I blogged recently about a decision from a federal district court in Virginia (Eastern District) involving a widow who sought to recover life insurance benefits from her late husband’s employer-sponsored group term life insurance plan. The employer had improperly allowed the late husband to enroll in the plan. The court had found on summary judgment that the employer was a fiduciary with respect to enrollment and therefore had breached its fiduciary duty by enrolling the employee improperly. A recent decision from a different federal district court in Virginia (Western Distrcit) has reached a contrary conclusion.
The Western Distrct decision also involved a widow attempting to recover life insurance benefits from her late husband’s employer-sponsored group term life insurance plan. In that decision, the employee, who was on long term disability, had received a confirmation statement showing that the life insurance coverage was in force. The family paid premiums for some benefits and shortly after the employee’s death, the family submitted a check for all unpaid premiums. The employer had accepted the premiums despite the fact that the employee was not eligible for coverage because the employee had become disabled. The family claimed that the employer had a duty to inform the family that there was no coverage.
Unlike the case from the Eastern District of Virginia, the court in the Western District of Virginia concluded that the employer’s actions of accepting premiums and making statements about eligibility were not discretionary function and therefore did not make the employer a fiduciary with respect to the plan. The court noted that the insurance carrier had the right under the insurance policy to determine claims under the plan and that the plan was clear that the employee had no right to coverage. Therefore, the case was dismissed and the widow was unable to recover.
It is interesting that two district courts in Virginia have reached opposite conclusions on similar facts. One difference between the cases may be that in the case where the family won, the family had made explicit requests of the employer as to whether coverage continued and were told that it had. In the case where the family lost, the employer had simply failed to inform the family that the coverage did not continue. Both cases would be heard by the Fourth Circuit Court of Appeals if appealed. We will have to see if either case is so appealed.
These cases show that it can be difficult to predict how a court will rule in any particular matter.