A recent decision in the U.S. Court of Appeals for the Ninth Circuit has left resounding implications for insurers with respect to benefit plans under ERISA. In Cyr v. Reliance Standard Life Insurance Co., case number 07-56869, an en banc panel of the Court held that insurers can be sued directly under ERISA by plan participants even when not acting as the plan administrator. A copy of the decision is available here.
In this case, the plaintiff had requested that Reliance, which funded her company’s insurance plan, increase her salary-indexed disability benefits. Reliance refused and this suit followed. Reliance argued that it did not administer the plan and thus should not be the defendant in the suit. The Court, however, in reversing its prior ruling, held that ERISA’s relevant provision, Sec. 1132(a), does not limit who can be sued by plan members. The Court cited Harris Trust & Savings Bank v. Salomon Smith Barney, Inc., 530 U.S. 238 (2000), in support of this proposition. Thus, an insurer who funds a retirement plan and makes decisions effecting members’ benefits can be a “logical defendant” even if it did not the administer the plan. As the Court noted, the plan administrator in this case had nothing to do with denying the plaintiff’s claim. Rather, “Reliance denied Cyr’s request for increased benefits even though, as the plan insurer, it was responsible for paying legitimate benefit claims.”
An issue raised by this case is what level of control makes insurers vulnerable to direct suit under ERISA.