plan participant only one hundred days to file an action in federal court. The holding in Nelson was one of the first in the Ninth Circuit to determine, in the wake of the Supreme Court’s decision in Heimeshoff v. Hartford Life & Accident Insurance Co., 134 S. Ct. 604 (2013), that a plan’s contractual limitation on filing a lawsuit is unreasonably short. While numerous questions still remain as to what constitutes an unreasonable plan limitations period, the Nelson decision makes it clear that, at the very least, providing a plan participant only one hundred days within which to file a complaint in federal court is not reasonable.

Last year, in its highly anticipated decision in Heimeshoff, the Supreme Court unanimously held that an ERISA governed plan’s limitation period, requiring a claimant to bring an action within three years of when proof of claim was due, was enforceable. The Court found that this contractual time limitation on filing a claim in federal court was valid despite the fact that it was shorter than the applicable statute of limitations. Although the Court held that a plan’s contractual limitation periods should ordinarily be enforced, it also stated that such provisions may not be enforced where the period provided is “unreasonably short.” The Heimeshoff Court explained that a limitations provision is unreasonably short if it “leav[es] [a] claimant[] with little chance of bringing a claim not barred.” The Heimeshoff decision left open the issue of just how short a plan’s contractual limitation must be in order to be considered unreasonable. The Southern District’s decision in Nelson now provides some guidance on this question.

In Nelson, the Plaintiff, a plan participant, brought an ERISA action against her Group Long-Term Disability Plan (“Defendant”) and the plan administrator, Standard Insurance Company (“Standard”). After initially accepting and paying the Plaintiff’s disability benefits in July 2008, Standard terminated her benefits in January 2010 based on a finding that she was no longer disabled. In June 2010, Plaintiff appealed the decision and a final denial was issued in October 2011. In January 2013, Plaintiff filed her action against Standard and Defendant in the Southern District. The plan contained a provision entitled, “Time Limits on Legal Actions”, which states that a plan participant must bring a legal action within three years after the earlier of either (1) the date the administrator received proof of loss or (2) the time within which Proof of Loss was due to the administrator. On the basis of this contractual limitations provision, Defendant filed a motion for judgment on the pleadings under the Federal Rules of Civil Procedure 12(c), arguing that because the Plaintiff provided her Proof of Loss in May 2008 and the contractual time limit had already expired in May 2011, she was barred from suit.

The court in Nelson first stated that it could not determine the date upon which the contractual limitations period began to run because the term, “proof of loss” was never used in Plaintiff’s first amended complaint and she had submitted documentation supporting her disability status on several different dates. Plaintiff argued that her cause of action did not accrue as of the May 30, 2011 date that Defendant contended the limitation period expired. However, Defendant asserted that Plaintiff’s cause of action accrued on February 16, 2011, one hundred days before the contractual time limit expired. The court held that, even accepting Defendant’s argument that the limitation period concluded on May 30, 2011 and that the Plaintiff’s cause of action accrued one hundred days earlier on February 16, Defendant cited to no legal authority finding that a period of one hundred days is a reasonable period for a Plaintiff to file a lawsuit. The court found that this time limitation was especially unreasonable in the Plaintiff’s situation because a final decision had not even been reached on the claim prior to the expiration of the contractual limitation period. Indeed, the court concluded that a contractual limitation period may be rendered unreasonable as a result of undue delay in reviewing a claim. Based on these findings, the court denied Defendant’s motion for judgment on the pleadings because the contractual limitations period in the plan was unreasonably short.

The decision in Nelson demonstrates that, even after Heimeshoff, a plan’s contractual limitation period that may run prior to the completion of administrative review process is a good candidate to be found to be unreasonable and unenforceable. Moreover, at least in the situation presented in Nelson, providing a plan participant with only one hundred days to file an action is patently unreasonable. It is important to note that the Nelson court also specifically stated that, even where a limitation period is found to be reasonable, the doctrine of equitable estoppel may still prevent enforcement of the contractual limitations provision. The decision in Nelson should remind plan participants to be mindful of both statutory and contractual time limitations on their ability to file a lawsuit to protect their benefits.

Third-Party ERISA Administrator Abused Discretion by Denying Medical Coverage: A Tale of What Not to Do

Sometimes an administrator so unashamedly abuses its discretion in handling an insurance claim that its actions constitute a textbook example of “what not to do” for other administrators and the ensuing decision provides a clear illustration of how courts apply an abuse of discretion standard of review under the Employee Retirement Income Security Act (“ERISA”). Indeed, a recent case clarified that plan administrators and third-party claims administrators alike are held to comparable standards when issuing claims decisions. In Pacific Shores Hospital v. United Behavioral Health, 2014 WL 4086784; 2014 U.S. App. LEXIS 16062 (9th Cir. Cal. Aug. 20, 2014) (“Pacific Shores”) the Ninth Circuit Court of Appeal reversed the district court, finding the third-party administrator acted improperly by denying the insured’s claim based on clear factual errors. Pacific Shores provides a clear example of how courts review a decision for an abuse of discretion, and shows that even third-party administrators, who purportedly have no conflict of interest with the insured, are still held to have the same duties in handling claims and must follow appropriate procedures.

Pacific Shores involved a Wells Fargo & Company (“Wells Fargo”) employee, dubbed “Jane Jones” by the court, covered under the employer’s health plan (“Plan”), governed by ERISA and administered by United Behavioral Health (“UBH”), a third-party claims administrator. Jones was admitted to the Pacific Shores Hospital (“PSH”) for inpatient treatment for severe anorexia nervosa and major depression with suicide attempts. During her inpatient stay, Jones submitted a claim to UBH for the costs of treatment, but UBH refused to pay for more than three weeks of treatment. PSH continued to treat Jones following UBH’s refusal, and subsequently Jones assigned her rights to payment under the Plan to PSH. PSH sued UBH and the Plan seeking payment for the additional days of inpatient treatment. The district court ruled in favor of UBH, finding that Jones’ administrative record provided a reasonable basis for UBH’s denial decision.

On appeal, PSH conceded the Plan granted discretion to the administrator, but advanced three arguments for the court to adopt a less deferential review of UBH’s decision. First PSH argued UBH’s claims administration contained procedural irregularities such that the denial should be reviewed de novo. Based on its review of the case, the court agreed, stating it was “painfully apparent” that UBH did not follow appropriate procedures in reaching its denial. For instance, although UBH maintained Jones’ case required medical evaluation due to its “‘medical and psychiatric complexity,’” UBH’s decision was based almost entirely on telephone conversations and voicemail messages. Indeed, Jones’ claim file was remarkably devoid of any hospital records or independent examination results. Moreover, UBH’s physician evaluations contained “obvious factual errors could easily have been corrected” if UHB consulted the PSH records or its own administrative record.

Second, PSH argued the court should consider materials outside Jones’ administrative record to review UBH’s denial decision. The district court declined to consider documents beyond the administrative record, as is typical in cases where a court is reviewing for abuse of discretion. However, the Court of Appeal explained when the administrator’s decision contains procedural irregularities, courts may consider extrinsic evidence to review the impacts of the irregularity. In the instant case, the administrator issued its decision based solely on telephone conversations and conflicting information despite the “medical and psychiatric complexity” involved in Jones’ case. The court determined that a review of the medical files would be helpful in establishing the accuracy of medical facts and Jones’ condition, and therefore it was appropriate to consider extrinsic evidence.

Next, PSH argued that even though UBH was third-party administrator, it was operating under a conflict of interest based on a desire for a continued relationship with Wells Fargo, and the court should consider these factors deciding whether UBH abused its discretion. The court declined to rule on this matter, stating that based on the record UBH reviewed before issuing its decision, UBH improperly denied Jones’ benefits. Indeed, even absent this analysis, the court found that there was sufficient information to conclude UBH acted improperly.

The court then explained the abuse of discretion standard entails a review of all the surrounding circumstances for “‘any reasonable basis’” to support an administrator’s decision. An administrator abuses its discretion if the administrator rendered its decision without any explanation, construed plan provisions in a way that conflicts with the plain language of the plan, fails to develop necessary facts for its determination or relies on clearly erroneous facts. In Jones’ case, the Plan documents represented an insured was eligible for coverage if any one of six state criteria was met, including having a “serious medical condition” requiring “24-hour management.” UBH authorized coverage for three weeks of inpatient treatment for Jones after finding this criteria applied. The Plan further also explains a plan member is eligible for continued coverage based on ten listed criteria involving a continuing condition and active participation in treatment. UBH, based on its physician evaluations, determined that Jones failed three of the ten criteria, as she did not meet the required level of care, she was not in danger of deterioration if transitioned into a lower level of care, and she was effectively recovering, as determined by UBH’s physician evaluations. The court first noted that in cases where residential care was required, the requirement necessarily satisfied the ten criteria regarding level of care and participation in treatment. The physician evaluations contained critical factual errors which downplayed Jones’ condition. Ultimately, the court held UBH breached its fiduciary duty to discharge its duties with “‘care, skill, prudence, and diligence” and solely in the interest of the Jones by employing and relying on three physician evaluators who made critical factual errors supporting UBH’s denial decision, and its denial was improper under the plan.

Pacific Shores clearly shows third-party administrators are held to the same fiduciary duties as first party plan administrators to act in the insured’s interests when administering claims. The case also provides support for allowing extrinsic documents in ERISA cases where the administrative record is inadequate. Although Pacific Shores leaves open the question of whether a third-party administrator may be acting under a conflict of interest with the insureds, for now, third party-administrators are not spared from federal ERISA laws applicable to plan administrators.

Recent Federal Court Decisions Give Teeth to California’s Ban on Discretionary Clauses in ERISA Plans

A virtually insurmountable concrete wall was once an apt analogy for the effect of discretionary clauses in ERISA Plans on claimants attempting to challenge a plan administrator’s unreasonable interpretation of policy terms. A valid discretionary clause gave insurance companies power to construe the terms of ERISA- governed group insurance policies based on their own interpretation, which could only be overturned by courts if it were “illogical, implausible or without support in inferences drawn from the facts in the record.” Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666 (2011). In order to counteract the discretion these clauses provided to plan administrators/insurers, California enacted Insurance Code section 10110.6, which placed a ban on such discretionary clauses. After the enactment of this new statute, questions regarding how courts would interpret and enforce it lingered. However, recent decisions in California strongly suggests that courts will give full force to the California statute and apply de novo review of claim denials rather than the abuse of discretion standard to claims denied on or after January 1, 2012.

California Insurance Code section 10110.6 provides in pertinent part:

(a) If a policy, contract, certificate, or agreement offered, issued, delivered, or renewed, whether or not in California, that provides or funds life insurance or disability insurance coverage for any California resident contains a provision that reserves discretionary authority to the insurer, or an agent of the insurer, to determine eligibility for benefits or coverage, to interpret the terms of the policy, contract, certificate, or agreement, or to provide standards of interpretation or review that are inconsistent with the laws of this state, that provision is void and unenforceable.

(b) For purposes of this section, “renewed” means continued in force on or after the policy’s anniversary date.

The statute applies to life and disability insurance policies issued, delivered or renewed on or after January 1, 2012 in California. One of the key questions that remained after the enactment of the statute was whether, and under what circumstances, it applies to policies that were in effect prior to the enactment of the statute. This question appears to have been answered in two recent Northern District of California decisions finding that the statute applies even to policies that were issued or had an effective date prior to January 1, 2012 where it is renewed annually and the relevant claim is denied after January 1, 2012.

In Polnicky v. Liberty Life Assurance Company of Boston, 2013 U.S. Dist. LEXIS 163915 (N.D. Cal. Nov. 18, 2013) the court interpreted section 10110.6 and concluded that the policy which controlled in that case was the one in effect at the time the claim was denied, after the enactment of section 10110.6, even though the policy had an effective date of January 1, 2010 (before the statute became effective). In Polnicky, the relevant policy was renewed annually on January 1. In March 2010, the plaintiff submitted a claim for short-term disability benefits under his ERISA-governed disability policy, which was denied in June 1, 2012. The plaintiff’s subsequent appeal was then denied in February 2013. The insurer argued that the abuse of discretion standard should be applied given the express grant of discretion authority in the policy. On the other hand, the plaintiff argued that any grant of discretion was void and unenforceable under section 10110.6. The court ultimately held that, because the policy was renewed and continued after its January 1, 2012 anniversary date, any provision in the policy attempting to confer discretionary authority was rendered void and unenforceable.

Recently, in Gonda v. Permanente Med. Group, Inc., 2014 U.S. Dist. LEXIS 5981, 2014 WL 186354 (N.D. Cal. Jan. 16, 2014), the court reaffirmed its prior holding in Polnicky and held that section 10110.6 made void any grant of discretionary authority in ERISA plans even if the plan was issued prior to when the statute came into effect because the policy in question renewed annually and became effective January 1, 2013, prior the final denial of the plaintiff’s claim in May 2013.

As Polnicky and Gonda demonstrate, courts will likely find discretionary clauses invalid and void where the policy is renewed after January 1, 2010, even if it became effective prior to the enact of section 10110.6.

Echague v. Met Life: Equitable Surcharge is an Available Remedy Against Unresponsive Plan Administrators Under ERISA

The Employee Retirement Income Security Act of 1974 (“ERISA”) seeks to protect participants in employer-sponsored plans, but lack of adequate communication and transparency is an often an unfortunate byproduct of the insurance industry. The California district court shed light on this issue in Echague v. Metro. Life Ins. Co., 2014 U.S. Dist. LEXIS 68642 (N.D. Cal. May 19, 2014) by holding an insurer breaches its fiduciary duty when providing insufficient responses and the insured may be entitled to equitable surcharge. Echague is highly beneficial to insureds and beneficiaries, as it warns plan fiduciaries (such as insurers and plan administrators/employers) to think twice before ignoring requests for information, giving incorrect information, or neglecting to provide updates regarding the policies they administer, as their inactions or providing of incorrect information about the plan may open them up to equitable remedies such as equitable surcharge which would allow plan participants to recover the full value of the plan benefits in dispute.

In Echague, Carol Echague (“Mrs. Echague”) opted for a basic life insurance policy and a supplemental life insurance policy worth a total of $440,000 through her employer, Pacific Coast Bankers’ Bank (“PCBB”). The policies were issued as part of a cafeteria-type plan by TriNet Group, Inc. (“TriNet”), the plan administrator and Metropolitan Life Insurance Company (“MetLife”), the claims administrator. In January 2011, Mrs. Echague was diagnosed with breast cancer and took medical leave. Mrs. Echague sent TriNet an inquiry stating she did not want her policies to lapse, inquired which policies she needed to pay on her own, and where to send the premium payments. TriNet resent two confusing form letters which did not address that the policies were in danger of lapsing. Following Carol Echague’s death, TriNet notified her husband (“Mr. Echague”), that it submitted a life insurance claim on his behalf to MetLife. This was the first time TriNet informed the Echagues that MetLife was the claims administrator. However, the life insurance policies lapsed due to nonpayment of premiums, and MetLife denied the claim. MetLife also denied Mr. Echague’s appeal, which argued neither he nor his wife ever received notice that the policies were at risk of terminating, or that PCBB ceased premium payments. Subsequently, Mr. Echague sued MetLife, TriNet and PCBB, for benefits under 29 USC section 1132(a)(1)(B) and equitable relief for breach of fiduciary duty under 29 USC section 1132(a)(3).

The court granted summary judgment for TriNet, PCBB and MetLife as to Mr. Echague’s first claim for reinstatement of the life insurance benefits under section 1132(a)(1)(B), holding the denial was proper. Here, MetLife did not act with a conflict of interest in denying Mr. Echague’s claim. The only information MetLife needed to issue a decision on the claim was whether premium payments were made to continue the policy, and proof of Mrs. Echague’s death. Here, MetLife already had this information and accordingly, did not need to conduct an investigation or state with specificity what additional information it needed. Finally, TriNet and PCBB were not proper defendants, as MetLife had sole authority to issue denials on the life insurance claims.

However, the court held Mr. Echague presented a different theory under section 1132(a)(3) for breach of fiduciary duty and thus the claim survived. The court explained Mr. Echague’s (a)(1)(B) claim was directed at MetLife for its failure to pay benefits, while his section 1132(a)(3) claim was primarily directed at TriNet for its failure to provide adequate notice and act in a fiduciary manner. TriNet cannot escape liability by claiming MetLife had discretion for claims determination, because TriNet retained responsibility for interpreting the Plan, applying the terms and administering the Plan. As such, TriNet had a duty to deal fairly and honestly with fiduciaries under ERISA by providing complete, thorough and accurate information. Prior to Ms. Echague’s death, the Echagues sent several inquiries to TriNet requesting information on her disability and supplemental policies. TriNet responded by sending form letters that did not provide information relating to Ms. Echague’s life insurance policies. The letters pointed her to an overarching cafeteria plan, a Summary Plan Description which did not provide answers to her questions, and a non-existent employee handbook. TriNet failed to refer the Echagues to the Certificate of Insurance, the only document which describes how to convert or continue life insurance coverage, and explain when the premiums for the policies would end. Therefore, TriNet breached its fiduciary duties because its response failed to provide complete and accurate information to the claimant’s specific questions. Accordingly, the court granted Mr. Echague the face value of the policies under the doctrine of equitable surcharge.

Echague is a clear win for insureds in several ways. First, Echague clarifies that even if an insurer denies a claim on a reasonable basis, insureds may assert breach of fiduciary duty claims. Secondly, the district decision expanded a plan fiduciary’s duty to provide insureds with complete and accurate policy/plan information. The court indicates that insurers must provide specific answers when asked specific questions, and implies a general response referring an insured to a number of documents may be insufficient. In addition, the insurer must provide specific answers even when an insured asks a general question—such as providing Ms. Echague with information pertaining to her life policies when her questions inquired as to all insurance policies. Finally, this court allowed insureds to sue simultaneously for benefits and for breach of fiduciary duty where these claims request alternate relief, distinguishing cases that held to the contrary.

Get the Answers and Assistance You Need