In Matter of First Impression, Eleventh Circuit Holds ERISA Beneficiary Can Recover Monetary Benefits Lost Due to a Breach of Fiduciary Duty

In Gimeno v. NCHMD, Inc., NCH Healthcare System, Inc., No. 21-11833, __F.4th__, 2022 WL 2309436 (11th Cir. June 28, 2022), a matter of first impression, the Eleventh Circuit considered whether Section 1132(a)(3) of ERISA creates a cause of action for an ERISA beneficiary to recover monetary benefits lost due to a fiduciary’s breach of duty in the plan enrollment process. In following the Supreme Court and its sister circuits which have recognized that courts in equity could traditionally order an “equitable surcharge” to be paid by a breaching fiduciary to remedy a loss to a beneficiary, the court held that a beneficiary of an ERISA plan can bring a lawsuit under Section 1132(a)(3) against a fiduciary to recover benefits that were lost due to the fiduciary’s breach of its duties.

In this case, Plaintiff-Appellant Raniero Gimeno was denied $350,000 in supplemental life insurance benefits under the Defendant’s life insurance plan because the insured, Gimeno’s late spouse, Justin Polga, did not submit an evidence of insurability (“EOI”) form required for coverage. Polga was employed by NCHMD, Inc., a subsidiary of NCH Healthcare System. NCHMD processed Polga’s enrollment paperwork and never informed him that EOI was necessary or missing. It then collected premiums for the supplemental coverage for three years and provided him with a benefits summary stating that he had the coverage. When Polga died, the company’s life insurance carrier refused to pay any supplemental benefits because of the lack of EOI. Gimeno sued Defendants under Section 1132(a)(1)(B) and they moved to dismiss on the basis that they are not proper defendants for a claim for benefits since they had no obligation to award benefits. Gimeno sought to amend his complaint to allege a claim for appropriate equitable relief against Defendants under Section 1132(a)(3), but the district court granted Defendants’ motion and denied Gimeno the opportunity to amend his complaint. The court found that the amendment would be futile because compensatory relief in the form of lost insurance benefits is not “equitable” and not available under ERISA.

On de novo review of the district court’s dismissal and denial of leave to amend, the Eleventh Circuit sided with Gimeno. First, the court found that Section 1132(a)(3) does permit him to seek to recover money equal to the insurance benefits that were not paid due to Defendants’ alleged breach of fiduciary duty. Section 1132(a)(3) authorizes a beneficiary to sue for “appropriate equitable relief” for violations of the statute or terms of the plan. “Equitable relief refers to those categories of relief that were typically available in equity before the fusion of courts of equity and courts of law.” (cleaned up). Certain kinds of monetary relief were typically available in equity, including the imposition of an equitable surcharge, which is an order that a trustee pay a beneficiary for a loss due to a breach of fiduciary duty. The Supreme Court recognized that Section 1132(a)(3) permits a beneficiary to sue an ERISA fiduciary for this kind of relief. See CIGNA Corp. v. Amara, 563 U.S. 421, 441–42 (2011). Every circuit to address this issue since Amara has recognized that Section 1132(a)(3) creates a cause of action for monetary relief for breaches of fiduciary duty. The court also found that Gimeno adequately alleged that Defendants are fiduciaries. Even though NCH Healthcare was named as the plan administrator in the plan documents, NCHMD engaged in enrollment functions sufficient to render it a fiduciary. For these reasons, Gimeno has sufficiently alleged that Defendants are fiduciaries and he can sue them for lost benefits.

The court also addressed Defendants’ argument that Gimeno improperly pleaded alternate claims under Section 1132(a)(1)(B) and (a)(3). The court clarified its prior holding in Ogden v. Blue Bell Creameries U.S.A., Inc., 348 F.3d 1284 (11th Cir. 2003). A plaintiff can plead as many alternate claims as he wants but if he has an adequate remedy at law under Section 1132(a)(1)(B), then he cannot succeed on a Section 1132(a)(3) claim. Here, Gimeno does not have an adequate remedy at law under (a)(1)(B) since benefits are not payable under the terms of the Plan due to lack of EOI. The court reversed the district court’s judgment and remanded the matter to allow Gimeno to bring a breach of fiduciary duty claim.