Compliance

Ruling Allows Monetary Compensation for Fiduciary Breach

By Kevin McGuinness editors@plansponsor.com | June 21, 2013
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June 21, 2013 (PLANSPONSOR.com) – An appeals court recently ruled that a health care plan participant has the right to sue for breach of fiduciary duties and receive monetary compensation.

In Kenseth v. Dean Health Plan, Inc., the 7th U.S. Circuit Court of Appeals found that the plaintiff had the right to sue the defendant for breach of fiduciary duties to recover damages due to a misrepresentation by employers over health benefits coverage. While early rulings had been in favor of the defendant, the court said recent case law had expanded the relief available for fiduciary breach under the Employment Retirement Income Security Act (ERISA). The court cited the Supreme Court ruling in Cigna Corp. v. Amara.

Originally in Kenseth, the court found that under ERISA Section 1132(a)(3), the plaintiff was not entitled to “equitable relief” since the scope of the section did not cover the “make-whole relief” the plaintiff was seeking. In other words, it did not cover monetary compensation. However, the implications of Cigna made this earlier finding moot, since this section of ERISA was found to “allow a participant, beneficiary or fiduciary to obtain other appropriate equitable relief to redress violations of parts of ERISA or the terms of the plan.” In further citing Cigna, the court said that since “monetary compensation is not automatically considered legal rather than equitable,” the plaintiff now had recourse under this section of ERISA.

“Under Cigna, [the plaintiff] may seek make-whole money damages as an equitable remedy under [ERISA] Section 1132(a)(3) if she can in fact demonstrate that Dean breached its fiduciary duty…and that the breach caused…damages,” the court opinion said