In the recently decided matter of Van Loo, et al. v. Cajun Operating Company, et al., No. 2:2014cv10604 (E.D. Mich. 2014), the U.S. District Court for the Eastern District of Michigan rejected allegations of a fiduciary duty breach brought against Reliance Standard Life Insurance Company, the employee benefit plan’s claims administrator. The court determined that an act not typical of a claims administrator’s responsibilities performed at the instruction of the plan sponsor and administrator did not establish a fiduciary relationship with the plan’s participants and, as such, did not give rise to a claim for breach of fiduciary duty.
Defendant Reliance Standard Life Insurance Company issued a group life insurance policy to defendant Church’s Chicken and its employee benefit plan. Church’s was the designated policyholder and plan administrator and Reliance Standard served as the “claims review fiduciary” with discretionary authority to interpret the plan and determine eligibility for benefits. Church’s chose to “self-administer” the policy and thus was responsible for ensuring that coverage enrollment requests (including any required proof of good health) were processed in accordance with the terms and conditions of the applicable policy. Because Church’s had elected self-administration, Reliance Standard typically had no record of an individual’s coverage or premium amounts paid for the coverage.
Under the plan, Church’s employees had the option of selecting basic and supplemental life insurance coverage. Coverage in excess of $300,000 was subject to Reliance Standard’s approval of a proposed insured’s “proof of good health” submitted through completion of an Evidence of Insurability Form (EIF). Without a completed and approved EIF, a participant was only eligible for coverage in the “guaranteed issue” amount of $300,000.
The plaintiffs’ daughter, Donna Van Loo, was an employee at Church’s from May 2007 through December 2012. Throughout her employment, Ms. Van Loo increased her coverage from two to three and finally four times her salary. She was unaware of her obligation to complete and submit an EIF for approval or that she had surpassed the “guaranteed issue” amount of $300,000, as Church’s continued to collect premiums at increased amounts in correlation with her increased coverage. Ms. Van Loo received generated messages from Church’s congratulating her on “completing her benefits enrollment” each year.
Church’s claimed that in 2010 it requested that Reliance Standard send Ms. Van Loo an EIF. Reliance Standard complied and “made an exception” to what typically fell outside of its responsibilities as a “favor to a client,” but the form was either never received by Ms. Van Loo or never completed and returned. At the end of 2012, Ms. Van Loo fell ill and subsequently went on disability leave. In February 2013, one of Church’s benefits employees sent Ms. Van Loo a letter informing her that even though she was no longer receiving paychecks, she was nonetheless obligated to continue to submit her life insurance premiums directly to Church’s, which she did. Ms. Van Loo passed away on March 4, 2013.
Plaintiffs Donald and Harriet Van Loo, Ms. Van Loo’s parents, submitted a claim to Reliance Standard seeking benefits in the amount of $614,000. Reliance Standard denied the plaintiffs’ claim for benefits in excess of the “guaranteed issue” amount of $300,000 because proof of good health had never been received and approved. Along with its payment of the “guaranteed issue” amount of $300,000, Reliance Standard requested that Church’s refund $3,900.76 to the plaintiffs – the total of all premium payments made by their daughter for coverage in excess of $300,000.
In 2014, the plaintiffs brought a five-count complaint against Church’s and Reliance Standard, sounding in claims for (1) full benefits, (2) breach of fiduciary duty, (3) equitable estoppel, (4) unjust enrichment and (5) breach of administrator’s duty under 29 U.S.C. § 1132(c). On both defendants’ motions, the court dismissed the claims in counts 1 and 3 through 5 against Church’s and in counts 2 through 5 against Reliance Standard. Reliance Standard did not move to dismiss count 1.
The court found that Church’s was not a proper defendant to the plaintiffs’ claim for benefits, agreeing with Church’s argument that it was the employer sponsor and did not have final claims determination authority or financial responsibility for the benefit, which was fully insured. The court explained that where the employer and the insurance company both have an “administrator” designation, the proper defendant to a denial of benefits claim is the party that exercised the final authority over the claims determination, which in this case was Reliance Standard. The plaintiffs argued that if not for Church’s failure to provide Ms. Van Loo with an EIF, Reliance Standard would not have denied their claim. However, the court found that even if Church’s failed to provide an EIF, that failure does not mean that Church’s “controlled or influenced” the benefits decision, which had been made by Reliance Standard.
Relative to the plaintiffs’ breach of fiduciary duty claim, the court found that Reliance Standard did not breach its fiduciary duty to Ms. Van Loo because it was not acting in a fiduciary capacity when sending out the EIF, which the plaintiffs claimed Ms. Van Loo never received. While the court found that count 2 was mainly directed at Church’s – and indeed determined that the plaintiffs’ claim for breach of fiduciary duty against Church’s was properly brought – it also explained why it did not reach that same conclusion vis-à-vis Reliance Standard. To establish a claim for breach of fiduciary duty based on alleged misrepresentations, the plaintiffs had to show that (1) the defendant was acting in a fiduciary capacity when it made the challenged representations, (2) the representations constituted material misrepresentations, and (3) Ms. Van Loo relied on those misrepresentations to her detriment.
Evaluating whether Reliance Standard acted in a fiduciary capacity when sending Ms. Van Loo an EIF to complete, the court pointed out that had Church’s sent the form, it would have acted in a fiduciary capacity when doing so, as the task was within Church’s authority to manage and administer the plan. However, Reliance Standard, as the claims administrator, did not have discretionary authority for plan administration purposes and as the EIF mailing was a one-time “favor to a client” done at Church’s instruction, it was not undertaken by Reliance Standard in a fiduciary capacity. Therefore, the plaintiffs failed to demonstrate that Reliance Standard breached a fiduciary duty when mailing the EIF.
The court also dismissed the plaintiffs’ equitable estoppel count, reasoning that although equitable estoppel may be a viable theory in ERISA cases, the plaintiffs were unable to show any ambiguity in the plan language. The court further dismissed their claim for unjust enrichment, rejecting their argument that the defendants gained a monetary benefit due to the denial of $314,000 in insurance benefits and also explained that a common law claim for plan beneficiaries seeking to recover benefits under a plan would be inconsistent with ERISA’s terms and policies, as ERISA has its own civil enforcement provisions outlined within the statute. In addition, the defendants returned all premiums that Ms. Van Loo paid for coverage exceeding $300,000. Finally, the court found that the plaintiffs failed to adequately state a claim against either defendant for breach of administrator’s duty under 29 U.S.C. §1132(c). The plaintiffs claim was based on the argument that the defendants failed to fulfill a prior request for documents evidencing that an EIF was sent to Ms. Van Loo. The court found that Church’s was not under a statutory obligation to provide the information that the plaintiffs requested, and that Reliance Standard could not be held liable under the statute because it was not a plan administrator.
The District Court’s decision makes clear how important it is to identify the scope of each fiduciary’s obligation in the context of any actions and/or omissions in relation to participants in a plan. Just because an entity is a fiduciary relative to one aspect of the plan that does not necessarily make it a fiduciary relative to another and, thus, not properly subject to a claim for breach of fiduciary duty.