Supreme Court: Plan Participants Can Recover In ERISA Actions Without Showing Detrimental Reliance


On May 16, 2011, the Supreme Court clarified the showing of harm that a participant must demonstrate in order to recover on a claim involving a Summary Plan Description (SPD) that conflicts with the terms of its underlying plan document. The Supreme Court explained that the requisite level of harm for a particular case will be dependent upon the applicable equitable theory of relief. If a plaintiff can satisfy one of the standards, it may then be rebutted by the defendant – if the defendant can demonstrate that the inconsistency was a harmless error.

Prior to today’s decision, the U.S. courts of appeals had been divided on the issue of the applicable standard where an SPD conflicts with the terms of a plan document. While the 1st, 4th, 7th, 8th, 10th, and 11th Circuits all required a plan participant to demonstrate some degree of reliance or prejudice on the conflicting documents in order to recover, the 3rd, 5th, and 6th allowed a plan beneficiary to recover where there was a clear and material conflict between the SPD and the plan, regardless of whether the beneficiary could demonstrate reliance on the SPD or prejudice of the conflict.

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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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