Court Awards $750,000 to Widow of Employee Who Received Insufficient Information About Employer-Sponsored Life Insurance

family insuranceFederal law does not require employers to provide employees with benefits like retirement plans, but it regulates employers that choose to do so. Employers may be liable to employees for failing to meet the requirements set by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. A federal court awarded $750,000 in damages in an ERISA claim for a failure to inform an employee of certain details of a life insurance plan. Erwood v. Life Ins. Co. of N. Am., et al., No. 2:14-cv-01284, opinion (W.D. Pa., Apr. 13, 2017). The case was in a Pennsylvania court but relied in part on New Jersey employment law claims.

ERISA covers a wide range of employment benefits, including retirement plans, deferred income plans, life insurance, and health insurance. Employers must designate an administrator, who has the duty of providing a summary of any covered plan, along with other information, to each beneficiary. 29 U.S.C. § 1021(a). Anyone who “exercises any discretionary authority or discretionary control respecting management of such plan” owes fiduciary duties to the beneficiaries. Id. at §§ 1002(21)(A), 1104(a).

If a plan does not provide any specific remedy for breaches of fiduciary duties or other violations, ERISA allows various forms of relief for aggrieved beneficiaries. Id. at § 1132(a)(3). These may include reformation of the plan and other equitable remedies, as well as “a surcharge remedy “extended to a breach of trust committed by a fiduciary.” Erwood, op. at 14, quoting CIGNA Corp. v. Amara, 563 U.S. 421, 440-42 (2011). See also Horan v. Reliance Standard Life Ins. Co., No. 3:12-cv-07802, opinion (D.N.J., Jan. 30, 2014).

The plaintiff in Erwood is the widow of a former employee of the defendant. According to the court’s opinion, the plaintiff worked for the defendant as a neurosurgeon. He had a total of $1 million in coverage under two life insurance policies, with the defendant acting as the administrator of both. In November 2011, the husband was diagnosed with brain cancer. The defendant offered 36 weeks of leave under the Family and Medical Leave Act (FMLA). The husband began FMLA leave soon after his diagnosis.

The plaintiff and her husband met with the defendant’s benefits representative in early 2012 to discuss their benefits and coverage. The representative provided them with information about benefits and premium payments during the FMLA leave period, but he told them nothing about what to do afterwards. The representative provided no information about continuation or conversion of life insurance after the FMLA leave period. The husband’s leave ended in September 2012, and he died in June 2013.

The defendant’s insurance provider denied the plaintiff’s life insurance claim in October 2013, on the ground that the husband’s “life insurance was no longer in force because he was no longer an active employee…nor had he elected to continue his policy on an individual basis.” Erwood at at 9. The plaintiff sued the defendant and the insurance provider for a breach of fiduciary duty under ERISA. After the plaintiff settled with the insurer, the court conducted a bench trial on the claim against the defendant. It found the defendant breached its fiduciary duty to disclose the conversion process for the life insurance policies. It held the defendant liable for $750,000, the amount of the remaining life insurance coverage at the time of the husband’s death.

To speak with an employment attorney about a dispute or another matter in New Jersey or New York, contact the Resnick Law Group today online, at 973-781-1204, or at 646-867-7997.

More Blog Posts:

New Jersey Supreme Court Applies Broad Definition of “Employee,” Including Many Normally Classified as Independent Contractors, The New Jersey Employment Law Firm Blog, April 22, 2015

Employer Settles Federal Lawsuit Alleging Unlawful Withholding of Employee Retirement Contributions, The New Jersey Employment Law Firm Blog, February 19, 2015

Former Post-Doctoral Student Files Lawsuit Against University, Supervisor, and Fellow, Alleging Sabotage of Experiment and Hostile Work Environment, The New Jersey Employment Law Firm Blog, July 7, 2014

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