In Edmonson v. Lincoln National Life Insurance Company, No. 12-1581 (3rd Cir. 2013), the plaintiff, Connie Edmonson (“Edmonson”) ,was a beneficiary of a life insurance plan, established by her employer, which insured the life of her husband. When Edmonson’s husband died, the defendant, Lincoln National Life Insurance Co. (“Lincoln”), chose to pay her benefits using a retained asset account, which allowed it to hold onto the benefits and invest them for its own profit until Edmonson affirmatively chose to withdraw them from the account. Edmonson brought this suit, claiming that Lincoln, by profiting under this arrangement, breached its fiduciary duty of loyalty under ERISA and sought disgorgement of the profit Lincoln earned by investing the benefits owed to her. The district court granted summary judgment in Lincoln’s favor, concluding Lincoln was not acting in a fiduciary capacity when it took the foregoing actions. Edmonson appeals.
In analyzing the case, the Third Circuit Court of Appeals (the “Court”) concluded that Lincoln did not breach its fiduciary duties under ERISA when it chose to pay Edmonson with a retained asset account and then invested the retained assets for its own profit. The decision to pay Edmonson with the retained asset account did not breach Lincoln’s duty of loyalty to her. And when Lincoln then invested the retained assets, those assets were not plan assets, so that it was not acting in a fiduciary capacity. As such, the Court affirmed the district court’s summary judgment.