The past six years have witnessed significant developments in the remedies available under the Employee Retirement Income Security Act of 1974 (ERISA), a law once reputed to offer limited relief for breaches of fiduciary duty. Since 2011, when the U.S. Supreme Court decided CIGNA Corp. v. Amara, 563 U.S. 421 (2011), and considerably expanded the universe of equitable remedies, there have been several notable circuit court decisions following course to remove the long-standing barriers to meaningful relief.
By way of background, ERISA Section 1132(a)(1)(B) provides that a civil action may be brought “by a participant, beneficiary, or fiduciary [ ] to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” ERISA Section 1132(a)(3) provides that a civil action may be brought “by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.”
In Varity Corp. v. Howe, 516 U.S. 489 (1996), The U.S. Supreme Court held that Section 1132(a)(3) provides for individualized equitable relief and acts as a safety net for injuries caused by violations that Section 502 does not elsewhere adequately remedy. The majority of circuits, including the 9th Circuit, interpreted Varity to hold that a claimant whose injury creates a cause of action under Section 1132(a)(1)(B) may not proceed with a claim under Section 1132(a)(3). In other words, courts were not permitting plaintiffs to bring simultaneous claims for relief where Section 1132(a)(1)(B) afforded a possible remedy.
On August 18, 2016, the U.S. Circuit Court of Appeals issued an amended order and denied rehearing in Moyle v. Liberty Mut. Ret. Ben. Plan, No. 13-56330, 823 F.3d 948 (9th Cir. 2016), a case seeking retirement plan benefits on behalf of a putative class of plan participants. The case was brought by former Golden Eagle Insurance Company employees against Liberty Mutual Insurance Company for past service credit they alleged Liberty Mutual promised them when it purchased Golden Eagle through a conservatorship sale and they became employees of Liberty Mutual. Liberty Mutual took the position that the terms of the retirement plan did not provide past service credit for benefits accrual and that it never made any representation to the employees that they would receive past service credit for their time with Golden Eagle. The former Golden Eagle employees brought several claims against Liberty Mutual, including a claim for entitlement to past service credit under the terms of the retirement plan under 29 U.S.C. Section 1132(a)(1)(B), and a claim for equitable relief under 29 U.S.C. Section 1132(a)(3) seeking plan reformation and surcharge for Liberty Mutual’s misrepresentations.
In Moyle, the district court found that the terms of the retirement plan did not provide the benefits the employees are seeking. The 9th Circuit agreed that Liberty Mutual’s reading of the retirement plan was reasonable and the employees do not prevail on the claim for benefits under Section 1132(a)(1)(B). The district court dismissed the equitable relief claim under Section 1132(a)(3) on the basis that Varity precludes the simultaneous claim. The 9th Circuit reversed the district court’s dismissal of this claim and held that the employees may pursue simultaneous claims under Section 1132(a)(3) and Section 1132(a)(1)(B) in light of Amara. In Amara, the Supreme Court held that Section 1132(a)(3) authorized equitable relief in the form of plan reformation, even though the plaintiffs also claimed relief under Section 1132(a)(1)(B). Although Amara did not explicitly state that litigants may seek equitable remedies under Section 1132(a)(3) if Section 1132(a)(1)(B) provides adequate relief, Amara’s holding in effect does precisely that. The 9th Circuit explained that Varity did not explicitly prohibit a plaintiff from pursuing simultaneous claims under Section 1132(a)(1)(B) and Section 1132(a)(3). Rather, plaintiffs are prohibited from obtaining double recoveries when Section 1132(a)(1)(B) provides a remedy similar to what they seek under Section 1132(a)(3).
Just recently, the 8th Circuit Court of Appeals in Jones v. Aetna Life Ins. Co., No. 16-1714, __F.3d__, 2017 WL 1825373 (8th Cir. May 8, 2017) reversed a dismissal of a Section 1132(a)(3) claim brought in connection with a denial of long term disability benefits. In Jones, the plaintiff asserted a Section 1132(a)(1)(B) claim for denial of long term disability benefits along with a Section 1132(a)(3) claim for breach of fiduciary duty related to the claims-handling process. Regarding the latter, Jones alleged that Aetna breached its fiduciary duty to her as a participant by (among other things) failing to obtain medical records, failing to tell her where to send evidence of disability, and using claims examiners with conflicts of interest.The district court dismissed the 1132(a)(3) claim on the basis that it was duplicative of the 1132(a)(1)(B) claim. The 8th Circuit reversed. It found that these two claims assert two different theories of liability. It explained:
But Aetna’s alleged liability under (a)(3) flows from the process, not the denial of benefits itself. A plan administrator is not liable under (a)(1)(B) for administering a claims process contrary to its fiduciary obligation to carry out its duties solely for participants and beneficiaries. Even if an administrator made a decision with procedural irregularities that ‘serious[ly] breach’ its duties to its beneficiary, it is not necessarily liable under (a)(1)(B); instead, the serious breach prompts more searching review of the denial-of-benefits claim.
Id. at *4. The court did affirm the district court’s judgment against Jones on her denial-of-benefits claim, finding that Aetna’s denial was not unreasonable. But Jones’s case gets a second chance at life through the Section 1132(a)(3) claim. Moyle and Jones are landmarks in the trail towards expanded remedies for aggrieved ERISA plan participants. This is a trail we are happy to help blaze.
If you have a long term disability claim against Aetna, or any other disability insurer, contact one of our knowledgeable ERISA attorneys today.
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