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Ministerial Act versus Fiduciary Act – D. MA

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  • Ministerial Act versus Fiduciary Act – D. MA

    Here’s a new case out of the District of Massachusetts entitled Robin J. Trovato v. Prudential Insurance Company of America, et. al. This matter involves the denial of a life insurance claim and the plaintiff brings several causes of action, including one for reformation of the plan. Prudential moves to dismiss as follows.

    Prudential contends that Trovato has failed to allege facts sufficient to state a claim for reformation of the terms of the plan under the Employee Retirement and Income Security Act (“ERISA”), which the parties agree governs the Plan at issue. D. 23 at 2; D. 28 at 2. In the complaint, Trovato contends that she is entitled to judicial reformation of the Plan terms, under 29 U.S.C. § 1132(a)(3), as an equitable remedy for a breach of fiduciary duty by Rapid7 Plans and Prudential in providing Trovato with false or misleading information. D. 1 at 13-14. As alleged by Trovato, Prudential provided false or misleading information by: first, failing to send written notice to Mr. Trovato that he was entitled to convert his rights under the Plan; second, advising Trovato to apply for benefits under the plan; and third, failing to “fully investigate the claim before denying it, including gathering information that Rapid7 LLC had extended coverage until June 24, 2016.” D. 1 at 12-15.
    The court first concludes that Prudential’s argument that it’s actions were ministerial rather than fiduciary is correct.

    Prudential first contends that providing notice of conversion rights is a ministerial rather than a fiduciary act and thus cannot be the basis of a claim under Section 1132(a)(3). D. 23 at 6-8. In Livick v. The Gillette Co., 524 F.3d 24, 29 (1st Cir. 2008), the First Circuit explained that “[u]nder ERISA, a fiduciary is defined functionally: a party is a fiduciary ‘to the extent’ that he or she exercises discretion over the management of the plan or its funds or over its administration.” Id. (quoting Pegram v. Hendrich, 530 U.S. 211, 226 (2000)). This functional analysis is important because “in cases alleging breach of ERISA fiduciary duty, the threshold question is . . . whether that person was acting as a fiduciary (that is, was performing a fiduciary function) when taking the action subject to complaint.” Id. (citation omitted). For example, in Brenner v. Metro. Life Ins. Co., No. CIV.A. 11-12096-GAO, 2015 WL 1307394, at *8, *11 (D. Mass. Mar. 23, 2015), this Court concluded that failing to provide notice of a conversion option was an administrative duty rather than a fiduciary function because it is a nondiscretionary act, and, on that basis, granted summary judgment to the entity that performed administrative functions but was not the statutory Plan Administrator (as is true of Prudential in this case). Trovato cites Keith v. Metro. Life Ins. Co., No. H-15-1030, 2017 WL 1026008 (S.D. Tex. March 15, 2017), in arguing that the failure to provide notice of the conversion option may have been a fiduciary act. But in Keith, the court agreed that the mere failure to provide notice of a conversion option was a ministerial act, but found that MetLife may have been acting as a fiduciary because it filed a claim on the beneficiary’s behalf and sent confusing or misleading letters to the beneficiary. Id. at *4. Such are not the allegations here. Moreover, even if Prudential was legally obligated by state law to send the conversion notice, as Trovato contends, D. 28 at 7-11, so long as sending that notice was a ministerial rather than fiduciary act, its failure to do so cannot be the basis for an equitable claim for relief based on a breach of fiduciary duty. Trovato also contends that, as Rapid7 Plan’s agent, Prudential can be considered a fiduciary to the extent that it performed fiduciary acts. D. 28 at 8. But, again, because the act was not fiduciary, Prudential cannot be held liable for a breach of fiduciary duty in failing to perform the act.

    Prudential next contends that advising a participant to apply for benefits is a similarly ministerial act. The complaint states only that Trovato was “advised by Prudential to apply for life insurance benefits in the amount of $501,000.00.” D. 1 ¶ 33. Prudential cites Brenner for the proposition that advising participants of their rights and options under a plan is not a fiduciary function. D. 23 at 8. The complaint, however, alleges that Prudential did more than inform Trovato that she had the option of applying for benefits. The complaint alleges that Prudential advised Trovato to apply for benefits, and Brenner stated that “giving advice about future benefits” is a fiduciary function. Brenner, 2015 WL 1307394 at *8. Nothing in the record indicates that, if Prudential had advised Trovato to apply for benefits, it would have been a nondiscretionary act. Prudential further argues that Trovato has not alleged facts sufficient to state a claim for a breach of fiduciary duty because, regardless of whether Prudential intended to pay the claim, Trovato would be required to file a claim to exhaust the administrative remedies available to her before filing suit in federal court, and thus the advice that Prudential purportedly gave her did not harm her. D. 23 at 8; see Madera v. Marsh USA, Inc., 426 F.3d 56, 61 (1st Cir. 2005) (stating that “[b]efore a plaintiff asserts an ERISA claim . . . [she] must exhaust [her] administrative remedies” under the plan). Nothing in the complaint makes any allegation that Trovato suffered any harm as a result of Prudential’s decision to advise her to apply for benefits, rather than as a result of Prudential’s non-payment of benefits. Thus, Trovato has not alleged facts sufficient to show a breach of fiduciary duty related to Prudential’s advice that she apply for benefits.
    The court then concludes that it is too early in the litigation to determine if the plaintiff’s failure to investigate the claim fails. The opinion to attached below.
    Attached Files