U.S. Supreme Court Rejects Equitable Make Whole Doctrine in Defense of Reimbursement Claim according to the Terms of a Self-Funded Plan.

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James McCutchen, an airline mechanic, participated in a self-funded benefits plan established by his employer, US Airways. The Plan was obligated to pay the medical expenses of a participant injured by a third party. However, the participant was requiredto reimburse the Plan out of any proceeds later recovered from the tortfeasor. McCutchen was seriously injured in a multiple car collision. …

Sixth Circuit Holds that Presumption of Prudence Does Not Apply at the Pleading Stage.

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Plaintiffs alleged that State Street Bank & Trust breached its fiduciary duty by continuing to allow participants to invest in GM common stock, even though reliable public information indicated that GM was headed for bankruptcy. The District Court assumed the presumption of prudence would apply at the pleading stage, and held that the plaintiffs had pleaded sufficient facts to rebut …

Ninth Circuit Holds that Claim Administrator Must Specifically Identify a Particular Fund to Secure an Equitable Lien.

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Plaintiff challenged  grant of summary judgment in favor of First Unum Life Insurance Company (Unum) on Unum’s counterclaim for restitution of overpaid benefits. “We vacate the judgment in favor of Unum on Unum’s counterclaim for reimbursement of overpaid long-term disability benefits. Unum has not shown that it is seeking equitable relief because it has not satisfied the elements for an …

Ninth Circuit Creates Split with Third Circuit, finding that the “Fiduciary Exception” to Attorney-Client Privilege Should be Extended to Insurers Administrating Benefit Plans, as ERISA Fiduciaries.

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“The obligation that an ERISA fiduciary act in the interest of the plan beneficiary does not differ depending on whether that fiduciary is a trustee or an insurer. There is therefore no principled basis for excluding insurers from the fiduciary exception.”  At the same time, “by agreeing to serve as a fiduciary, an ERISA trustee is not completely debilitated from …

Seventh Circuit Finds that Unsolicited, Informal Complaints Constitute a Protected “Inquiry” under Section 510.

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An employee filed suit alleging employer terminated his employment in retaliation for complaints he made about the employer not funding his retirement account and health savings account. The Seventh Circuit held that “as a matter of first impression, employee’s conversations with employer regarding his retirement account complaints involved an ‘inquiry’ under ERISA.”  The Court concluded that ‘the best reading of …

U.S. Supreme Court holds that Statements in an SPD Cannot be Enforced as Terms of the Plan; but Plan Can be Reformed, in the event of a fiduciary breach, as a form of Appropriate Equitable Relief.

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The terms of statutorily required plan summaries (or summaries of plan modifications) may not be enforced (under Section 502(a)(1)(B)) as the terms of the plan itself.  The plan’s sponsor (e.g., the employer), like a trust’s settlor, creates the basic terms and conditions of the plan, executes a written instrument containing those terms and conditions, and provides in that instrument a …

A Participant Who Achieves “Some Degree of Success on the Merits” May Be Entitled to an Award of Attorneys’ Fees.

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In a long-term disability denial of benefits case, the U.S. Supreme Court held that a participant or beneficiary who sues under ERISA need not be a “prevailing party” to be eligible for an award of attorneys’ fees. A court may award fees and costs under the statute as long as the claimant has achieved “some degree of success on the …

District Court Orders ChevronTexaco to Pay Benefits to Misclassified Employees.

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In a class action filed in 2000 on behalf of former Texaco employees who had been hired by and through third-party staffing agencies, Judge Parker initially dismissed claims for benefits as time-barred, but found that breach of fiduciary duty claims could proceed. [127 F.Supp.2d 443 (S.D.N.Y. 2001)] Electing to proceed on the merits first, the parties submitted cross-motions for summary …

Fifth Circuit Vacates Denial of Benefits for Failure to Employ Appropriate Claim Review Process.

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After suffering a heart attack, the plaintiff was placed in a nursing home. Initially, Blue Cross agreed to pay the costs, but then later changed its mind. The plaintiff’s claim for continued benefits turned on whether his care at a nursing home qualifies as Skilled Nursing Care, which is covered, or Custodial Care, which is not. Addressing the plaintiff’s Substantial …

Second Circuit Court of Appeals Refines Abuse of Discretion Standard in Light of Glenn.

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The Second Circuit had the opportunity to clarify and apply the Glenn standard in a denial of benefits case. In determining that the defendant’s decision was arbitrary and capricious, the Court noted that the insurance company not only operated under an inherent conflict of interest, but also (i) clung unreasonably to a single piece of evidence despite the availability of …