U.S. Courts of Appeals recently issued key rulings for the insurer defendants in two cases challenging insurers’ use of retained asset accounts (RAAs) to pay ERISA-governed life insurance benefits. First, the Second Circuit issued its highly anticipated decision in Faber v. Metropolitan Life Insurance Company, in which it affirmed the district court’s dismissal of the plaintiffs’ putative class action complaint. In doing so, the court held that MetLife could not, as a matter of law, be held liable for breaching its ERISA fiduciary duties because, among other reasons, the express terms of the plaintiffs’ ERISA-governed plans permitted MetLife to pay benefits through RAAs. As part of its decision, the court adopted the Department of Labor’s opinion that the key inquiry for resolving challenges to an insurer’s use of RAAs is whether the terms of the ERISA-governed plan permit the payment of benefits in such a manner.

In Otte v. Life Insurance Company of North America, the First Circuit accepted the defendant’s Rule 23(f) petition seeking appellate review of the District of Massachusetts’s June 2011 certification of two Rule 23(b)(3) subclasses. Particularly because the district court’s class certification decision included a significant discussion related to the merits of the plaintiffs’ claims, the First Circuit’s acceptance of this Rule 23(f) petition is significant; as it raises the possibility that the First Circuit may clarify the scope of its decision in Mogel v. UNUM Life Ins. Co. of America, the seminal case relied upon by plaintiffs challenging insurers’ ability to pay ERISA-governed benefits through RAAs. The defendant’s initial briefing in this appeal is due in November, and thus a decision is not expected until 2012.