ERISA Surcharge Against an Employer-Fiduciary: New Mexico District Court Lets a Lapsed Group Life Insurance Claim Proceed

In Vigil v. Taos Ski Valley, Inc., No. 1:25-cv-01323-KWR-JFR, 2026 WL 2883448 (D.N.M. Sept. 25, 2026), United States District Judge Kea W. Riggs denied an employer’s motion for judgment on the pleadings and allowed an ERISA beneficiary’s claim for equitable surcharge under Section 502(a)(3) to proceed. The decision works through whether make-whole monetary relief remains available under Section 502(a)(3) in the Tenth Circuit after CIGNA Corp. v. Amara, 563 U.S. 421 (2011), whether such relief requires an identifiable res, and whether Plaintiff pleaded each element of a surcharge claim against her late husband’s employer.

Plaintiff’s now-deceased husband, whom the court referred to as “the Insured,” received group life insurance through his employment with Defendant, comprising employer-paid Personal Life Insurance and employee-paid Voluntary Life Insurance funded through payroll withholdings remitted to Lincoln National Life Insurance Company. After the Insured stopped active work in November 2022 and was terminated in early 2023, Defendant initiated a long-term disability claim that Lincoln approved. Following the termination, the Insured and Plaintiff emailed Defendant to ask about maintaining coverage. The Insured died in June 2024. When Plaintiff filed her claim, Lincoln offered to reinstate coverage and pay the claim if Defendant paid back premiums, but Defendant declined and, Plaintiff alleged, never relayed the offer to her. Lincoln denied the claim and the appeal. Plaintiff brought a single count under Section 502(a)(3) seeking equitable surcharge measured by the roughly $95,000 in lost proceeds.

Is equitable surcharge still available under ERISA Section 502(a)(3) after CIGNA?

Defendant’s gating argument was that Callery v. U.S. Life Insurance Co., 392 F.3d 401 (10th Cir. 2004), forecloses what amounts to compensatory relief under Section 502(a)(3). The court held that Callery‘s reasoning rested on a premise the Supreme Court later rejected. Callery reasoned that a defendant’s fiduciary status was immaterial to whether damages qualify as appropriate equitable relief. Amara held the opposite, that the identity of the defendant is pivotal and that make-whole monetary relief, historically called a surcharge, is available against a fiduciary. Because intervening Supreme Court authority ran contrary to the prior panel decision, the court treated Amara as controlling. See In re Smith, 10 F.3d 723 (10th Cir. 1993).

The court rejected Defendant’s contention that Amara left Callery intact. It reasoned that footnote three of Montanile v. Bd. of Trustees of National Elevator Industry Health Benefit Plan, 577 U.S. 136 (2016), addressed only equitable liens and did not disturb surcharge, and that neither Mertens v. Hewitt Associates, 508 U.S. 248 (1993), nor Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002), reached the surcharge remedy at issue. The court added that even if Amara’s Section 502(a)(3) discussion were dicta, recent and unenfeebled Supreme Court dicta is nearly as binding as a holding. See Gaylor v. United States, 74 F.3d 214 (10th Cir. 1996).

The court reinforced its reading with the Tenth Circuit’s own treatment. In Stark v. Reliance Standard Life Insurance, 142 F.4th 1252 (10th Cir. 2025), the panel expressly declined to resolve the surcharge question but surveyed the circuits recognizing the remedy after Amara. And in the unpublished decision Watson v. EMC Corp., No. 1:19-CV-02667, 2024 WL 501610 (10th Cir. Feb. 9, 2024), the Tenth Circuit reversed the denial of a surcharge claim seeking the value of a lost life insurance policy against an employer-fiduciary, on facts resembling this case, without treating Callery as an obstacle.

Does an ERISA surcharge claim require an identifiable res?

Defendant argued in the alternative that no res existed for equitable relief to attach, relying on Montanile and Teets v. Great-West Life & Annuity Insurance Co., 921 F.3d 1200 (10th Cir. 2019). The court disagreed. It read Montanile‘s identifiable-fund requirement as limited to equitable liens and restitution, and it distinguished surcharge as a remedy for a fiduciary’s breach that requires no traceable property. The court noted that Amara, which expressly recognized surcharge, makes no mention of a res.

Why could Plaintiff not proceed on the March 2023 nondisclosure theory?

Plaintiff’s single count rested on two independent grounds: Defendant’s alleged failure to respond to the March 2023 inquiry about continued coverage, and its failure to disclose Lincoln’s June 2024 reinstatement offer. The court considered Exhibit B to Defendant’s Answer, an email showing Defendant responded to the March 2023 inquiry two days later, because the document was referenced in and central to the Complaint. See GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381 (10th Cir. 1997); Zevallos v. Allstate Property & Casualty Co., 776 F. App’x 559 (10th Cir. 2019). Because a properly considered document controls over contradictory allegations, Plaintiff’s claim that Defendant never responded was not a well-pleaded fact, and she could not proceed on that theory. The court declined to decide whether the content of the March 2023 response satisfied Defendant’s fiduciary obligations, and it held that abandonment of one ground did not defeat a single count resting on a second, independent ground.

Did Plaintiff plead the elements of an ERISA surcharge claim?

Drawing the elements from Amara, the court required allegations that Defendant acted as a fiduciary, breached a duty in that capacity, caused actual harm, and that the breach caused the harm. On fiduciary status, the court disregarded the bare label but credited allegations that Defendant served as Plan Administrator, withheld and remitted premiums, assisted with the LTD claim, and communicated with Lincoln about coverage, which plausibly alleged functional fiduciary authority under Teets. The court rejected Defendant’s argument that its duties ended when coverage terminated, reasoning that fiduciary duties are functional rather than temporal.

On breach, the court recognized an affirmative duty to disclose material information, finding persuasive out-of-circuit authority including Farr v. U.S. West Communications, Inc., 151 F.3d 908 (9th Cir. 1998), Bixler v. Central Pennsylvania Teamsters Health & Welfare Fund, 12 F.3d 1292 (3d Cir. 1993), and Eddy v. Colonial Life Insurance Co., 919 F.2d 747 (D.C. Cir. 1990), and it held that the failure to relay Lincoln’s reinstatement offer plausibly alleged breach. On harm, the court accepted the lost policy proceeds as sufficient actual harm under Amara’s flexible standard. On causation, the court held that the June 2024 nondisclosure independently supported causation as a distinct lost opportunity to cure the lapse, separate from the 2023 events.

The court concluded that Plaintiff’s requested relief was not foreclosed and that she had pleaded each element of a surcharge claim, and it denied Defendant’s motion for judgment on the pleadings.