Tenth Circuit Revives ERISA Breach of Fiduciary Claim Against Employer Based on Misleading Email About Continued Life Insurance Coverage

In Watson v. EMC Corp., No. 22-1356, 2024 WL 501610 (10th Cir. Feb. 9, 2024) (Before: Matheson, Kelly, and Eid, Circuit Judges), the Tenth Circuit reversed and remanded the district court’s judgment against Plaintiff Watson, finding that the district court erred in its legal analysis of Plaintiff’s ERISA § 502(a)(3) claim against her deceased husband’s former employer related to an alleged miscommunication about her husband’s continued life insurance coverage.

Thayne Watson worked for EMC Corporation and was a participant in its ERISA-governed health and welfare benefit plans, which included a group basic life insurance policy with Metropolitan Life Insurance Company. When Dell purchased EMC in 2015, Mr. Watson accepted a voluntary separation plan (“VSP”), which would enable him to retain employment benefits though November 24, 2016, and have the option of converting his life insurance from a group policy to an individual policy. On November 29, 2016, Mr. Watson emailed EMC asking about how to start paying for benefits at the employee rate for the following year. On November 30^th, an EMC benefits representative emailed and advised that he would get a bill from ADP to continue paying for his benefits and that benefits would remain active during the transition. Mr. Watson did not contact MetLife about his life insurance, but he paid each bill he received from ADP. Mr. Watson died less than a year later, and Plaintiff filed a life insurance claim. MetLife denied Plaintiff’s claim because he did not convert his life insurance or pay the required premiums.

Plaintiff then sued EMC under 29 U.S.C. §1132(a)(3)(B) for breach of fiduciary duty, seeking an equitable remedy of surcharge. Her theory is that EMC breached its fiduciary duty because its November 30^th email was misleading and caused Mr. Watson to believe he still had basic life insurance coverage. The district court denied Plaintiff’s motion for determination. In its opinion, it assumed without deciding that EMC breached its fiduciary duty and that Plaintiff could seek a surcharge remedy under ERISA. The district court denied relief on the basis that a surcharge would not be “appropriate equitable relief” because Mr. Watson did not pay any premiums towards a life insurance policy.

The Tenth Circuit reviewed the district court’s decision for abuse of discretion. The court noted that under ERISA § 502(a)(3), a beneficiary may bring an action for equitable relief not available under § 502(a)(1)(B), which is the provision to enforce plan terms. “The district court committed legal error and therefore abused its discretion because it treated Ms. Watson’s § 1132(a)(3) claim for fiduciary breach as a § 1132(a)(1)(B) claim to recover under the plan. These provisions provide for distinct claims.” Mr. Watson was not entitled to life insurance benefits under the terms of the plan because he did not convert his insurance. This is why Plaintiff sued instead for breach of fiduciary duty. By considering whether Plaintiff could recover under the terms of the plan, the court legally treated her equitable relief claim as a claim for benefits. The court reversed and remanded for further proceedings consistent with this opinion.