District Court Finds Employer Breached Its Fiduciary Duty Under ERISA By Failing to Provide Adequate Information Regarding Conversion of Group Life Insurance Coverage

In Watson v. EMC Corp., No. 1:19-CV-02667-RMR-STV, 2025 WL 1333806 (D. Colo. May 7, 2025), on the parties’ joint motion for determination, Colorado District Judge Regina M. Rodriguez found in favor of Plaintiff and against Defendant EMC Corporation, awarding relief in the form of a surcharge as a remedy for Plaintiff’s request for equitable relief on her claim for breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 (“ERISA”).

This case addressed Plaintiff Marie Watson’s pursuit of equitable relief following her husband’s inability to convert life insurance benefits due to allegedly misleading information provided by his former employer, EMC Corporation. Marie Watson filed a lawsuit against EMC, her late husband’s former employer, for breach of fiduciary duty under ERISA after being denied life insurance benefits. The core of her claim was that EMC, acting as the plan administrator, failed to provide complete and accurate information regarding the conversion of group life insurance to an individual policy, which ultimately led to the lapse of coverage upon her husband’s unexpected death. The Tenth Circuit previously reversed a summary judgment that denied Watson equitable relief, remanding the case for further proceedings.

ERISA imposes stringent fiduciary duties on plan administrators, mandating them to act solely in the interest of plan participants and beneficiaries. Under 29 U.S.C. § 1132(a)(3)(B), beneficiaries can seek “appropriate equitable relief” for breaches of fiduciary duty. Ms. Watson argued that EMC breached its fiduciary duty when it responded to Mr. Watson’s written inquiry about the status of his employment benefits at the time he left his job under a voluntary separation program. At that time, EMC replied that if Mr. Watson continued to pay for his benefits they would remain active during the transition but neglected to mention that his life insurance coverage under the group policy had already ended and that he needed to promptly convert his coverage to an individual policy. If EMC had informed Mr. Watson that he needed to convert his life insurance coverage and given him instructions on how to do so, Ms. Watson argued that he would have, and that she would have then been eligible for benefits following her husband’s death.

The principal question addressed by the court was whether EMC’s response to Mr. Watson’s inquiry about continuing his benefits was adequate and met the fiduciary standards dictated by ERISA. The court concluded that EMC’s reply was deficient. Mr. Watson’s email, sent shortly after the expiration of his pay continuation period, sought guidance on maintaining benefits at the employee rate. EMC’s response failed to address the necessity of converting life insurance benefits to an individual policy and did not delineate the specifics of what coverage would be continued.

The court emphasized the fiduciary’s duty to provide complete and accurate information, especially in response to direct inquiries from beneficiaries. Drawing from precedent across multiple circuits, the court underscored that fiduciaries are obligated to proactively offer all pertinent details, even if a beneficiary does not explicitly ask for them. The court rejected EMC’s defense that Mr. Watson’s lack of specificity absolved them of this duty, affirming that technicalities should not be exploited to avoid fiduciary responsibilities.

Having established the breach, the court turned to the question of appropriate relief. The court found that a surcharge was justified, aligning with the Supreme Court’s recognition that such relief falls within the scope of ERISA’s equitable remedies. Watson demonstrated actual harm: the loss of life insurance benefits directly attributable to EMC’s breach. Therefore, the court awarded a surcharge equal to the policy’s value—$633,000—minus any premiums that would have been paid to maintain the coverage, thus preventing a windfall to the plaintiff.

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