The Heritage Group Investment Company (“THG”) employed Norman Burkett for 46 years. During his employment Burkett enrolled in THG’s group life insurance policy (the “Life Plan”). Burkett’s death benefit was $300,000. Unum Life Insurance Company of America (“Unum”) was the plan administrator.
In July 2019 Burkett was diagnosed with a brain tumor. He qualified for long term disability in November 2019.
Unum sent Burkett a letter in December 2019. The letter notified Burkett that he was no longer covered by the Life Plan, but he could elect to convert the group coverage to an individual portable policy within 90 days from the end of the group coverage. The letter instructed Burkett to contact the Unum Client Service Center to obtain an election form. Burkett was hospitalized, and alleged he did not receive the letter.
In January 2020, Burkett contacted THG to ask questions about his life insurance. THG told Burkett by email that company-paid group life insurance terminates after 6 months when someone is on leave and not an active employee, but he should have received a letter from Unum about continuing or converting the coverage. A few days later, THG emailed Burkett to tell him: (1) the Life Plan did not contain a provision that benefits would be paid out upon disability; and (2) Burkett could have continued his coverage by responding within 30 days to Unum’s December 4, 2019, letter about conversion options. Three days later, THG sent Burkett a copy of Unum’s December 4 letter and told him he had 90 days (instead of 30) to respond to Unum’s letter. THG told Burkett to direct any further questions to Unum. Burkett never contacted Unum. He died in April 2020.
The Summary Plan Description (“SPD”) for the Life Plain provides that participants in the Life Plan can elect to convert coverage to an individual life policy if their employment is terminated. According to the SPD, however, the application for the conversion is due 31 days after the date of termination. The SPD directs participants to ask their employer for a conversion application form, which the participant needs to complete and send to Unum with a check for the first premium.
Burkett’s widow attempted to collect the death benefit from the Life Plan, but she learned her husband never completed the conversion process. She sued Unum and THG, alleging that THG breached its fiduciary duty under the Employee Retirement Income Security Act (“ERISA”) by: (1) providing Burkett with misleading information in response to his January 2020 inquiry about the Life Plan; and (2) failing to complete and submit Burkett’s election form to convert the policy.
The Court determined the complaint did not properly allege a breach of fiduciary duty based on any alleged misleading or confusing responses to Burkett’s January 2020 inquiry. Although THG had a duty under ERISA to provide accurate information, negligence in fulling that duty is not legally actionable. An employer must have intended to mislead or deceive, and the Court said there were no such allegations. The Court concluded that when THG told Burkett had 30 days to respond to Unum’s December 4 letter, it was, at most, a negligent misstatement that was not actionable under ERISA.
The Court also ruled, however, that the allegations concerning THG’s failure to obtain a conversion application for Burkett could state a claim for breach of fiduciary duty. In essence, Burkett’s widow claimed the information provided about the conversion process was so confusing that THG had a duty to take a more active role assisting Burkett, and the Court agreed she could proceed with her claim.
The Court recited the applicable legal standard as follows:
If the plan documents are clear and the fiduciary has exercised appropriate oversight over what its agents advise plan participants and beneficiaries as to their rights under those documents, the fiduciary will not be held liable simply because a ministerial, non-fiduciary agent has given incomplete or mistaken advice to an insured. Nevertheless, if a fiduciary supplies participants and beneficiaries with plan documents that are silent or ambiguous on a recurring topic, the fiduciary exposes itself to liability for the mistakes that plan representatives might make in answering questions on that subject. Killian v. Concert Health Plan, 742 F.3d 651 , 665 (7th Cir. 2013) (citations and quotations omitted).
According to the Court, [t]he documents attached to the [complaint] show not just ambiguity, but conflict on how a participant obtains a conversion application. The SPD directed Burkett to contact THG to obtain the application. But when he did so, THG told Burkett to call Unum, and provided him with a letter with similar instructions. It is impossible to say, based on the pleadings, which set of instructions was correct. The Court cannot say, then, that THG fulfilled its fiduciary duty when it sought to shuffle him off to Unum.” Therefore, the claim survived a motion to dismiss.
The lesson is simple. Employers should ensure their plan documents are clear, and they exercise appropriate oversight over those who advise plan participants and beneficiaries. If plan documents are ambiguous or conflict with advice to participants and beneficiaries, it may not be enough “shuffle [them] off” to the plan administrator.