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Employer on the Hook for Failing to Provide Plan Document – N.D. Ia.

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  • Employer on the Hook for Failing to Provide Plan Document – N.D. Ia.

    Employer on the Hook for Failing to Provide Plan Document – N.D. Ia.

    Attached is a case out of the Northern District of Iowa, Snitselaar v. Unum Life Insurance Company of America, et. al. The case involves a claim for dependent life insurance benefits. Plaintiff was an employee of Mount Mercy University and was provided dependent life insurance benefits for her spouse. Under the plan, dependent coverage ends upon divorce, and the dependent has the opportunity to convert coverage to an individual policy. Plaintiff and her husband divorced, and he passed away about 45 days later. Plaintiff filed a claim for dependent life insurance benefits, and Unum denied the claim asserting that he was not covered.

    The interesting portion of the opinion is that plaintiff added her employer as a defendant and asserted a breach of fiduciary claim against it asserting that she was not aware of the termination and conversion language of the policy because her employer failed to provide her with a plan document or SPD. The court finds that her employer did breach its fiduciary duty by failing to provide the plan/SPD and awards plaintiff the $60,000 she would have been due under the policy and, possibly, attorney’s fees and costs upon proper motion.

    A cause of action under 29 U.S.C. § 1132(a)(3) allows:

    a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan[.]

    Id.; see also CIGNA Corp. v. Amara, 563 U.S. 421, 443-44 (2011) (recognizing that an equitable claim for surcharge, reformation or estoppel may be permitted under ERISA for a breach of fiduciary duty); Silva v. Metro. Life Ins. Co., 762 F.3d 711, 722 (8th Cir. 2014) (recognizing that Amara changed the legal landscape by permitting equitable remedy under ERISA for a plan administrator’s breach of fiduciary duties).

    The Supreme Court described the equitable remedy of surcharge under § 1132(a)(3) as follows:

    Equity courts possessed the power to provide relief in the form of monetary “compensation” for a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment. Indeed, prior to the merger of law and equity this kind of monetary remedy against a trustee, sometimes called a “surcharge,” was “exclusively equitable.”

    The surcharge remedy extended to a breach of trust committed by a fiduciary encompassing any violation of a duty imposed upon that fiduciary.

    Amara, 563 U.S. at 441-42 (internal citations and citations to authority omitted). In order “[t]o obtain relief under the surcharge theory, a plan participant is required to show harm resulting from the plan administrator’s breach of a fiduciary duty.” Silva, 762 F.3d at 722; see also Amara, 563 U.S. at 444 (“We believe that, to obtain relief by surcharge for violations of §§ [1022 and 1024(b)], a plan participant or beneficiary must show that the violation injured him or her. But to do so, he or she need only show harm and causation.”). Recovery under § 1132(a)(3) on the surcharge theory, allows for “makewhole, monetary relief” in the amount of benefits owed under the plan. See Silva, 762 F.3d at 724 (collecting cases). Plan participants may assert both a claim for denial of benefits and a claim for breach of fiduciary duty, so long as each claim asserts a different theory of liability. See Jones v. Aetna Life Ins. Co., 856 F.3d 541, 547 (8th Cir. 2017).

    A plan administrator breaches its fiduciary duty when it fails to provide a plan participant with the necessary information regarding a plan. Silva, 762 F.3d at 721. Under 29 U.S.C. § 1024(b), “[p]ublication of the summary plan description . . . shall be made to participants and beneficiaries . . . as follows: (1) The administrator shall furnish to each participant, and each beneficiary receiving benefits under the plan, a copy of the summary plan description.” See also 29 U.S.C. § 1022(a) (“A summary plan description of any employee benefit plan shall be furnished to participants and beneficiaries as provided in section 1024(b) of this title.”). 29 U.S.C. § 1022(b) provides in pertinent part that “[t]he summary plan description shall contain . . . the plan’s requirements respecting eligibility for participation and benefits . . . [and] circumstances which may result in disqualification, ineligibility, or denial or loss of benefits. . . .” The Second Circuit Court of Appeals has explained that “ERISA’s disclosure provisions were enacted to ‘ensur[e] that the individual participant knows exactly where he stands with respect to the plan,’ and the regulations promulgated under ERISA are designed to achieve that goal.” Leyda v. Allied Signal, Inc., 322 F.3d 199, 208 (2d Cir. 2003) (quoting Bruch, 489 U.S. at 118).

    4. Application

    First, Mount Mercy’s argument that Snitselaar’s breach of fiduciary duty claim is barred because it duplicates her claim for benefits against Unum is misplaced. In Silva, the Eighth Circuit explained that duplicate recovery is barred, but alternate theories of liability are not barred. 762 F.3d at 727. Here, Snitselaar’s claim against Unum for breach of the insurance policy is not duplicative of her claim against Mount Mercy for breach of fiduciary duties because each claim asserts a different theory of liability. Specifically, in Count I, Snitselaar seeks relief for Unum’s denial of benefits under the Plan. In Count II, Snitselaar seeks equitable relief for Mount Mercy’s breach of fiduciary duty. See Jones, 856 F.3d at 547 (finding that under ERISA, a claim for denial of benefits alleged a separate theory of liability from a claim for breach of fiduciary duty); see also Silva, 762 F.3d at 727-28 (finding that a claim under § 1132(a)(1)(B) for breach of terms of an insurance policy asserted a different theory of liability from a claim under § 1132(a)(3) for breach of fiduciary duty, and that the two claims were not duplicative). Accordingly, the court finds that Snitselaar’s breach of fiduciary duty claim against Mount Mercy is not barred as duplicative of her claim against Unum.

    Second, regardless of whether the Plan complied with the terms of § 509.2(7), there is no doubt that Mount Mercy and the Plan failed to comply with the requirements of § 1022 (listing the description and requirements for a summary plan description) and § 1024(b) (stating that an administrator “shall furnish” a summary plan description to each participant) by failing to provide Snitselaar with a summary plan description. See Silva, 762 F.3d at 721 (“Under ERISA, the plan administrator must distribute a summary plan description to all participants”); Antolik v. Saks, Inc., 463 F.3d 796, 800 (8th Cir. 2006) (“Adequate disclosure of employee benefits is an important ERISA principle. To this end, the statute provides that an ERISA plan administrator . . . shall furnish a ‘summary plan description’ to plan participants and beneficiaries”); Palmisano, 190 F.3d at 888 (“The [summary plan description] is an important part of ERISA’s reporting and disclosure requirements. It is a plain language summary of the plan’s terms and benefits that must be distributed to participants.”). It is undisputed that Mount Mercy did not provide Snitselaar with the summary plan description. Accordingly, the court finds that Mount Mercy’s breached its fiduciary duty.

    Third, under the circumstances presented here Mount Mercy’s breach of fiduciary duty by failing to provide Snitselaar with a summary plan description, see §§ 1022, 1024(b) caused Snitselaar harm. Mount Mercy’s failure to provide Snitselaar a summary plan description caused Snitselaar harm because she had no notice that Gerard would cease to be a covered dependent if they divorced. Mount Mercy’s failure to provide Snitselaar a summary plan description also caused Snitselaar harm because she was not provided with notice of the conversion rights with respect to Gerard and those conversion rights were not exercised. As a result, Snitselaar’s benefits claim was denied by Unum, because due to their divorce, Gerard “was no longer eligible for coverage under the policies . . . [as] he was no longer an eligible dependent" and “was not covered on the date of his death.” AR at 212.

    Mount Mercy argues that it was not the cause of Snitselaar’s harm because Snitselaar relied on advice from her divorce attorney that coverage would continue after the divorce, and therefore, neither she nor Gerard exercised their conversion rights. See Mount Mercy’s Brief at 14. The court is unpersuaded by this argument. In support of its argument, Mount Mercy references a “Claim Document,” in which a Unum employee documented a telephone conversation she had with Snitselaar. See AR at 91. The document states that “both [Snitselaar’s] lawyer and Gerard’s lawyer advised [Snitselaar] that per the decree, as the policy was in her name, she would be entitled to the benefits.” Id. This document does not support Mount Mercy’s argument that Snitselaar relied on her divorce attorney’s advice to not exercise conversion rights or that the advice informed her that divorce from Gerard would make him ineligible under the group life insurance policy. Instead, the document simply demonstrates that, because the group policy was in Snitselaar’s name, under the divorce decree, she would be entitled to the benefits. The reason Snitselaar was harmed is that Mount Mercy failed to provide Snitselaar a summary plan description, which would have provided her with notice that Gerard would cease to be a covered dependent if they got divorced, and would have provided her notice of the conversion rights with respect to Gerard. Because Snitselaar was not provided the summary plan description as required by §§ 1022(b) and 1024(b)(1), the conversion rights provided for in the group policy were not timely exercised after her divorce from Gerard. Therefore, her claim for benefits was denied because Gerard was ineligible under the policy.

    Mount Mercy also references a June 2015 email, where a Mount Mercy employee requested assistance from Unum in interpreting the insurance policy.3 See AR at 160. The email states that Snitselaar’s divorce was final in late February 2015 and that a co-worker “found something on page 21 that talks about a divorced spouse is not eligible.” Id. The email further states:

    We would be grateful for any help you can provide to us on this. We should have checked it out when [Snitselaar] came into our office in March but when she said that her lawyer said it was ok as long as she continued to pay the premium we didn’t do anything more.

    Id. This email is too vague to support Mount Mercy’s argument that Snitselaar relied on advice from her divorce attorney regarding Gerard’s eligibility under the group policy and the failure to exercise the conversion rights. An email that states Snitselaar’s “lawyer said it was ok” does not eliminate the harm caused by Mount Mercy’s failure to provide Snitselaar with the summary plan description. See Silva, 762 F.3d at 721 (providing that a plan administrator breaches its fiduciary duty when it fails to provide a plan participant with the necessary information regarding a plan).

    The court finds that Snitselaar has shown harm resulting from Mount Mercy’s breach of its fiduciary duty. See id. at 722 (“To obtain relief under the surcharge theory, a plan participant is required to show harm resulting from the plan administrator’s breach of a fiduciary duty”); see also Amara, 563 U.S. at 444 (“We believe that, to obtain relief by surcharge for violations of §§ [1022 and 1024(b)], a plan participant or beneficiary must show that the violation injured him or her. But to do so, he or she need only show harm and causation.”). Accordingly, the court finds that Snitselaar is entitled to equitable “make-whole, monetary relief” in the amount of benefits owed under the Plan from Mount Mercy. See Silva, 762 F.3d at 724-25 (collecting cases).
    Attached Files

  • #2
    Thanks for posting. Great summary of Amara and surcharge remedy...

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