On June 13, 2013, the Seventh Circuit ruled that a plan beneficiary could bring a breach of fiduciary duty claim seeking monetary damages relating to a decision to deny benefits as appropriate equitable relief under the Employment Retirement Income Security Act of 1974 (“ERISA”). This case, which is based on a recent ruling from the United States Supreme Court, Cigna Corp. v. Amara, 131 S. Ct. 1866 (2011), is a notable departure from previous holdings of courts in the Seventh Circuit and other courts that had severely limited the ability of a plan beneficiary to seek monetary remedies for a breach of fiduciary claim.
The case involved a claim by an individual, Deborah Kenseth, in which she asserted that she had called the number on her plan certificate, as suggested, to ask if her plan covered her upcoming surgery. Kenseth was told that it did, but later the plan denied her claim because the surgery was required as the result of a complication from a prior surgery that was not covered under the plan. Kenseth filed a complaint alleging that the plan administrator breached its fiduciary obligations by not training its employees to tell individuals who called that statements made by the employees were not binding on the plan, and by not explaining to the individuals what process was necessary to obtain a pre-determination letter that would be binding on the plan.
In her complaint, Kenseth sought relief in the form of changes to the certificate given to plan participants, a requirement that the plan administrator tell individuals who call that the plan may change its mind, and to tell the individual what the process was to obtain a binding pre-determination letter. Kenseth did not file a claim alleging that the plan had improperly denied her benefits. Instead, Kenseth also requested a “surcharge” and other monetary damages in the amount of the medical claims she was responsible for paying.
The central issue in the case was whether a claim for equitable relief could include monetary damages under ERISA. Based on the Cigna decision, the Seventh Circuit found that, if the plan had breached a fiduciary duty, Kenseth could be awarded make-whole relief in the form of money damages. Further, a second important issue in the case was that the Seventh Circuit was willing to allow a claim for make whole damages against the plan, even if the plan’s language unambiguously supported the plan administrator’s decision to deny coverage. The ramification of this holding is that a plan beneficiary can recover monetary damages (including the amount of benefits that the individual was denied) in certain circumstances by showing that there was a breach of fiduciary duty, even if the plan was not ambiguous and did not cover the benefits, which resulted in the denial.