In McCravy v. Metropolitan Life Ins. Co., 2012 U.S. App. Lexis 13683 (4th Cir. July 5, 2012), the Fourth Circuit interpreted Cigna v. Amara, 131 S. Ct. 1866 (2011) to pave the way for monetary relief to a participant bringing a claim for equitable relief under ERISA § 502(a)(3). In McCravy, the plaintiff, Ms. McCravy, was a participant in her employer’s life insurance benefit plan. The Defendant, MetLife, insured the life insurance benefits under the plan. Ms. McCravy enrolled for dependant life insurance coverage for her minor daughter. Under the plan terms, eligibility for dependant life insurance ended when the dependant reached age 19, or age 24 if enrolled as a full-time student. Nevertheless, Ms. McCravy paid (and MetLife accepted) premiums up through the time that her daughter died at age 25. When Ms. McCravy made a claim for the life insurance benefits, MetLife denied the claim, citing the eligibility provisions, and attempted to refund the premium for the years that Ms. McCravy’s daughter was not eligible for coverage.
Ms. McCravy filed a lawsuit, claiming that MetLife breached its fiduciary duty to her by continuing to accept premiums without notice that her daughter was no longer eligible. (She could not bring her claim under ERISA § 502(a)(1)(B) to seek recovery of the benefits, because the terms of the plan clearly did not provide coverage.) Accordingly, Ms. McCravy sought “appropriate equitable relief” under ERISA § 502(a)(3). However, Courts have traditionally interpreted ERISA § 502(a)(3) as providing a very narrow opportunity for recovery, because the recovery had to be equitable, not legal, in nature; thus, claims for compensatory damages typically have not been not available. See e.g. Mertens v. Hewitt Assoc., 508 U.S. 248, 113 S. Ct. 2063 (1993).
The recent Supreme Court case of Cigna v. Amara, 131 S. Ct. 1866 (2011), changed the landscape. In Amara, the Supreme Court opened the door to a more expansive interpretation of “equitable relief,” specifically including surcharge and equitable estoppel as possible remedies available under ERISA § 502(a)(3). The Supreme Court declared that, in the time of the Divided Bench, “equity courts possessed the power to provide relief in the form of monetary ‘compensation’ for a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment,” and that this was referred to as the equitable remedy of “surcharge.” Id., at 1878-80.
Using the new opportunity provided by the Amara decision, Ms. McCravy argued that the equitable remedies of surcharge as well as equitable estoppel should be available to her in this instance to allow monetary compensation caused by MetLife’s fiduciary breach. The Fourth Circuit Court of Appeals agreed and remanded the case to the District Court to determine whether Ms. McCravy could prove facts in her case to warrant recovery under these equitable principles.