District Court Finds ERISA Breach of Fiduciary Duty and Equitable Estoppel Claims Against Insurer Survive Despite Policy Termination

In Fleming et al. v. Minnesota Life Insurance Co. et al., No. CV 23-2558, 2025 WL 2165947 (E.D. Pa. July 29, 2025), the U.S. District Court for the Eastern District of Pennsylvania ruled that plaintiffs plausibly alleged claims for breach of fiduciary duty and equitable estoppel under ERISA, despite the insurer’s contention that coverage under the group policy had terminated when the insured resigned. The court dismissed several claims as preempted or unsupported but allowed critical ERISA-based claims to proceed, emphasizing the insurer’s repeated misrepresentations about continued coverage.

Background

The dispute arose after K. DiNicola, a long-time Vanguard employee, became disabled due to colorectal cancer and was approved for waiver of premium coverage under her group life insurance policy issued by Minnesota Life Insurance Company. The group policy, which included both basic and supplemental life insurance, totaled $1,656,000 and listed family members as beneficiaries.

Although DiNicola stopped working in January 2020 due to her illness, she received a Conversion Application from Minnesota Life and subsequently obtained an individual life policy for $100,000. Several months later, Minnesota Life notified her that the individual policy was being rescinded and refunded, and that her group policy remained in effect under the waiver of premium provision.

Between April and July 2021, Minnesota Life repeatedly confirmed to DiNicola—both in writing and through calls—that the group policy was active, even requesting updated medical documentation to support the continuation of coverage. DiNicola relied on these assurances and informed her family that coverage remained intact. She passed away in October 2021.

However, Minnesota Life later denied the beneficiaries’ claim for the group policy benefit, asserting that DiNicola had lost eligibility when she resigned and that the previous confirmations of coverage were clerical errors. Plaintiffs filed suit alleging various ERISA and state law claims, including breach of contract, fiduciary duty violations, equitable estoppel, bad faith, and statutory unfair practices.

Federal Court’s Decision

Judge Kai N. Scott dismissed with prejudice several claims against Minnesota Life, including:

• Count One (Declaratory Relief): Dismissed as conflict preempted by ERISA, which already provides for such relief under § 1132(a)(1)(B).
• Count Two (Benefits Due Under ERISA): Dismissed because the group policy unambiguously terminated coverage upon DiNicola’s resignation, and Minnesota Life’s denial of benefits was not arbitrary or capricious.
• Count Three (Breach of Contract): Dismissed as expressly preempted by ERISA.

However, the court allowed two key ERISA-based claims to proceed:

Count Four – Breach of Fiduciary Duty

The court found that Minnesota Life acted as a fiduciary when it repeatedly communicated to DiNicola that her group policy coverage remained intact. These misrepresentations were material and misleading, particularly given their frequency and the insurer’s request for further documentation—actions that implied the policy was active.

The court rejected Minnesota Life’s argument that reliance was unreasonable due to the group policy’s clear language. It distinguished the case from In re Unisys Corp. by noting that DiNicola did not rely on her own interpretation of policy documents, but rather on multiple direct confirmations from the insurer itself.

Further, the court concluded that DiNicola and her family reasonably relied on these representations to their detriment, making financial decisions in anticipation of the group benefit.

Count Five – Equitable Estoppel

Similarly, the court found that plaintiffs plausibly alleged an equitable estoppel claim under ERISA. The court noted that repeated misrepresentations from Minnesota Life constituted “extraordinary circumstances”—a required element under ERISA estoppel doctrine. The misstatements were not isolated; they formed a pattern of false assurances over months.

Although Minnesota Life argued that DiNicola could not have obtained alternative coverage due to her medical condition, the court held that this question required further factual development and was inappropriate for resolution at the motion to dismiss stage.

Claims Against Vanguard

The court dismissed the breach of contract claim against Vanguard (Count Six), finding that Vanguard was not responsible for paying benefits under the group policy. Plaintiffs’ allegations of a breach of employment contract lacked specificity and were unsupported.

As to the ERISA-based claims against Vanguard (Counts Seven and Eight), the court granted plaintiffs leave to amend, citing insufficient factual allegations of misleading communications attributable to Vanguard.

Key Takeaways

This decision underscores the importance of consistent and accurate communications from insurers. Fiduciaries who provide materially misleading information about coverage—even if contrary to the policy’s written terms—may still face liability under ERISA’s fiduciary and equitable estoppel provisions.

The ruling provides a significant reminder that plaintiffs may proceed with ERISA claims even when traditional benefit denial claims are foreclosed, particularly where insurers’ actions go beyond mere clerical error and create confusion regarding plan benefits.