Sixth Circuit Finds Employer Is Not Liable under ERISA for Erroneous Benefit Statement Promising Greater Amount of Disability Insurance Benefits

In Higgins v. Lincoln Electric Company, Inc., No. 23-5862, 2025 WL 213846 (6th Cir. Jan. 16, 2025), the court addressed an ERISA-estoppel claim, focusing on the discrepancy between the long-term disability (LTD) benefits promised to Plaintiff-Appellant Jerry Higgins and the benefits he ultimately received based on a cap in the governing disability plan document. The district court dismissed Higgins’s claim under Federal Rule of Civil Procedure 12(b)(6), a decision that the Sixth Circuit Court of Appeals affirmed. The crux of the dispute revolved around whether Higgins could successfully establish an ERISA-estoppel claim despite the clear terms of the plan documents.

Higgins, employed by Lincoln Electric Company, relied on a Benefit Election Form provided by the company, which suggested that his annual LTD benefits would amount to $92,260.80. This representation led him to make financial and insurance decisions, specifically forgoing additional supplemental disability insurance, based on the belief that he was adequately covered. However, upon becoming disabled, Higgins was informed that according to the official plan documents, his benefits were capped at $60,000 annually. This revelation prompted Higgins to file a lawsuit, asserting that Lincoln Electric should be estopped from denying him the higher benefits stated on the Benefit Election Form.

To prevail on an ERISA-estoppel claim when the plan terms are unambiguous, a plaintiff must meet a stringent eight-element standard. This heightened standard includes demonstrating a material misrepresentation, the defendant’s awareness of the true facts, the defendant’s intent for the plaintiff to rely on the misrepresentation, the plaintiff’s unawareness of the true facts, and the plaintiff’s detrimental and justifiable reliance on the misrepresentation, among other elements. Additionally, there must be a written misrepresentation, the plan’s terms must not allow for individual calculation of benefits, and there must be extraordinary circumstances, such as affirmative misconduct.

Higgins contended that the district court erred by applying this demanding standard, arguing instead that either the plan was ambiguous or that he met the requirements under the less demanding standard for equitable estoppel. However, the Sixth Circuit found that Higgins failed to plausibly allege several of the critical elements required by the heightened standard. Specifically, he did not demonstrate detrimental and justifiable reliance because he had access to the official plan documents, which clearly outlined the $60,000 cap. The court found that reliance on the contradictory Benefit Election Form was unreasonable as a matter of law.

Moreover, Higgins did not adequately allege that Lincoln Electric acted with intent to deceive or with gross negligence akin to constructive fraud. He also failed to show that Lincoln Electric intended for him to rely on the incorrect information or that the company stood to gain from such reliance. The court noted that Higgins did not establish the presence of extraordinary circumstances that might override the clear terms of the plan, such as repeated assurances or affirmative misconduct.

Ultimately, the Sixth Circuit underscored the primacy of written plan documents in ERISA cases and the stringent requirements for altering benefits through estoppel when the terms of a plan are clear and unambiguous. The court’s decision to affirm the district court’s dismissal of Higgins’s claim highlights the challenges plaintiffs face in establishing ERISA-estoppel claims and serves as a reminder to employees to carefully review official plan documents rather than relying on potentially erroneous supplementary forms. This case reinforces the importance for employers to ensure accuracy and clarity in all communications regarding employee benefits to avoid legal disputes and potential liability.