Sometimes, in the course of pursuing a claim for insured disability benefits, the plaintiff may feel that the insurance company has instituted a practice in which it deliberately fails to afford fair and reasonable treatment of the claims submitted, that is, it is using a “bad faith claims handling practice”. But can the plaintiff do anything about this, such as force the company to change its claims review practice? The district court faced this question in Davis v. Unum Group, Civil Action No. 03-940 (E.D. PA 2011).
In this case, the plaintiffs brought suit against disability insurer and administrator Unum Group and its predecessors and subsidiaries (“Unum”). The plaintiffs alleged, among other things, that in deciding to terminate disability benefits, Unum had engaged in a scheme by which it implemented bad faith claims handling practices resulting in the improper denial or termination of disability benefit claims. Based on this allegation, the plaintiffs had sought injunctive relief under sections 502(a)(2) and (3) of ERISA. Specifically, they asked the Court to appoint a Special Master to supervise the establishment by Union of an independent and fair procedure to review and evaluate all long-term disability claims.
However, the Court ruled that this relief is not available to the plaintiffs under those sections. First, given that no class has been certified, the plaintiffs cannot seek redress for the injuries of others. Second, they cannot seek this relief on their own behalf. Of the two plaintiffs, one has been paid his disability benefits in full by his employer, and therefore has no standing to seek any additional relief under ERISA. The second plaintiff has an adequate legal remedy for the termination of her disability benefit under section 502(a)(1)(B) of ERISA (which generally allows a participant to sue for benefits). Under case law, this precludes relief under section 502(a)(3) (which generally permits a participant to seek injunctive and other equitable relief). Further, since, according to the Court, the plaintiffs offered no evidence that Unum’s procedures did not comply with ERISA, the Court felt that there was no meaningful relief to be gained by granting the plaintiffs’ request. As to section 502(a)(2) of ERISA (which generally allows a plan participant to sue for breach of fiduciary duty), under case law, that section allows an action on behalf of the plan, and does not provide for individual relief. Since the plaintiff is seeking individual relief, section 502(a)(2) is not available. Based on the foregoing, the Court denied the plaintiffs request for injunctive relief which would require Unum to change its disability claims review practices.