The purpose of insurance companies is to generate profits, which they do by bringing in more revenue through premiums than they pay out in benefits. Naturally, then, they are motivated to avoid paying out benefits. Unsurprisingly, they will go to great lengths to find a reason to deny a claim for benefits. Even if the insurer or the claimant’s employer makes a mistake in administering the insurance policy or the claim, the insurer will likely take advantage of a situation that allows it to deny a claim, regardless of the impact on the claimant. For example, an employer may mistakenly fail to notify its insurer of an employee’s resignation or termination, so the insurer will not make any changes to the employee’s insurance enrollment. The employee may continue paying premiums thinking that he is still covered by the policy. When the employer catches its mistake, it retroactively terminates the policy. Then the insured suffers an injury and the beneficiary makes a claim, which the insurer predictably denies. Because the insured did not get notice that the coverage was terminated, he never had the opportunity to secure coverage from a different insurer.

In situations like this, the beneficiary can bring an ERISA claim against the insurer to recover benefits under the policy and another ERISA claim against both the employer and the insurer for breach of fiduciary duties. In response to a motion to dismiss such claims, the Sixth Circuit Court of Appeals recently found that the beneficiary’s claim against the employer should not be dismissed in Bailey v. United of Omaha Life Ins. Co., 2023 WL 2599979 (S.D. Ohio Mar. 22, 2023).

In Bailey, Adam Bailey was an employee of Hirschvogel Inc. from September 16, 2016 to September 24, 2019. During his employment, he obtained two life insurance policies (the “Policies”) taken out as part of an employee welfare benefit plan established by Hirschvogel under the provisions of ERISA. The plaintiff was Bailey’s son and the beneficiary of the life insurance policies at issue. His father terminated his employment, but a glitch in Hirschvogel’s system caused the company to fail to notify the insurer, United of Omaha, of several employees’ termination of employment, including his. The company caught the mistake and retroactively terminated his policies as of the time his employment ended, then he died in a car accident. Because he had been paying the premiums on the policies and had not been notified of the termination of his coverage under the policy, plaintiff filed a lawsuit asserting ERISA claims against Hirschvogel and the insurer for breach of fiduciary duties under Section 1132(a)(3) of ERISA (which acts as a catch-all provision to cover claims not covered in other ERISA provisions), and against the insurer to recover benefits due under the policy. Hirschvogel moved to dismiss the claim against it. The court denied the Hirschvogel’s motion and found that the plaintiff’s claim against Hirschvogel was adequate because the claim alleged an injury that was separate and distinct from the injury alleged in the claim for recovery of benefits and that could not be remedied through a claim brought under any other ERISA provision.

Regardless of the reason for Hirschvogel’s failure to notify United of Omaha of the termination of employment, Hirschvogel was bound as a fiduciary to take the necessary steps to ensure that such mistakes do not happen. Whether the plaintiff in Bailey will find success on the merits remains to be seen, but his claim survived the motion to dismiss by Hirschvogel under ERISA’s catch-all provision because it was separate and distinct from his claim for recovery of benefits and because his injury cannot be remedied through any other provision.

Bailey serves as an example to be diligent and understand the various provisions of ERISA. However, just because your particular claim is not covered by a specific policy/plan provision, that does not mean that you are not able to pursue that claim. McKennon Law Group PC has vast experience with ERISA claims and can assist ERISA plan participants and their beneficiaries with pursuing their employment benefits. If you would like to know whether you are to bring an ERISA claim against your insurer or employer, look to McKennon Law Group PC.