ERISA Fiduciary Rulings Not Subject to Due Process Suits

February 13, 2003 ( - Plan participants can't sue ERISA fiduciaries for violating their constitutional due process by refusing to pay their requested long-term disability benefits, a federal judge ruled in two separate cases.

In both cases, US District Judge George Singal of the US District Court for the District of Maine rejected participants’ claims that they were denied due process when their plan administrators failed to conduct a “full and fair” review of their benefits claim, Washington-based legal publisher BNA reported. Singal ruled that due process protections come into play when a fiduciary is acting under state law and not the federal ERISA.

In the first of the two cases , plan participant Nancy Wade sued her long-term disability benefit plan administrator, Life Insurance Co. of North America, alleging it violated her constitutional due process and ERISA rights by declining her claim. As relief for the alleged violations, Wade sought the present value of all future benefits owed to her under her disability benefit plan.

Wade also argued that she did not receive a full and fair review of her claim under ERISA because the plan administrator had a substantial financial interest in the outcome of whether she was entitled to benefits. Wade argued that ERISA is constitutional only if it is read to provide for a full and fair review by a “truly independent” ERISA fiduciary.

The court rejected the argument. “In ERISA cases, the administrator’s status as the source of funding does not create a conflict so serious as to preclude the administrator from acting as the reviewing authority,” Singal wrote.

Second Case

In the second case, Thomas Black and three other long-term disability benefit plan participants sued UNUMProvident Corp. alleging they were denied due process because UNUMProvident did not conduct a “full and fair” review of their benefits request.

As he had done in the Wade case, Singal found that UNUMProvident, as an ERISA plan fiduciary, was not subject to the due process clause because it was not operating under state law.  

The cases are Wade v. Life Insurance Co. of North America , D. Maine, No. 02-CV-105, 2/4/03 and Black v. UNUMProvident Corp. , D. Maine, No. 02-CV-176, 2/5/03.