Ninth Circuit Finds Employer Waived Life Insurance Policy’s Evidence of Insurability Requirement as Agent of Insurance Company

In Cho v. First Reliance Standard Life Insurance Company, No. 20-55314, __F.App’x__, 2021 WL 2885855 (9th Cir. July 9, 2021), First Reliance Standard Life Insurance Company (“First Reliance”) appealed the district court’s order awarding Plaintiff-Appellee Soohyun Cho the full amount of her dependent spouse’s life insurance policy and the district court’s dismissal of its third-party complaint against Giorgio Armani Corporation (“Armani”). The Ninth Circuit affirmed the district court’s judgment.

First, though the life insurance policy “was somewhat sloppily drafted,” the court agreed with First Reliance that the “Effective Date of Dependent Insurance” clause makes it clear that there is an evidence of insurability requirement for coverage and no benefits are due under the terms of the ERISA plan. Regardless, the court found that Cho is entitled to the benefits for which she paid. Armani administered the plan and handled nearly all the administrative responsibilities, including accepting Cho’s premiums without evidence of insurability for over a year. Armani’s actions made it such that Cho reasonably believed that no evidence of insurability was required. A “non-waiver clause” in the policy does not change this conclusion. In Salyers v. Metropolitan Life Insurance Company, 871 F.3d 934 (9th Cir. 2017), the court explained that the incorporation of agency principles into the federal common law governing employee benefit plans encourages diligent oversight and prevents an insurer from relying on a compartmentalized system to avoid responsibility. Enforcement of First Reliance’s non-waiver clause to vitiate Salyers would be “unfair and unjust.” Thus, “Armani is deemed to have waived on First Reliance’s behalf the evidence of insurability requirement.”

Separately, First Reliance cannot maintain a claim for contribution or indemnification against Armani because the ERISA statute cannot be read as providing for an equitable remedy of contribution in favor of a breaching fiduciary. Lastly, the court affirmed the award of attorneys’ fees to Cho and granted her request for fees incurred since the last award.