A Life Insurance Fiduciary Breach Case Gets Set for Trial

Today’s blog post brings us another life insurance case in which an insurer and an employer were alleged to have breached their fiduciary duty to a plan participant and his beneficiary.    That case, Keith v. Metro….

By Adam Garner

Today’s blog post brings us another life insurance case in which an insurer and an employer were alleged to have breached their fiduciary duty to a plan participant and his beneficiary.    That case, Keith v. Metro. Life Ins. Co., et al., Case No. H-15-1030, 2017 U.S. Dist. LEXIS 37263 (S.D. Tex. March 15, 2017), is now headed to trial because the Court denied the parties’ cross motions for summary judgment yesterday.  A copy of the Court’s opinion can be found here.

This is the second life insurance fiduciary breach case I have written about in recent months.  (My earlier blog post can be found here).

The decedent in Keith was a Vice President of Central Bank from 2007 until 2013.  While employed by Central Bank, he enrolled in a welfare benefit plan offered by his employer that provided life insurance and related benefits (“the Plan”) through policies issued by MetLife, which served as the Plan’s claim administrator. The decedent named Linda Keith, the plaintiff, as the beneficiary of his life insurance policy.

Towards the end of his employment, the decedent was diagnosed with amyotrophic lateral sclerosis (“ALS” or Lou Gehrig’s Disease). The decedent began a leave of absence under the Family Medical Leave Act on March 6, 2013.  He never returned to work.  While on FMLA leave, the decedent applied and was approved for long term disability benefits under his employer’s disability plan, which MetLife also insured. During an exit interview from his employment, the decedent reiterated his desire: 1) not to make any changes to his insurance elections for plan year 2013-2014; and 2) to maintain Keith as the beneficiary for his life insurance policy.

MetLife subsequently generated an internal claim for continuation of group life insurance for the decedent.  Central Bank was not notified of the claim. On or about May 9, 2013, MetLife wrote the decedent a letter acknowledging receipt of the internal claim for continuation of his life insurance benefits.  The letter stated that the life insurance plan “‘includes a provision that continues your coverage while you are not actively at work,’ advised White that a representative ‘may be in contact’ and that ‘[n]o action is required from you at this time.’”   MetLife wrote to the decedent twelve days later and stated “that his insurance plan required him to be totally disabled continuously for nine consecutive months before he would be eligible for continuation of group life insurance coverage during his absence from work.”  Unfortunately for the decedent and the plaintiff, neither letter advised the decedent that there were other ways for him to maintain continuation of his life insurance coverage, or that the decedent did not qualify for continuation under the provision with the nine-month waiting period.

Central Bank, which appears to serve as the Plan’s Administrator, also received the second letter from MetLife.  A Senior Vice President of the bank called MetLife to “get an understanding of [its] meaning.”  She was told that the decedent was required to convert his life insurance to an individual policy to maintain coverage. Central Bank made its last premium payment on June 1, 2013, and the decedent’s employment formally terminated four days later. No one told the decedent that he needed to convert his policy to an individual policy to maintain coverage, or that he was required to make premium payments following his termination.  The decedent passed away on or about September 14, 2013.

After the plaintiff made a claim for life insurance benefits and her claim was denied, she filed suit against MetLife, Central Bank, and the Plan.  The plaintiff contends that the defendants breached their fiduciary duties to the decedent and to her by failing to adequately advise him of his right to convert his life insurance policy to an individual policy prior to his death.  Following the close of discovery, the parties all filed cross-motions for summary judgment.  The Court denied them all.

With respect to MetLife’s motion for summary judgment, it contended that it was not required as a Plan fiduciary to notify the decedent of his options to maintain his life insurance, because it was only a claim administrator.  Although it was “undisputed that MetLife had no routine obligation to notify plan participants of their options upon termination,” the Court found that there was a triable issue of fact as to whether MetLife acted as a fiduciary by generating an internal life insurance continuation claim on the decedent’s behalf and that its subsequent letters to the decedent were misleading or confusing.   Thus, it concluded that there were genuine issues of material fact as to whether MetLife “acted as a fiduciary and whether it breached a fiduciary duty to communicate in a manner calculated to avoid confusion and misunderstanding.”

With respect to Central Bank, its motion contended “that in the absence of a specific employee-initiated inquiry it had no fiduciary duty to notify [the decedent] of his option to convert his plan and that, at any rate, he was made aware of those options upon receipt of the summary plan description.”  The Court rejected that argument based on the facts of the case and noted that the bank’s Senior Vice President was aware of the decedent’s condition and was actively involved in the claim process by, among other things, contacting MetLife regarding its correspondence to the decedent.  Thus, the Court found that trier of fact could find that the Senior Vice President’s actions were fiduciary functions and she had a duty to prudently: 1) avoid misunderstanding and confusion on the part of the decedent; and 2) take steps to maintain the decedent’s coverage because of his misunderstanding or confusion.

Finally, the plaintiff’s motion for summary judgment was denied because a genuine issue of material fact remained as to whether she was damaged by any alleged fiduciary breach.  The Court noted that the trier of fact could conclude: 1) the decedent was ignorant of or confused and that confusion led to her loss of life insurance benefits; or 2) that the decedent “never intended to pay for life insurance out of his own pocket and would not have converted his policy regardless of the actions of MetLife or the Central Bank Defendants.”  Thus, the Court determined that the case could only be resolved at full trial on the merits.

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