ERISA-Sixth Circuit Rules That The “Clear Notice” Standard Should Apply When Determining Whether To Impose the ERISA Penalty For Failing To Furnish A Document Upon Request

In Cultrona v. Nationwide Life Insurance Company, No. 13-3558, 13-3585 (6th Cir. 2014), the plaintiff, Nicole Cultrona (“Nicole”), filed suit against Nationwide Life Insurance Company (“Nationwide”), the Nationwide Death Benefit Plan (the “Plan”), the Nationwide Benefits Administrative Committee (the “BAC”), and StarLine Group (“StarLine”) , following the denial of her claim for accidental-death benefits and her subsequent exhaustion of the Plan’s internal administrative procedures. The claim was based on the death of Nicole’s husband, Shawn Cultrona, in June 2011. Nicole, an employee of a Nationwide affiliate, was a participant in the Plan. Among other benefits, the Plan provided coverage in the event of an accidental death. Shawn was a covered person under the Plan, and Nicole was the designated beneficiary for any benefits paid as a result of Shawn’s death. Following the parties’ cross-motions for judgment on the administrative record, the district court entered judgment in favor of the defendants on the claim for benefits , but assessed a statutory penalty of $55 per day (for a total of $8,910) against the BAC for its delay in providing Nicole with a copy of the accidental-death policy after her written request for relevant documents. One issue for the Sixth Circuit Court of Appeals (the “Court”): was the penalty valid?

The Court said that, in a November 18, 2011 (written) letter to BAC, Nicole’s counsel requested “all documents comprising the administrative record and/or supporting Nationwide’s decision.” The BAC, however, did not provide Nicole’s counsel with a copy of the accidental-death policy until June 12, 2012. Pursuant to ERISA section 502(c)(1), the district court imposed an $8,910 penalty against the BAC as a consequence of this delay. The list of documents that a plan administrator must furnish to a participant or beneficiary upon written request is set forth ERISA section 104(b)(4). These documents include a “copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is . . . operated.” Id. If a plan administrator fails to respond to a request for one or more of the above documents within 30 days, then the district court may in its discretion impose a penalty against the plan administrator of up to $110 per day under section 502(c)(1).

The Court continued by stating that the BAC argues that the district court erred in construing Nicole’s broadly worded document request as including a request for a copy of the accidental-death policy. In making this argument, the BAC urges the Court to adopt the “clear-notice” standard, under which claimants seeking documents pursuant to section 104(b)(4) must provide clear notice to the plan administrator of the information they desire. The Court decided to adopt this standard on a going-forward basis, including here. As to the instant case, the Court found no abuse of discretion by the district court in imposing the statutory penalty in question. Nicole’s counsel, true enough, broadly phrased the request as one for “all documents comprising the administrative record and/or supporting Nationwide’s decision.” The Court said that, although such language would not pass the clear-notice test for most of the documents identified in section 104(b)(4), one is hard-pressed to believe that the BAC should not have known that the accidental-death policy was the key document supporting its decision to deny Nicole’s claim. Similarly, the Court found that the district court did not abuse its discretion by imposing less than the maximum amount of the penalty, based on the lack of prejudice Nicole suffered, a factor which a court may take into account. As such, the Court affirmed the district court’s decision as to the assessment of the penalty.