July 16, 2012 (PLANSPONSOR.com) – A federal appellate court has found a life insurance and accidental death & dismemberment plan participant can recover more than just premiums withheld for her ineligible daughter.
Debbie McCravy argued that a district court committed a legal error by limiting her damages to premiums wrongfully withheld by MetLife because the remedy of surcharge is available to her under Section 1132(a)(3). Specifically, McCravy contends that she, as "the beneficiary of a trust," is rightfully "seeking to ‘surcharge’ the trustee [MetLife] in the amount of life insurance proceeds lost because of that trustee’s breach of fiduciary duty."
The 4th U.S. Circuit Court of Appeals said it must agree with McCravy’s arguments in light of the U.S. Supreme Court decision in CIGNA Corp. v. Amara, as the Supreme Court pronounced in that case that a "surcharge," i.e., "make-whole relief," constitutes "appropriate equitable relief" under Section 1132(a)(3). In its opinion, the high court said "[e]quity courts possessed the power to provide relief in the form of monetary ‘compensation’ for a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment. . . . [P]rior to the merger of law and equity this kind of monetary remedy against a trustee, sometimes called a ‘surcharge,’ was ‘exclusively equitable.’"
The 4th Circuit reversed the district court’s opinion and remanded the case for further proceedings.
McCravy was employed with Bank of America, which offered a dependent life insurance and accidental death & dismemberment welfare benefit plan that was insured and administered by Metropolitan Life Insurance Company (MetLife). McCravy was the named beneficiary under a policy that covered her now deceased daughter, Leslie. Although McCravy paid and MetLife accepted premiums for coverage for Leslie until the time of Leslie's death in July 2007, Leslie was not eligible to participate in the plan because she was over the age of 19 at the time of her death, although she was younger than 19 when plaintiff first elected coverage.