ERISA-Fifth Circuit Rules That Participant Does Not Have Standing To Sue For Life Insurance Benefits Under ERISA

In Caples v. U.S. Foodservice, Inc., No. 11-30120 (5th Cir. 2011), the plaintiff, Dana Caples (“Caples”), was appealing a summary judgment against her, and in favor of the defendants, U.S. Foodservice, Inc. (“USF”) and Hewitt Associates, LLC (“Hewitt”). In this case, Caples had been married to David Caples (“Mr. Caples”), but they later separated and divorced. Mr. Caples had a son, Daniel, who was not Caple’s biological child. Mr. Caples had life insurance coverage under an employer-sponsored plan (the “Plan”). Mr. Caples died in September 2007 of an apparent suicide. At the time of his death, he had not designated a beneficiary under the Plan. Hewitt was managing USF’s employee benefits plans. Prudential Insurance Company of America (“Prudential”), the insurer and plan administrator under the Plan, was informed by USF through Hewitt that Mr. Caples had died without a designated beneficiary. According to the terms of the Plan, Prudential paid $56,000 to Daniel as Mr. Caples’s sole surviving child. Due to the divorce, he had no surviving spouse.

Caples sued Prudential in state court for the $56,000, and Prudential removed to federal court. Caples amended to add USF and Hewitt as defendants and dismissed Prudential. The district court then had Caples submit her claim to Prudential for administrative review. Based on the evidence filed by all parties, Prudential found that it was correct to pay Daniel the $56,000 at issue. Her administrative remedies under ERISA exhausted, Caples brought this suit in district court under ERISA. The question for the Fifth Circuit Court of Appeal s (the “Court”): does Caples have standing to sue under ERISA?

The Court said that, to have standing, Caples must be a “beneficiary”, which ERISA defines, for this purpose, as a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder (section 3(8) of ERISA). Here, Caples was not designated as beneficiary by the participant. Prudential had confirmed this, and had substantial evidence to support its findings (and, since it had discretionary authority under the Plan, Prudential’s findings were entitled to a deferential review by the courts). Caples was not otherwise entitled to a benefit under the Plan’s terms. Based on the foregoing, the Court concluded that Caples is not a beneficiary with standing to sue under ERISA. As such, the Court upheld the summary judgment against her.

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