ERISA- Fourth Circuit Holds That Insurer Must Return Premiums Under ERISA Section 502(a)(3) (But It Doesn’t Have To Pay Life Insurance Benefits)

In McCravy v. Metropolitan Life Insurance Company, Nos. 10-1074, 10-1131 (4th Cir. 2011), the plaintiff, Debbie McCravy (“McCravy”), sued Defendant Metropolitan Life Insurance Company (“MetLife”), alleging, among other things, breach of fiduciary duty, and seeking damages under the “other appropriate equitable relief” provision of section 502(a)(3) of ERISA. The district court granted summary judgment to McCravy. However, it limited her damages to the return of her premiums. Both parties appealed. The Fourth Circuit affirmed the district court’s summary judgment.

At work, McCravy had participated in a life insurance and accidental death and dismemberment plan (the “Plan”). The Plan was issued and administered by MetLife. It provided that an insured-such as MCCravy- could purchase accidental death and dismemberment coverage for “eligible dependent children.” McCravy elected to obtain such coverage under the Plan for her daughter Leslie, with McCravy herself as the beneficiary. McCravy paid premiums, which were accepted and retained by MetLife. Later, Leslie was murdered at age 25. McCravy, filed a claim for benefits. MetLife denied McCravy’s claim on the grounds that Leslie did not, at the time of her death, qualify for coverage under the Plan’s “eligible dependent children” provision. The Plan defines “eligible dependent children” as children of the insured who are unmarried, dependent upon the insured for financial support, and either (a) under the age of 19 or (b) under the age of 24 if enrolled full-time in school. According to MetLife, because Leslie was 25 at the time of her death, she no longer met this definition As a result, MetLife denied McCravy’s claim and attempted to refund the premiums retained to provide coverage for Leslie. McCravy, however, refused to accept the refund and filed suit instead.

The Fourth Circuit Court said that, in a lawsuit seeking recovery under ERISA section 502(a)(3), the plaintiff is limited to equitable relief. The court cannot impose personal liability on the defendant, but it may restore to the plaintiff particular funds or property in the defendant’s possession . Here, McCravy seeks a monetary award in the amount of the life insurance benefits lost. But McCravy is not the true owner of any funds in MetLife’s possession, other than the premiums MetLife had received. Thus, the district court did not err in limiting McCravy’s damages to the premiums withheld by MetLife (presumably, the premiums must be returned because McCravy never had the coverage on her daughter’s life under the Plan). The Fourth Circuit Court also rejected recovery on the theory of estoppel, since (1) estoppel cannot be used to vary the terms of the Plan, under which-in this case- the life insurance benefits were not payable and (2) McCravy did not reasonably rely on any mistatement by MetLife.

Question: Does the Fourth Circuit’s ruling on the recovery permissible under section 502(a)(3) need to be thought through again under the Supreme Court’s ruling in Cigna Corp. v. Amara (5/16/11)? In this case, I’m not sure that there is actually any breach of fiduciary duty ( particularly a breach of disclosure duty) to be remedied under section 502(a)(3), so Cigna Corp. would not be applicable.

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