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Eleventh Circuit Affirms Allstate Retirees Are Not Entitled to Lifetime Vesting in Life Insurance

Yesterday, the Eleventh Circuit Court of Appeals issued its decision in Klaas v. Allstate Ins. Co., No. 20-14104, __F.4th__, 2021 WL 6124337 (11th Cir. Dec. 28, 2021). This matter involves consolidated putative class actions brought by retirees of Allstate Insurance Company who allege that Allstate violated ERISA § 502(a)(1)(B) by terminating the life insurance benefits for retirees and violated ERISA § 502(a)(3) by breaching its fiduciary duty with respect to representations it made about the life insurance being “paid up” for the rest of their lives. The district court granted summary judgment to Allstate on these claims. The Eleventh Circuit concluded that (1) Allstate did not violate ERISA § 502(a)(1)(B) because it had the authority under the Summary Plan Descriptions (“SPDs”) to terminate the retiree life insurance benefits for both putative classes and (2) any claims for breach of fiduciary duty under ERISA § 502(a)(3) were time barred.

In the early 1980s, Allstate distributed booklets to its employees discussing retirement benefits available to them, including retiree life insurance. The booklets described the retiree life insurance benefit as being “paid up” or provided at “no cost.” Starting in 1990, Allstate distributed SPDs for its group life and accidental death and dismemberment insurance which described the retiree life insurance benefits as “provided at no further cost to” the retiree. However, the SPDs, unlike the earlier booklets, contained reservation-of-rights language. Specifically, Allstate reserved “the right to change, amend or terminate the Plan or the provisions of the Plan at any time.” The language in the SPDs distributed throughout the 1990s altered slightly but continued to disclaim creating any vested rights to benefits. In 2001, Allstate issued SPDs called Allstate Cafeteria Plans which described the retiree life insurance benefits as provided at no cost to retirees and included reservation-of-rights language similar to the earlier SPDs. Allstate representatives also made oral statements to employees through 2006 indicating that the life insurance is paid up for retirees and would continue without further contribution. In 2013, Allstate informed its retirees that starting January 1, 2016, it would terminate life insurance coverage for individuals who retired after 1990. Allstate choose 1990 since that was the first time an SPD was issued that contained a reservation-of-rights provision.

The two putative classes are the Turner retirees and the Klaas retirees. The Turner retirees worked for Allstate prior to 1990 but did not retire until after 1990. The Klaas retirees are those retirees who retired in November 1995 as part of a Special Retirement Opportunity (“SRO”) whereby they were offered an additional three years to their length of service to the company and five years to their age for purposes of calculating their entitlement to enhanced retirement benefits. The three-year credit could be used to reach the ten-year participation requirement needed for retiree life insurance eligibility. Employees who accepted the SRO had to sign a “General Release and Waiver Agreement” which waived any claims they had against Allstate related to their employment or decision to retire.

The Eleventh Circuit determined that Allstate’s actions do not give rise to ERISA § 502(a)(1)(B) claims for either class because under the SPDs Allstate could terminate the life insurance benefits. Construing the SPDs’ reservation-of-rights provisions as modifying the guarantee of life insurance “at no cost” is consistent with how its sister circuits have interpreted similar provisions. The court refused to consider extrinsic evidence to interpret the unambiguous plan terms because it would run counter to the Supreme Court’s statement in M & G Polymers USA, LLC v. Tackett, 574 U.S. 427 (2015) that ERISA welfare benefit plans should ordinarily be enforced as written. With respect to the Klaas retirees, they received an SRO booklet that contained reservation-of-rights language which allowed Allstate to terminate retirement benefits at any time. The Klaas retirees did receive the year and age credits promised by the SRO in consideration for a release of claims so allowing Allstate to terminate retirement benefits did not make that consideration illusory. Even if Klaas did not receive consideration, that would violate the ADEA, not ERISA.

Lastly, the court agreed with the district court that the retirees’ breach of fiduciary duty claims are time barred. Applying 29 U.S.C. § 1113’s six-year repose period, the court concluded that any action by Allstate that could give rise to a breach of fiduciary duty claim took place outside the repose period. Allstate last made representations outside of the SPDs about the life insurance benefits in 2006. The Turner named plaintiffs did not file suit until September 2013. Klaas alleged that Allstate told him his life insurance would remain in force until his death if he accepted the SRO. These representations must have taken place before November 1995 since that was the deadline to accept the SRO. Klaas did not file suit until March 2015. To the extent that Allstate’s 2006 comments created confusion about the life insurance benefit, it issued SPDs thereafter that included reservation-of-rights provisions which notified the retirees that Allstate could terminate benefits at any time. The court rejected the argument that the six-year repose period did not run until Allstate informed them in 2013 that it would no longer pay for retiree life insurance. Allstate did not act as a fiduciary when it terminated the benefits in 2013.


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*Please note that this blog is a summary of a reported legal decision and does not constitute legal advice. This blog has not been updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The case above was handled by other law firms, but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Roberts Disability Law, P.C. may be able to advise you so please contact us.

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