Seyfarth Synopsis: A recent case from the Western District of North Carolina contains a helpful example of how the standards applicable to an employee’s request for accommodation of a disability differ from those for determining whether the same employee is eligible for benefits under a short-term disability plan. At the same time, it demonstrates the importance of following a deliberate, principled claims handling process, even when the decision appears simple.

By: Tom Horan and Ron Kramer

In Cannon v. Charter Commc’ns Short Term Disability Plan, No. 3:18-CV-041-DCK, 2019 WL 235325 (W.D.N.C. Jan. 16, 2019), the Plaintiff sought benefits under his employer’s self-insured short-term disability plan (the “Plan”), claiming he was unable to work due to recurrent vertigo, sleep apnea, heart disease, insomnia, and other, related conditions. In support of his claim, he submitted documentation from his sole treating physician, which stated he was unable to perform the essential functions of his position, but identified his only restriction as an inability to “drive in traffic.” To be eligible for benefits under the Plan, Plaintiff needed to demonstrate that he was unable to perform the essential duties of his occupation.

Defendant denied the claim, after determining that Plaintiff’s only documented restriction—an inability to drive—did not impact his ability to perform the essential functions of his “sedentary” job, which consisted of reviewing orders from customers for accuracy, keying those orders into the billing system, and scheduling certain installation services. In making this determination, Defendant relied on reviews conducted by two different intendent, board certified specialists, and the fact that for several years before making his claim for benefits, Plaintiff had been accommodated for his medical conditions with an agreement allowing him to work from home. Accordingly, as driving—the sole activity from which he was restricted from performing—was not an essential function of his job, Plaintiff’s claim was denied. After exhausting his administrative remedies, Plaintiff filed suit, alleging he was wrongfully denied benefits under the Plan.

In granting the employer’s motion for summary judgment the Court credited the administrator for its deliberate, principled review process, and found no abuse of discretion in denying the claim. In doing so the Court apparently accepted that Plaintiff’s sole restriction—his inability to drive—was irrelevant, since it did not impact an essential job function.

More notable for employers, however, is Defendant’s underlying argument that the fact that Plaintiff could perform his job with a reasonable accommodation meant that Plaintiff was not eligible for STD benefits under the Plan, because it demonstrated that (while requiring accommodation) he was not incapable of performing the essential functions of his occupation. In short, this case demonstrates that the fact that an employee has a “disability” for which he receives an accommodation does not mean—depending on the applicable plan language—he is entitled to disability benefits.

By Mark Casciari and Kristine Argentine

Synopsis : Many parties to ERISA litigation and arbitration pay lip service to the burden of proof, put on their respective cases and leave it to the trier of fact to decide which side deserves the victory.   Burdens of proof have become increasingly important, however, as procedural and substantive issues become more complex, and judges often have less time to deal with the subtleties in ERISA litigation. Burdens of proof thus demand more attention.

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It is easy to glaze over a basic tenet of law that is getting more attention — Who has the burden of proof?

Emphasizing burdens of proof can mean the difference between winning or losing, and potentially millions of dollars in damages. Earlier this year, Putnam Investments LLC stated its intention to file a petition with the U.S. Supreme Court asking the high court to weigh in on who bears the burden of proving injury and whether retirement investment choices were prudent in ERISA fiduciary breach cases. (See Brotherston v. Putnam Investments, LLC, No. 17-1711 (1st Cir. Oct. 15, 2018)).   This is not the first time that the Supreme Court has been asked to take up this issue as there is a significant split among the circuits—certain circuit courts have said causation is an element of the cause of action, other circuits have said it is the plaintiff’s burden to prove that the harm was attributable to the fiduciary, and still other circuits have said that the burden shifts to the fiduciary to show that it did not cause the harm. This is but one example where the burden of proof can have a significant effect on the outcome of a case.

Also, as cases become more complex, and judges and arbitrators are asked to navigate through more evidence, weigh the credibility of witnesses testifying by deposition video and transcript, and parse through heightened attorney showmanship, burdens of proof are likely to get more attention. A U.S. District Court Judge recently admonished an attorney for glazing over the evidence necessary to meet his burden, stating “I am not co-plaintiff counsel . . . I’m [not] supposed to now go find evidence to supplement your record. That’s totally improper.” (See Law360, 12/4/18, 10:40 PM, https://www.law360.com/articles/1107974 ).

There is no denying that employee benefit claims can include emotional appeals, given the personal relationship aspect of employment and the financial consequences of an award of fewer benefits than expected. When faced with emotional appeals in the context of increasingly complicated laws and regulations, employers and fiduciaries should remember that they can make their case on a burden of proof procedural ground, i.e., “plaintiff should lose because, notwithstanding his emotional appeal, he has not met his burden of proof under the law.”

A judge or arbitrator overwhelmed by complexity may be more receptive than counsel thinks. No party should ask the trier of fact to define his or her case. It is a claimant’s job to present his or her case with specificity and within the confines of the substantive and procedural law.

Seyfarth synopsis: The Second Circuit reversed dismissal of an ERISA stock drop class action finding plaintiff alleged enough to plausibly show that disclosure of alleged corporate problems would not have done more harm than good and sketching a treasure map for ERISA plaintiffs seeking to recover for 401(k) plan losses.

By Ian H. Morrison and Michael W. Stevens

Many thought ERISA stock drop claims were doomed by the Supreme Court’s 2014 decision in Fifth Third Bancorp v. Dudenhoeffer, and given court rulings since that decision they largely were. The Second Circuit may have reversed that trend in a recent decision.

In Jander v. Retirement Plans Committee of IBM et al., No. 17-3518 (2d Cir. Dec. 10, 2018), investors in the IBM Company Stock Fund, an ESOP contained within the company’s 401(k) plan, claimed that the plan fiduciaries violated the duty of prudence by continuing to invest ESOP funds in IBM common stock, despite knowing that IBM’s microelectronics business was losing money, and was allegedly overvalued in company disclosures. The troubled division was losing $700 million annually, and eventually had to be sold on a write-down, causing IBM’s stock to fall by $12 per share, the complaint alleges.

The district court dismissed the complaint, finding plaintiffs had not pleaded facts showing the fiduciaries could not have reasonably concluded that available alternatives, such as disclosing the alleged difficulties, halting investment in IBM stock, or investing in hedging investments, would not have caused more harm than good.

The Second Circuit reversed. The Second Circuit analyzed Dudenhoeffer, and standards of pleading for a breach of the duty of prudence. The Second Circuit focused on the difference between whether a plaintiff must plead merely that an “average” fiduciary “would not” have viewed available alternatives as more likely to do harm than good to a plan, or a more stringent requirement to plead that “any” fiduciary “could not” have viewed the available alternatives as more likely to harm than help.

The Court declined to weigh in on the difference, however, because it found that the plaintiffs had adequately pleaded a breach of the duty of prudence under either standard. The Court recited several specific factual allegations, such as the fiduciaries’ alleged knowledge of the supposedly artificial price inflation, their power to disclose the truth, and the negative impact of the failure to disclose on the reputation of the company’s management, that cumulatively satisfied the plaintiffs’ burden. Notably, the Court also focused on the allegation that the defendants knew that the eventual disclosure regarding the troubled division was inevitable, and therefore earlier disclosure would have been less harmful to stock price than later disclosure.

By not weighing in on which of the “harm versus help” standards apply, but extensively examining the adequacy of plaintiffs’ specific allegations, and repeatedly noting the district courts’ duty to construe inferences in plaintiffs’ favor on a motion to dismiss, the Second Circuit has given putative ERISA stock drop plaintiffs a roadmap to survive a motion to dismiss, something that has largely eluded them since 2014. ESOP fiduciaries take heed.

Seyfarth Synopsis: Please join us at our Chicago Willis Tower office on Thursday, December 6th, for breakfast along with a Seyfarth Legal Forum and Continuing Legal Education (CLE): 2018 Highlights and a Look Ahead to 2019.

About the Program

Providing our clients with a multidisciplinary overview of Legal Hot Button issues and Best Practice:  Featuring:

  • Biometric Information Privacy Act: What a long, strange year it’s been (and there’s more on the way!)
  • Legalize it: will Illinois go from medical to recreational marijuana and what would that mean to the real estate industry?
  • Affordable Care Act Update & Enforcement Activities, 401(k) Student Loan Repayment Arrangements, Socially Responsible Investments, and HIPAA Privacy & Security Audits
  • Mergers and Acquisitions: Current State of the Market and Post-Merger Integration Strategies
  • The “Cloud”…is in a building?: Data Centers are the newest, and maybe most important, type of real estate
  • Latest Developments in Pregnancy Accommodation (Illinois’ New Lactation Law and Nationwide Trends)
  • Litigation Hot Topics for 2019, including: Developments in trade secret and non-compete law; New laws affecting threshold issues such as forum selection and choice of law; Frontloaded discovery in federal court: Mandatory Initial Discovery Pilot Programs; Best practices for protecting the attorney-client privilege for in-house counsel
  • Welcome to the Future: It arrived yesterday – The intersection of Technology and Legal Services
  • Bots, bits and bytes… Artificial Intelligence and its leading role in recent legal projects

The program will feature a panel of Seyfarth Chicago subject matter experts — with an eye toward preparing for the developments in the coming year. Our overview will be targeted at highlighting issues for the General Counsel, Chief Information Officer, Chief Human Resource Officer, and other members of their teams.

The program will consist of an engaging ninety minute presentation with speakers from each of Seyfarth Chicago’s practice groups: Benefits, Corporate, Labor & Employment, Litigation, and Real Estate, as well as an exciting presentation on the use of technology in law. Then, we will offer 30 minute break-out sessions on hot topics warranting a deeper dive that companies are facing when looking at their legal compliance needs. The break-out sessions will address Privacy/Data Security, Managing in the #metoo Environment, and Blockchain/Cryptocurrency in business.

The program is on Thursday, December 6, 2018, at 8:00 a.m. – 8:30 a.m., for breakfast and registration, 8:30 a.m. – 10:00 a.m., for the panel presentations, and 10:00 a.m. – 10:30 a.m., for the breakout sessions.  Our offices are at 233 S. Wacker Drive, Suite 8000, in Chicago, IL.

While there is no cost to attend, registration is required and space is limited.  If you have any questions, please contact Fiona Carlon at fcarlon@seyfarth.com and reference this event.

Also, for those that need the credits, note that Seyfarth Shaw LLP is an approved provider of Illinois CLE credit. This seminar is approved for 1.5 hours of CLE credit CA, IL, NY, NJ and TX. CLE Credit is pending for GA and VA. HR professionals: please note that the HR Certification Institute accepts CLE credit toward recertification.

By: Tom Horan and Sam Schwartz-Fenwick

Seyfarth Synopsis: A recent case from the Eastern District of Pennsylvania reaffirms the basic principle that a threshold element of any ERISA claim is pleading the existence of an ERISA plan.

In Dixon v. Washington, No. 18-cv-2838, 2018 WL 5046033 (E.D. Pa.), plaintiffs—members of the congregation of the First Baptist Church of Fairview—brought suit against the Church’s elected Pastor and CEO, and the members he selected to serve on the Church’s Board of Directors.

Plaintiffs asserted both state law claims and a breach of fiduciary duty claim under ERISA. The ERISA claim alleged that the defendant pastor stole money collected to award scholarships to two church members, who had never received the promised benefits, and misappropriated funds from the sale of real estate and from a FEMA grant intended to cover repairs related to damages caused by a flood. The ERISA claim did not allege the existence of an ERISA plan, a pre-requisite for any ERISA claim.

Defendants moved to dismiss both for lack of subject matter jurisdiction and for failure to state a claim for relief that was plausible on its face.

The court first considered whether it had subject matter jurisdiction. Because the complaint asserted claims arising under § 409 of ERISA, the court concluded that it presented a valid federal question. Accordingly, the court held that it could not dismiss for lack of subject matter jurisdiction.

Having found that it had subject matter jurisdiction from the face of the complaint, the court considered whether plaintiffs had presented a plausible claim for relief. Here, the court found the complaint deficient, holding that plaintiffs had not plead enough facts to make their ERISA claim plausible. Specifically, without deciding whether plaintiffs’ allegations regarding the misappropriation of funds constituted a breach of fiduciary duty, the court found that plaintiffs had not alleged sufficient facts to show the involvement of a plan covered by ERISA, which was necessary to make an ERISA claim plausible. The court thus dismissed the complaint, noting plaintiffs could amend the complaint if they could plead sufficient detail to make their claim plausible.

While the holding of the case is relatively straightforward—a claim under ERISA must involve a plan covered by ERISA—this case highlights the importance of evaluating whether a complaint is sufficiently pled as to all required elements.

Seyfarth Synopsis: Excessive fee complaint dismissed because the diverse selection of funds available to plan participants negates any claim that Defendants breached their duties of prudence simply because cheaper funds were available.

By Ron Kramer and Shannon Callahan

Nearly 20 universities have been sued under the Employee Retirement Income Security Act (“ERISA”) over the fees paid in their Section 403(b) qualified employee benefit defined contribution plans.

Many of these actions have survived the motion to dismiss stage. Still, some courts have been willing to look carefully at ERISA’s requirements and quickly determine that these suits have no basis because they do not allege violations of ERISA. Most recently, the Southern District of New York ruled against plaintiffs, noting after a trial that plaintiffs have not proven a violation of ERISA, that prudent process does not require perfection, and that, relative to performance there is no such claim under ERISA. Sacerdote v. New York University, Case No. 16-cv-6284, 2018 WL 3629598 (July 31, 2018 S.D.N.Y.).

The latest blow to these largely cookie cutter cases is Davis v. Washington University, Case No. 17-cv-1641 (E.D. Mo.), which alleged that the plan paid excessive fees for administrative or investment management services, the plan should have consolidated to one recordkeeper (as opposed to two), that certain funds underperformed and that the plan’s fiduciaries caused the plan to engage in prohibited transactions.

On Friday, September 28, 2018, Judge Ronnie L. White dismissed Davis holding that Plaintiffs failed to allege a breach of fiduciary duties based upon Plan participants’ payment of purportedly excessive fees and recordkeeping fees. The court reasoned that the complaint starts with the false premise that just because the plan’s fees could have been lower, there must have been some breach of duty. Relying on precedent in other circuits, the court held that the diverse selection of funds available to the plan’s participants negates any claim that defendants breached their duties of prudence because cheaper funds were available. The court further held that allowing plan participants to pay fees on an asset basis is a pure question of where the burden of recordkeeping costs should be placed and that plaintiffs pled no basis for removing the discretion of a reasonable plan administrator. The court likewise dismissed the prohibited transaction claims, noting that plaintiffs pled the affirmative defense in their complaint.

With the recent defense victories in Divane v. Northwestern University, Sacerdote v. New York University and Sweda v. University of Pennsylvania, Washington University brings another beacon of hope to the universities facing these claims and reinforces the discretion incumbent upon plan administrators.

 

 

By: Michelle M. Scannell and Kathleen Cahill Slaught

Seyfarth Synopsis: A district court recently denied a motion to dismiss a 401(k) proprietary fund class action, continuing an overwhelming trend of allowing these cases to survive pleading challenges. On the bright side, however, the Eighth Circuit recently affirmed a dismissal of such a case, and the first of these cases to be tried resulted in a defense victory, which is on appeal with the First Circuit.

The plaintiffs’ bar sparked a new 401(k) class action trend a few years ago by targeting “proprietary” in- house investment products, alleging that fiduciaries were committing a breach by including their in-house proprietary funds in plans to the exclusion of less expensive, better-performing comparable options.

In most of these cases, plaintiffs have survived initial pleading challenges. Generally courts have found that allegations underlying these cases supported an inference that the fiduciaries engaged in a flawed process. See, e.g., Cryer v. Franklin Templeton Res., No. 16-cv-4265 (N.D. Cal. Jan. 17, 2017); Urakhchin v. Allianz Asset Mgmt. of Am., L.P., No. 15-cv-1614 (C.D. Cal. Aug. 5, 2016).

A district court in Maryland recently continued the trend by denying a motion to dismiss a first amended complaint for a proprietary fund case. See Feinberg v. T. Rowe Price Group, Inc., et al., D. Md. Case No. MJG-17-0427, 2018 BL 298391 (Aug. 20, 2018). In Feinberg, plaintiffs alleged that fiduciaries breached their duties and committed related ERISA violations by, among other things, including in the plan retail-class versions of in-house funds even though purportedly cheaper versions of the same funds were available for commercial customers. Notably, in addressing defendants’ argument that the plan documents required that they select an exclusive line-up of proprietary funds, the court found that the decision to structure the plan that way was a settlor, non-fiduciary function, and “did not provide a blanket defense” for the fiduciaries. The court concluded that plaintiffs pled sufficient allegations to raise plausible inferences to support all of their claims.

Defendants also argued that plaintiffs’ prohibited transaction claim was barred under ERISA’s six-year statute of repose, because no prohibited transaction (i.e. the initial inclusion of the fund in the plan) occurred within six years of the lawsuit. The court noted that while defendants “may have viable defenses,” the claim would not be dismissed now, because the court could infer a plausible timely claim of prohibited transactions, including the continuous monthly fees being paid for the funds at issue.

In contrast to this decision and the plaintiff-friendly trend on pleading challenges for these cases, one defense victory on a motion to dismiss was recently affirmed by the Eighth Circuit. See Meiners v. Wells Fargo & Co., No. 0:16-cv-003981, 2017 WL 2303968 (D. Minn. May 25, 2017); Eighth Circuit No. 17-2397 (Aug. 3, 2018). In that case, the Eighth Circuit expressly acknowledged the “challenging pleading burden” for plaintiffs because they have different levels of knowledge regarding the investment choices the fiduciary made versus how the choices were made. The Eighth Circuit held that the existence of a cheaper fund, as pled by plaintiff, doesn’t mean that a particular proprietary fund is too expensive in the market generally or that it’s otherwise an imprudent choice.

As any litigator knows, losing a motion to dismiss is the loss of merely one battle in what can be a long-fought (and not to mention, costly) war. In fact, in the first of these cases to go to trial resulted in a defense victory, which is pending appeal in the First Circuit. Brotherston v. Putnam Investments LLC, 1:15-cv-13825, 2017 WL 2634361, (D. Mass. June 19, 2017). While some companies avoid protracted litigation and choose to settle these cases at early stages, this is not to say that a sound fiduciary process cannot be ultimately vindicated in court. Stay tuned on further developments. . .

By: Mark Casciari and Jim Goodfellow

Seyfarth Synopsis: The Ninth Circuit declined to enforce an agreement to arbitrate ERISA Section 502(a)(2) claims, but did not rule out enforcement in other ERISA claim contexts.

In Munro v. University of Southern California, et al., No. 17-5550, 2018 WL 3542996 (9th Cir. July 24, 2018), plaintiffs sought to represent a class of participants in two ERISA-governed defined contribution plans sponsored by the University of Southern California, alleging multiple breaches of fiduciary duty stemming from the administration of those plans. Plaintiffs sought equitable relief on behalf of the plans under ERISA Section 502(a)(2) in the form of monetary relief, removal of the breaching fiduciaries, a full accounting of losses, reformation of the plans, and an order regarding appropriate future investments.

The defendants moved to compel arbitration, as all of the potential class members had signed arbitration agreements to arbitrate all claims that the putative class members or USC had against one another. The agreements expressly covered claims under federal law, including ERISA. The defendants sought further to compel individual, and not class arbitrations, because the arbitration agreements did not specifically allow class arbitration.

The district court denied the motion, and the Ninth Circuit affirmed. The Ninth Circuit analogized the plaintiffs in this case to plaintiffs in a qui tam action brought on behalf of the U.S. Government under the False Claims Act. Citing to its 2017 decision in U.S. ex rel. Welch v. My Left Foot Children’s Therapy, LLC, 871 F.3d 791 (9th Cir. 2017), the Court stated that individual agreements to arbitrate do not extend to qui tam actions because those are brought on behalf of the government by the plaintiffs. Similarly, the Court said, an ERISA Section 502(a)(2) breach of fiduciary duty claim is brought on behalf of an ERISA plan by its participants.

There is more to take away from this decision, however. The Ninth Circuit specifically declined to rule that an agreement to arbitrate ERISA claims is always unenforceable. The Court suggested that it might disagree in a future case with its 1984 decision in Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1984), which it held that ERISA’s “equitable character” could not be satisfied in an arbitral proceeding. The Court referred to “intervening Supreme Court case law,” obviously referring to a number of Supreme Court decisions after 1984, including, most recently the Epiq Systems decision that broadly enforce agreements to arbitrate. So we have not heard the last word from the Ninth Circuit on the enforceability of agreements to arbitrate ERISA claims. And we should expect other Courts of Appeal to address arbitration of ERISA claims, and perhaps create a split in the Circuits that would lead to Supreme Court review. Notwithstanding the Ninth Circuit decision in Munro, arbitration agreements remain a hot topic in federal jurisprudence. Stay tuned.

By, James Goodfellow and Amanda Sonneborn

Seyfarth Synopsis: The Fifth Circuit adds to the growing body of case law requiring more detailed reviews of claims for life insurance or accidental death and dismemberment benefits following accidents resulting from drunk driving.

In White v. LINA, No. 17-30356, __F.3d__, 2018 WL 2978641 (5th Cir. June 13, 2018), a case involving denial of life insurance benefits provided pursuant to an ERISA governed plan, the Fifth Circuit concluded that LINA abused its discretion in determining that the intoxication exclusion applied.

The facts of the case are straight forward. The insured was driving a car and collided with a truck. Following the crash, two blood samples were drawn from the insured, as well as a urine sample. These samples were tested, and while none tested positive for alcohol, all tested positive for illegal drugs. None of the test results, however, provided the level of drugs in the insured’s system. All of the samples subsequently were destroyed pursuant to the labs’ respective policies, and no further testing was conducted. The police did cite the insured for driving under the influence.

A few days after the crash, the insured died from a stroke. The medical examiner determined that the immediate cause of death was a “massive stroke,” and the underlying causes of death were “multiple trauma (from the car accident),” as well as illegal drug abuse.

The plan at issue, like many ERISA plans, contained exclusions precluding coverage if death is caused, at least in part, by intoxication or by voluntary ingestion of narcotics or drugs without a prescription. Upon receipt of Plaintiff’s claim for benefits, LINA hired a toxicologist to review the claim file to determine the level of impairment. Though the toxicologist concluded that it was impossible to estimate the level of the insured’s impairment, given that no qualitative analysis of the samples taken was complete, he concluded that in the absence of any other cause for the collision, the drugs in the insured’s blood system could explain his level of impairment that resulted in the crash. LINA thus denied the claim.

The district court found in favor of LINA, but the Fifth Circuit reversed, concluding that LINA had failed to provide Plaintiff’s claim a full and fair review because it did not disclose the toxicologist’s report until it filed the administrative record with the court after the lawsuit had been filed. On the merits, the Fifth Circuit acknowledged that the evidence was “close,” given that there was no other possible explanation for the insured’s driving on the night of the accident. Yet, because there was no way to determine the level of intoxication, if any, at the time of the accident, LINA’s structural conflict of interest acted as the tie-breaker.

In reaching this conclusion, the Fifth Circuit joined the other circuits in reading these exclusions to require an insurer to conclude that the insured was intoxicated at the time of the accident, which in turn requires some form of scientific proof. It is not sufficient, for example, for a toxicology report to reveal drugs in an insured’s system. It also may not be it sufficient, depending on the jurisdiction, that a toxicology report reveal alcohol intoxication at some point after the accident.

In sum, not having scientific proof to gird an otherwise logical conclusion could be fatal in defending the decision to apply the exclusion in court.

By: Chris Busey, Tom Horan and Sam Schwartz-Fenwick

Seyfarth Synopsis: The Fourth Circuit found in favor of an insurer on a claim for life insurance benefits, finding the insured’s failure to submit the required evidence of insurability was not excused by his employer having wrongly deducted premiums for that coverage from his pay.

In Gordon v. CIGNA Corp., Plaintiff sought to represent a putative class of participants and beneficiaries who were deemed ineligible for additional life insurance benefits despite having paid premiums for the for the additional coverage, because they failed to submit the requisite evidence of insurability (“EOI”).

Plaintiff, as her deceased husband’s beneficiary, made a claim for supplemental life insurance benefits from the insurer and claims administrator, Life Insurance of North America (“LINA”). LINA denied the claim because the decedent never submitted the EOI required for supplemental coverage. Plaintiff claimed the employer and insurer breached their fiduciary duties by failing to notify the insured of the EOI requirement while continuing to accept premiums for that coverage. Plaintiff also alleged that, if any defendant was not a fiduciary under the plan, it was liable for knowingly participating in a breach of trust.

The district court granted LINA’s motion for summary judgment on the bases that LINA was not acting as a fiduciary with respect to enrollment for coverage, and there was no evidence it had knowledge of the employer’s collection of a premium for the additional coverage. The court also rejected Plaintiff’s argument that the motion was premature because she had not conducted discovery. On appeal, the Fourth Circuit affirmed the district court’s opinion in full.

First, the court found the employer, and not LINA, was tasked with day-to-day administration of the plan, including billing and screening applications. Given this allocation of duties, LINA was not responsible for notifying the decedent of the EOI requirement, and therefore could not be liable for a breach of that duty.

Second, the court found that, even if breach of trust was a cause of action, Plaintiff’s claim would still fail. The record lacked evidence that LINA had any knowledge of the employer’s acceptance of premiums on behalf of the decedent for coverage above the guaranteed amount. To the contrary, the evidence showed that the employer remitted premiums to LINA as a lump-sum and did not provide employee names or associated coverage amounts.

Finally, the court rejected the argument that discovery was required before ruling on the motion. It noted Plaintiff had a reasonable opportunity to conduct discovery, also further found that the information sought would not have created a genuine issue of material fact given the clear allocation of fiduciary duties in the plan documents and, especially, the employer’s concession that it erred in collecting premiums and failing to obtain EOI.

This case is positive for insurers and claims administrators, and stands in stark contrast to the Ninth Circuit’s recent opinion in Salyers v. MetLife, 871 F.3d 934 (9th Cir. 2017) (finding employer acted as insurer’s agent in collecting premiums, thereby imputing knowledge of premium collection to insurer). The finding that LINA did not owe a fiduciary duty to the decedent with respect to enrollment, as the plan did not vest it with that duty, will help insurers defend against similar cases where premiums paid to the employer exceed the actual level of coverage.