In Gimeno v. NCHMD, Inc., 2022 WL 2309436, the U.S. Court of Appeals for the Eleventh Circuit reversed the trial court’s dismissal of a lawsuit for breach of fiduciary duty concerning an ERISA-governed life insurance plan. In reinstating the lawsuit, the Court of Appeals ruled that ERISA permits claims to recover money equal to benefits lost due to a breach of fiduciary duty.
After a life insurance plan participant passed away, the surviving spouse filed a claim for supplemental benefits with the life insurance company. The insurance company denied the claim because the participant had never submitted a form showing evidence of insurability, which voided the participant’s life insurance coverage. When enrolling the participant in $350,000 worth of supplemental life insurance, the participant’s employer had never provided the required form for evidence of insurability to the participant or indicated that the form was necessary. Nonetheless, the employer deducted premiums for the three-year supplemental life insurance coverage and furnished the participant with a benefits summary showing active supplemental coverage.
After receiving a claim denial from the insurance company, the surviving spouse filed suit against the employer, under ERISA, to recover the supplemental insurance benefits due under the plan. Later, conceding that the insurance company, not the employer, was responsible for paying the insurance benefits, the surviving spouse amended the complaint against the employer to include a claim for breach of fiduciary duty seeking equitable relief.
The trial court concluded that compensation for supplemental life insurance benefits was compensatory, not equitable relief, and therefore not permissible under an ERISA claim. As a result, the trial court dismissed the lawsuit.
On appeal, the Eleventh Circuit disagreed. The appellate court ruled that although equitable surcharge is a form of monetary relief, it is still a common equitable remedy in a suit based on breach of fiduciary duty. The court held that the surviving spouse showed sufficient evidence that the employer had acted as a fiduciary in helping the participant enroll in the life insurance plan, notifying him of other missing paperwork, providing him with a benefits summary, and deducting supplemental insurance coverage premiums. The court stated that the surviving spouse adequately had alleged a breach of fiduciary duty by the employer, based on the allegations that the employer provided inaccurate information about the benefits and failed to notify the participant of the necessary evidence of insurability form.
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