In Bilyeu v. Morgan Stanley Long Term Disability Plan, No. 10-16070 (9th Cir. 2012), the plaintiff, Leah Bilyeu (“Bilyeu”), was appealing: (1) the district court’s dismissal of her claim challenging the termination of her long-term disability (“LTD”) benefits under ERISA and (2) the summary judgment in favor of the insurer, First Unum Life Insurance Company (“Unum”), on Unum’s counterclaim for restitution of overpaid LTD benefits.
As to issue (1), the Ninth Circuit Court of Appeals (the “Court”) overturned the district court’s dismissal of Bilyeu’s claim. It ruled that the administrative exhaustion requirement should have been excused, because Bilyeu acted reasonably in light of Unum’s ambiguous communications and failure to engage in a meaningful dialogue. Here, the district court abused its discretion in failing to excuse Bilyeu.
As to issue (2), the Ninth Circuit likewise overturned the district court’s grant of Unum’s counterclaim for reimbursement of overpaid LTD benefits. The Court said that equitable relief is the only form of remedy available to Unum (see section 502(a)(3)(B) of ERISA). Here, Unum has not shown that it is seeking equitable relief because it has not satisfied the elements for an equitable lien by agreement, which is the only form of equitable relief Unum has asserted. These elements are not satisfied because the particular fund subject to the lien, having been dissipated, is no longer in Bilyeu’s possession. Unum thus seeks only the imposition of personal liability against Bilyeu, to be paid out of her general assets. That is quintessentially legal, rather than equitable, relief, and is therefore not allowed under ERISA.