In Kenseth v. Dean Health Plan, Inc., __ F.3d __, 2013 WL 29991466 (7th Cir. 2013), the U.S. Court of Appeals for the Seventh Circuit changed course in the wake of the U.S. Supreme Court decision in CIGNA v. Amara, __ U.S. __, 131 S.Ct. 1866 (2011), finding that monetary damages may be available as “other appropriate equitable relief” under the Employee Retirement Income Security Act of 1974 (“ERISA”) § 502(a)(3), 29 U.S.C. § 1132(a)(3). The Seventh Circuit’s opinion follows other recent Circuit Courts’ opinions interpreting Amara. See Gearlds v. Entergy Servs., Inc., 709 F.3d 448 (5th Cir. 2013); McCravy v. Metropolitan Life Ins. Co., 690 F.3d 176 (4th Cir. 2012). But the Seventh Circuit went further under ERISA § 502(a)(3) and charted a new tack for future claimants to obtain monetary damages as “make-whole relief” – which is in the amount equivalent to the benefits otherwise not available under the plan – because of poorly worded plan language.
Ordinarily, a claim under ERISA § 502(a)(3) seeking the equivalent of benefits is ineffectual for several reasons. The ERISA plan language controls whether a claimant is entitled to benefits and thus, if claimants cannot prove their entitlement to benefits under the plan, they will not prevail under section 502(a)(3). See ERISA § 402, 29 U.S.C. § 1102; Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 83 (1995). Also, claimants previously faced the unyielding hurdle that the relief sought could not be money damages. See Mertens v. Hewitt Assocs., 508 U.S. 248 (1993). But in Kenseth, the Seventh Circuit ruled that an oral communication in connection with claims administration could provide a basis to award “make-whole relief” in the form of money damages.
In Kenseth, Deborah Kenseth (“Kenseth”) was enrolled in an employee welfare group health benefit plan governed by ERISA. The ERISA plan provided in-network coverage subject to certain limitations and exclusions, including an exclusion for medical services related to the treatment of morbid obesity and any medical services to treat a non-covered service. On its face, the plan did not provide coverage for Kenseth’s gastric bypass and surgery to treat severe acid reflux associated with a previous gastric banding surgery that she received years ago. But the ERISA plan invited plan members to call the claim administrator to find out if services were covered. Kenseth, without reviewing the plan, called the claims administrator, who purportedly misinformed Kenseth that the services would be covered. In the initial appeal, the Seventh Circuit found that an ambiguity existed in the plan regarding whether treatment for complications associated with Kenseth’s original gastric banding surgery was covered, and whether there was an authoritative process for confirming whether a particular service was included in the plan. See Kenseth v. Dean Health Plan, Inc., 610 F.3d 452 (7th Cir. 2010). Nevertheless, the Seventh Circuit presaged the futility of Kenseth’s claim, stating “[t]he relief that Kenseth truly seems to seek is relief that is legal rather than equitable in nature,” and “this is the sort of make-whole relief that is not typically equitable in nature and is thus beyond the scope of relief that a court may award pursuant to section 1132(a)(3).” Id. at 481.
But after Amara, on the second appeal, the Seventh Circuit ruled that: “We can now comfortably say that if Kenseth is able to demonstrate a breach of fiduciary duty as we set forth in our first opinion, and if she can show that the breach caused her damages, she may seek appropriate equitable relief including make-whole relief in the form of money damages.” Kenseth, 2013 WL 2991466, at *14.
The ruling in Kenseth should serve as a warning to all ERISA plan administrators to review their plan language regarding who has the final authority to advise whether a particular service is covered. Equivocal or ambiguous plan language may open the door to a potential breach of ERISA fiduciary duty claim designed at getting the equivalent of benefits that are not covered under the plan. The best practice to protect against these claims is to make sure the plan expressly provides that oral communications are not sufficient to confirm coverage for a particular service.