We have handled many cases where an employer has advised an employee, either directly or indirectly, that they were entitled to certain benefits even when the Benefit Plan did not provide the benefits promised. Examples would be false promises that a pension would vest or life insurance would continue after leaving employment when in fact the Plan did not provide the continuing coverage promised.

 

What are your remedies when the Benefit Plan does not provide coverage but the employer erroneously advises that there is coverage? When you adversely rely on this erroneous advice the remedy is a claim for breach of fiduciary duty as opposed to a claim for benefits under the Plan. Employers and Claims Administrators who make coverage decisions are fiduciaries who must provide employees accurate information about Plan coverages. The question then becomes does the misrepresentation give rise to a claim for a breach of fiduciary duty?

 

The recent case of Morris v. Aetna life Ins. Co., 2023 U.S. App. LEXIS 13683 addressed this very issue. Morris had received disability benefits through his employer’s insured Benefit Plan for several years when it suddenly realized it had been overpaying Morris. Aetna demanded repayment from Morris and stopped her monthly disability payments to apply it towards the claimed overpayment. Morris sued claiming a breach of fiduciary duty. Aetna asserted that its calculation of benefits was a mere clerical duty that did not involve the exercise of a fiduciary duty citing an earlier Ninth Circuit decision of Bafford v. Northrup Grumman Corp., 994 F.3d 1020 (9th Cir. 2021). Bafford held that the calculation of benefits did not involve the exercise of discretion and thus did not arise to the exercise of a fiduciary act.

 

The court disagreed differentiating Brafford’s holding by stating:

“In contrast to Brafford’s use of an online mechanism to calculate              benefits, Aetna ability specialists, team leaders, and customer service representatives consulted with Morris by phone about her benefit amount numerous times; Aetna’s Long Term Disability Benefit Manager sent letters Aetna knew Morris would share with lenders as proof of her benefit; and Aetna communicated with Morris’s financial institutions to verify her benefit amount. Conveying information about the likely future of plan benefits through benefits counselors amounts to a fiduciary act.”

Importantly the court further found Aetna’s decision to aggressively collect the overpayment after 9 years had passed and to entirely suspend Morris’s benefits was an exercise of its discretion as a fiduciary which they did not have to pursue.

 

As the above reflects these are very nuanced cases that are very fact specific. Thus, if you feel you have been harmed by a misrepresentation from your employer regarding a Group Benefit consider consulting an attorney experienced in ERISA Benefit Plans.