This case arose from a Plan’s failure to add an employee’s dependents to an ERISA welfare benefit plan. As a benefit of employment, the employer offered its employees health insurance. Under the Plan, the employer was both a “participant” and the “Plan Administrator.” Employees were instructed to direct their inquiries about the Plan to their employer, which acted as the general intermediary between its employees and the Insurer.

In August of 1999, an employee inquired about dependent coverage for her daughters and by October, the employee had decided to add her daughters to the Plan. On October 19, 1999, she executed a final change of enrollment request. The employer forwarded the request the next day to their third-party administrator. Certificates of coverage were needed for both daughters, but documentation was provided only for one. Nevertheless, the employer began deducting a higher premium from the employee’s paycheck for the additional coverage for both daughters. Moreover, the employee was told several times that both daughters were covered and that she should continue to direct all insurance inquires to the employer rather than the TPA or insurer. At the end of December 1999, one of the daughters underwent optional surgery relying upon coverage under the Plan. The claim was submitted and denied. The employer had failed to add the daughter to the Plan. This was true despite the filling out of necessary paperwork, despite paying the increased premiums, and despite being told that the daughter was covered. The case was brought to court when the employee invoked ERISA § 502(a)(3), seeking to obtain equitable relief for the employer’s breach of fiduciary duty. Under this provision, a civil action may be brought by a participant, beneficiary, or fiduciary to enjoin any act or practice which violates any provision of this title or the terms of the plan, or to obtain other appropriate equitable relief to redress such violations or to enforce any provisions of the title or the terms of the plan. The employer, in its role as a plan administrator, was a fiduciary of the employee. They handled the paperwork for its employees and forwarded documents relating to coverage to third-party administrators for the insurer. The employer was responsible for remitting the premium payments as well. As such, the court concluded that the employer was a fiduciary in this case. The fundamental inquiry then became whether the employer breached its fiduciary duties in handling the requests for dependent coverage under the Plan. It was determined that they ultimately failed to contract for dependent coverage despite receiving written requests for additional coverage and collecting the greater premiums. The court concluded that the employer did not act prudently in administering the plan, breached its fiduciary duty, and as such, was liable.

This entry was posted on Wednesday, April 4th, 2007 at 4:41 pm and is filed under Claims Procedures, ERISA, Fiduciary Liability, Plan Language, Standings, Third Party Administrators. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.