Court Finds Failure To Provide SPD An ERISA Failure

September 10, 2003 ( - Not providing a former employee with a copy of a life insurance plan's summary plan description (SPD) following her termination is a violation of ERISA provisions.

>The US 8th Circuit Court of Appeals, in affirming a lower federal court’s decision, determined that the company violated ERISA provisions by not providing the SPD to a former employee who left her copy of the SPD in her locker after being dismissed.   Further, the appellate court upheld the maximum damage award granted by the lower court.

The court’s decision was based on the fact that the employer’s actions could be considered “bad faith,” even though the employer said its failure to provide the necessary documents in a timely fashion was due to the moving of its offices.   In this case however, the court found the employee took all the necessary steps to follow the proper procedures to obtain a copy of the necessary plan documents.

“Until [the participant] was terminated, she had no reason to memorize the procedures required to convert her benefits. Once the need to learn these procedures arose, she contacted Aventis, but was unsuccessful in her attempts to have her copy of the SPD replaced. Putting important information in an SPD may fulfill a company’s duty to inform its employees, but it does not meet this burden when an employee does not have meaningful access to that document,” Judge Michael Mellow said in writing for the court.

Case History

Linda Sue Brown worked for Aventis Pharmaceuticals Inc., and its predecessor companies, since 1986 and in 2000 when she received a 180-day period of disability leave.   However, at the end of the leave period, Brown was unable to return to work and her employment was subsequently terminated.

To notify her of her dismissal, Aventis sent Brown a termination letter in November of 2000 detailing the impact of her termination on her benefits, which included life insurance.   Per Aventis’ life insurance policy, employees had the right to convert their life insurance benefits upon leaving the company, thus allowing employees to maintain their current level of coverage without having to provide additional evidence of insurability.  

However, to qualify for this conversion, an employee had to fill out the necessary paperwork and pay a fee within 31 days of termination, a process that was explained in the plan’s SPD, contained within Aventis’ Employee Yearbook.   Brown did not have the Employee Yearbook in her possession following her termination because it was left in her work locker, which was cleaned out after her dismissal, the contents of which were not returned to her.   Brown then called Aventis’ Human Resources Department to try and obtain a copy of the life insurance plan’s SPD, and the HR department assured her that the information was coming.  

On February 23, 2001, Brown received the documents and tried to convert her life insurance coverage.   Aventis informed her that the application was denied since the conversion application was not filed within the 31-day time frame.  

However, in the most recent case,the appeals court ordered the company to provide Brown with an individual life insurance policy per the terms of the plan due to the company’s inability to provide her with the necessary documentation sooner.

The case isBrown v. Aventis Pharmaceuticals Inc.,Eighth Circuit, Number 02-4063/03-2084.