PROBLEM: During the claim process your claims administrator mistakenly tells the claimant that the ERISA-governed plan is NOT governed by ERISA.  Uh oh.

Do you lose ERISA as the governing law over the policy and claim?  NO. This rule makes a lot of sense. Claims administrators have a tough job, and sometimes clerical mistakes can be made.  The courts seem to understand this.

Here the case of Hill v. Lincoln National Life Insurance, [PDF] __ F. Supp.2d __, 2013 WL 5863007 (N. D. Cal. October 30, 2013) that illustrates the point.

FACTS. Hill made a claim for long term disability benefits. Defendant contended the claim was governed by ERISA. During the claims process, however, a claim summary incorrectly stated the claim was “non-ERISA” and that a Legal Referral form incorrectly stated “Group is Non-ERISA.” Plaintiff contended that the insurance policy was not an ERISA plan because of these statements in the claim file.

ISSUE.  Whether incorrect statements by the claims administrator (that the policy is “non-ERISA”) estop the plan from arguing that ERISA applies.

HELD:  Mistaken statement or writings cannot change the application of ERISA.

  1. If the plan was originally governed by ERISA, “employee statements or writings opining on legal determinations that are not binding admissions of an insurer …do not determine the interpretation of an insurance contact.” Op. at 7.
  2. “To establish estoppel, Plaintiff must show that she justifiably relied on the statements.  Here, there is no evidence that Plaintiff even knew about these documents before discovery in this case, much less relied on them.” Op. at 7.
  3. The real debate in the case was whether the documents and practices satisfied requirements to establish that ERISA governed the insurance policy. The opinion has a good discussion about what it takes to make sure the court considers the policy to be governed by ERISA.  In this case the court concluded it was a “triable issue of fact” whether ERISA governed the insurance policy.  See Op. at 8-9.