The case of Kenseth v. Dean Health Plan, Inc., No. 11-1560 (7th Cir. 2013), involved the second appeal of plaintiff Deborah A. Kenseth (“Kenseth”) in her suit under ERISA against Dean Health Plan, Inc. (“Dean”), her health insurer, seeking a remedy for an asserted breach of fiduciary duty. The district court had twice granted summary judgment in favor of Dean. However, after the district court ruled against Kenseth for the second time, but before Kenseth filed this appeal, the Supreme Court issued its opinion in Cigna Corp. v. Amara, clarifying the relief available for a breach of fiduciary duty under ERISA. Upon reviewing this appeal, the Seventh Circuit Court of Appeals (the “Court”) concluded that, under Amara, Kenseth has a viable claim for equitable relief under section 502(a)(3) of ERISA, and it again vacated the district court’s decision and remanded the case back to the district court for further proceedings.
In this case, Kenseth’s doctor advised her to have an operation to resolve severe acid reflux and other serious health problems that were the result of complications from an earlier surgery. At the time of this operation, Kenseth was covered at work by a health care plan (the “Plan”), which was insured and administered by Dean. Prior to the operation, Kenseth called Dean’s customer service number and spoke with a customer service representative. The representative told Kenseth that the operation was covered by the Plan, subject to a $300 co-payment. The representative did not warn Kenseth and she could not rely on the representative’s statement about the operation.
The operation was performed on December 6, 2005. On the next day, Dean decided to deny coverage for the operation, and all associated services, based on language in the Plan’s Certificate of Coverage. Kenseth was discharged from the hospital on December 10, 2005, but was readmitted from January 14 through January 30, 2006, for complications from the operation, including an infection. Dean denied coverage for the second hospitalization as well. Kenseth was sent a bill for $77,974 for the operation and related services. Kenseth subsequently filed suit against Dean under ERISA, alleging primarily that Dean had breached its fiduciary duty because (1) the customer representative provided Kenseth with wrong information about Plan coverage, (2) Dean failed to provide an authoritive way to obtain a determination as to whether surgery was covered and (3) Dean provide and unclear and misleading Certificate of Coverage for the Plan.
In analyzing the case, the Court concluded-as it did in the first appeal- that the foregoing allegations establish the possibility of a fiduciary breach, so that the case survives summary judgment. The issue now: could Kenseth be entitled to receive monetary damages (to pay the $77,000 plus bill) to make her whole for this fiduciary breach? The Court said the following. In Amara, the Supreme Court significantly altered the understanding of equitable relief available under section 1132(a)(3) of ERISA. Among other things, the Supreme Court indicated that “surcharge” against fiduciary-a monetary remedy- is a potential remedy under that section. The fiduciary could be surcharged only upon a showing of actual harm. This harm might consist of detrimental reliance or the loss of a right protected by ERISA. The district court needs to make a determination as to whether surcharge is available to Kenseth in this case. Surcharge will be available if she can in fact demonstrate that Dean breached its fiduciary duty to her and that the breach caused her damages.