District Courts in the Fourth Circuit Run Full Speed Ahead with Equitable Estoppel Claims


Executive Summary:  District Courts in Fourth Circuit allow ERISA claims to go forward premised on oral representations.
Prior to Cigna v. Amara, 131 S. Ct. 1866 (2011), the law was clearly established: An employee benefit plan participant had no claim of equitable estoppel against a plan fiduciary stemming from an oral representation if the representation was contrary to the written terms of a plan. See e.g., Coleman v. Nationwide Life Ins. Co., 969 F.2d 54 (4th Cir. Va. 1992). No longer. Following Amara and the Fourth Circuit decision in McCravy v. Metropolitan Life Ins. Co., 2012 U.S. App. Lexis 13683 (4th Cir. July 5, 2012), District Courts in the Fourth Circuit, in two recent decisions, permitted plan participant’s claims to move forward past summary judgment, premised upon oral representations made by plan fiduciaries that were inconsistent with the written plan terms.

In Israel v. Prudential Ins. Co. , 2012 U.S. Dist. Lexis 106107 (D.S.C. July 31, 2012), Plaintiff enrolled in life insurance coverage for his wife under the employee benefit plan offered by his employer, Lockheed Martin (“Lockheed”). Plaintiff and his wife subsequently divorced. Under the terms of the plan, eligibility for coverage for a spouse ceased after divorce. Plaintiff claimed that he called Lockheed’s benefits department, which allegedly told him that he could continue the life insurance coverage on his ex-wife. Thereafter, Lockheed continued to deduct premiums from Plaintiff’s paychecks for the life insurance coverage. A few months following the divorce, Plaintiff’s ex-spouse died. Plaintiff filed a claim for the life insurance benefits, which was denied on the grounds that his ex-spouse was no longer eligible for coverage. After Plaintiff brought suit, the District Court granted Defendant’s motion for summary judgment on Plaintiff’s benefit claim under ERISA § 502(a)(1)(B), finding that the plan’s terms unequivocally did not provide coverage. Nevertheless, following Amara and McCravy, the District Court denied Defendant’s motion for summary judgment with respect to Plaintiff’s claim for equitable relief under ERISA § 502(a)(3), finding genuine issues of material facts, including whether Defendant did in fact misinform Plaintiff in a phone call.

Similarly, in Strickland v. AT&T Umbrella Benefit Plan, 2012 U.S. Dist. LEXIS 14145 (W.D.N.C. Sept. 30, 2012), Plaintiff was a disabled participant of AT&T’s medical benefit plan. After Plaintiff became eligible to receive Medicare benefits, he claimed that he spoke with someone at Blue Cross Blue Shield (“BCBS”), the third-party administrator, and asked whether he needed to purchase both Parts A and B of Medicare coverage. He was allegedly told that he needed to purchase only Part A. He subsequently had extensive knee and shoulder surgery. BCBS initially processed and paid the medial expenses related to these surgeries, and according to its records, confirmed coverage in 23 phone calls from medical providers. Subsequently, BCBS reversed its approval and collected the payments from the providers, who then billed Plaintiff.

In the lawsuit, Plaintiff conceded that he did not have a claim for benefits under ERISA § 502(a)(1)(B); according to the clear terms of AT&T’s plan, Plaintiff was required to enroll in both Parts A and B when he became eligible for Medicare. Nevertheless, Plaintiff brought a claim for equitable relief under ERISA § 502(a)(3). Defendant moved for summary judgment, arguing that oral representations were unenforceable under ERISA to vary the written terms of the plan. The Court rejected this argument, citing Amara and McCravy, and allowed the case to move forward on the factual issues of: (1) whether the alleged phone call took place and the contents of the conversation; and (2) whether BCBS’s payment of the claims in error affected the reasonableness of Plaintiff’s reliance on BCBS’s alleged representation.


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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