Recent Case Highlights Importance of Plan Sponsor’s Careful Delegation of Fiduciary Responsibility to Third Party

On October 7, 2020, the U.S. District Court for the Northern District of Illinois ruled that a Plan Servicer did not have the authority to deny a claim because the Plan Administrator had failed to properly delegate fiduciary authority to the Servicer.

Background

In 2014, Boeing Company employee Bob Hampton died following a car accident in St. Charles, Missouri. His widow, Barbara Hampton, submitted a benefits claim to National Union Fire Insurance Co., which underwrote and co-administered the Boeing accidental group death insurance policies. National Union denied the claim on the basis that Mr. Hampton died of natural rather than accidental causes. Mrs. Hampton appealed the decision and provided medical records and the official cause of death determination to National Union, which again denied her claim. 

Mrs. Hampton then filed suit, asserting that National Union was not properly authorized to act as fiduciary in deciding her claim.

The Opinion

At issue in the case — Hampton v. National Union Fire Insurance Co. — was whether Boeing had properly delegated fiduciary authority to National Union. First, the court noted that in ERISA cases, “De novo review is presumed to apply unless the plan documents clearly state that the plan administrator has discretionary authority to determine whether benefits are due.” 

In this case, Boeing’s Plan governing health and welfare benefits clearly granted fiduciary authority to an Employee Benefits Plan Committee, which acted as the plan administrator. The Plan had established guidelines for delegating administrative and fiduciary authority, and clearly stated, “Any allocation or delegation of fiduciary responsibilities will be in writing, approved by majority vote.”

The court found that National Union did act as a fiduciary in denying Hampton’s benefits claim. However, was National Union properly authorized to act as fiduciary? The court said no. Even though National Union argued that Boeing’s Summary Plan Document (SPD) authorized a service representative “to make benefit determinations and administer benefit payments for the plans,” the court found this argument problematic since the Plan had outlined a specific method for delegating fiduciary authority to a service representative. In addition, the SPD stipulated that when the Plan and SPD conflict, the Plan trumps the SPD. 

Therefore, the court concluded, the Plan Administrator did not properly delegate fiduciary authority to National Union. As a result, National Union had no authority to deny Hampton’s claim.

The experienced, responsive team of ERISA attorneys at Hall Benefits Law helps plan administrators understand what regulations and rulings are relevant to them and how best to apply these rulings in practice. Learn more by calling 678-439-6236.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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