When Insurers Confirm Coverage That Doesn’t Exist: A Fiduciary Duty Trap Under ERISA

When dealing with ERISA-regulated benefit plans, both employers and insurers must tread carefully when communicating with plan participants. Misleading or incorrect statements about benefits—especially those repeated over time—can result in liability, even if the actual plan terms don’t support coverage. A recent federal decision in Fleming et al. v. Minnesota Life Insurance Co. et al., 2025 WL 2165947 (E.D. Pa. July 29, 2025), illustrates how an insurer’s repeated assurances of life insurance coverage can trigger ERISA claims for breach of fiduciary duty and equitable estoppel, despite the insured’s technical ineligibility under the plan terms.

Background: A Life Policy Denied After Assurances of Coverage

Kim DiNicola, a longtime Vanguard employee, became disabled from colorectal cancer and qualified for waiver of premium coverage under her group life insurance policy with Minnesota Life. She later resigned due to her illness. After her resignation, Minnesota Life issued her a conversion policy for $100,000. However, a year later, the insurer rescinded that policy and repeatedly confirmed that her original group life policy—worth over $1.6 million—remained in force under the waiver of premium provision.

From April through July 2021, Minnesota Life communicated several times—both in writing and over the phone—that DiNicola’s group coverage was active. They even requested updated medical documentation to support continued coverage. DiNicola, relying on these statements, told her family that coverage remained intact. She died in October 2021. Her beneficiaries later submitted a claim, only to have it denied. Minnesota Life stated that DiNicola’s group coverage ended upon her resignation and that the prior confirmations were merely clerical errors.

Court’s Ruling: Fiduciary Duty and Estoppel Claims Survive

The court dismissed claims for benefits under the policy and for breach of contract as preempted or unsupported under ERISA. However, two critical ERISA claims survived: breach of fiduciary duty and equitable estoppel. The court noted that “To establish a breach of fiduciary duty under ERISA, the plaintiff must demonstrate that: (1) the defendant was acting in a fiduciary capacity; (2) the defendant made affirmative misrepresentations or failed to adequately inform plan participants and beneficiaries; (3) the misrepresentation or inadequate disclosure was material; and (4) the plaintiff detrimentally relied on the misrepresentation or inadequate disclosure.” Id. at *4.

 

The court found that Minnesota Life acted as a fiduciary when it repeatedly confirmed the validity of the group policy after DiNicola’s resignation. These repeated statements, over several months, were not one-off errors but a pattern of misrepresentations. The court held that a reasonable participant could have relied on those confirmations and that DiNicola’s reliance was not unreasonable merely because the plan documents said otherwise. The communications involved direct, repeated, and consistent confirmations from the insurer itself. In addressing the materiality and detrimental reliance issues, the court stated:

In addition, Minnesota Life separately argued that the misrepresentations were not material because they did not prevent her from making an adequately informed retirement decision. Minnesota Life noted that Kim’s Group Policy coverage ceased as soon as she resigned on January 22, 2020, and the post-resignation misrepresentations from April 2021-July 2021 had nothing to do with Kim losing the Group Policy. ECF No. 16 at 6-8 [hereinafter “Minnesota Life Reply”]. Yet, since the time of Minnesota Life’s misrepresentations beginning in April 2021, Kim may have refrained from making other retirement decisions unrelated to the Group Policy—such as finding employment elsewhere to enroll in a different employee-sponsored life insurance policy or seeking supplemental insurance. See Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226, 237 (3d Cir. 1994) (“we conclude that the [plaintiffs] have suffered an injury in giving up an opportunity to accommodate their insurance needs through an independent insurance carrier because of their reasonable reliance on [employer’s] [mis]representations.”). On the other hand, Minnesota Life argued that Kim could not have received alternative coverage in 2021 given her medical condition, and cited Smith v. Hartford Ins. Group for the proposition that a plaintiff’s conclusory allegation that they could have obtained alternative coverage, without more, was insufficient to withstand summary judgment. 6 F.3d 131, 137 (3d Cir. 1993); Minnesota Life Reply at 5; Hearing Transcript at 32, 43. However, Smith was decided on a motion for summary judgment, a different posture than present here. At the motion to dismiss phase, discovery has not yet born out whether it would have been achievable for Kim to pursue alternative policies or other retirement options after her resignation and Minnesota Life’s misrepresentations. This is an issue better suited for disposition after discovery, not at the motion to dismiss phase.

Last, Kim detrimentally relied on Minnesota Life’s misrepresentations in making a retirement decision. Detrimental reliance may include “decisions to decline other employment opportunities, to forego the opportunity to purchase supplemental health insurance, or other important financial decisions pertaining to retirement.” In re Unisys Corp., 579 F.3d. at 229. As discussed above, Kim did detrimentally rely on Minnesota Life’s misrepresentations. As a result of Kim’s reliance, she communicated to Plaintiffs before she died that the Group Policy was still in effect. Plaintiffs consequently made several financial decisions in reliance on that information. Compl. ¶¶ 35-45; Curcio, 33 F.3d at 237 (finding that the beneficiary plaintiff and the insured decedent gave up opportunities to accommodate their insurance needs in detrimental reliance on the employer’s misrepresentations).

Id. at *5–6. Thus, the court determined that plaintiff adequately plead materiality and detrimental reliance.

Equitable Estoppel Under ERISA: Extraordinary Circumstances Established

The court also allowed the plaintiffs’ equitable estoppel claim to proceed. To succeed on such a claim under ERISA, plaintiffs must show (1) a material misrepresentation, (2) reasonable and detrimental reliance, and (3) extraordinary circumstances. The court found all three. Minnesota Life’s communications were material, repeated, and formed a “network of misrepresentations” over an extended period. These facts supported a finding of extraordinary circumstances, even at the motion to dismiss stage.

Claims Against the Employer: Vague Allegations Do Not Survive

While the court allowed claims against Minnesota Life to proceed, it dismissed claims against Vanguard, DiNicola’s former employer. The plaintiffs alleged that Vanguard also misled DiNicola, but failed to provide specific facts showing any misleading statements attributable to the employer. The court granted leave to amend these claims, but underscored the need for more than generalized assertions of wrongdoing.

Key Takeaways for Plan Participants and Fiduciaries

This case is an important reminder that even when the written plan terms seem clear, an insurer or employer can still be liable for misleading communications. Courts will not allow plan fiduciaries to hide behind the plan document if they repeatedly and materially mislead participants to their detriment.

Key takeaways:

• Insurers and plan administrators who repeatedly confirm coverage—even erroneously—may face liability under ERISA.
• Plaintiffs can prevail on breach of fiduciary duty or equitable estoppel claims even where benefit denial claims fail, if they show detrimental reliance on false assurances.
• The “clerical error” defense is not always sufficient, especially when misstatements are repeated and form a pattern.

The ruling in Fleming reinforces that fiduciary duties under ERISA are not to be taken lightly. Repeated, affirmative misstatements—especially during sensitive periods such as disability or resignation—can open the door to litigation, regardless of what the plan documents say. If you believe you may be a victim of misrepresentations by your employer or insurer regarding your employee benefits, contact McKennon Law today.