7th Circuit Rules Employee May Recover Monetary Damages In ERISA Claim For Unpaid Benefits Against Insurer Who Denied Coverage After Her Surgery Took Place

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The Seventh Circuit’s recent decision in Kenseth v. Dean Health Plan, Inc. provides a means for employees to collect monetary relief on their claim for benefits if they can show that the terms of the plan were not clear, and that they were told coverage would be available and then were subsequently denied coverage. In Kenseth, the plaintiff sought verification from her health insurer that her surgery would be covered before undergoing treatment and was told by a customer service representative for the insurer that coverage was available. After her surgery, the health insurer denied coverage for the procedure. The plaintiff subsequently filed a lawsuit against the health insurer, asserting a breach of fiduciary duty. The district court granted summary judgment in favor of the defendant after determining that monetary damages were not available under the Employee Retirement Income Security Act (ERISA). In reversing the district court’s ruling, the Seventh Circuit ruled that “make-whole” monetary damages are available as a form of equitable relief under ERISA. The Seventh Circuit remanded the case back to the district court to determine whether a breach of fiduciary duty occurred and if so, to then fashion an appropriate equitable remedy to redress plaintiff’s injury. To reduce the risk of a similar result, employers are encouraged to ensure that: (1) plan documents and summaries clearly set forth the terms of coverage, (2) employer personnel who communicate plan terms with participants provide accurate information or defer all such questions to their health insurer, and (3) plan documents state that participants cannot rely on oral representations of benefits.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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