Failure to Mention Benefit Option Explained in SPD no Fiduciary Breach

June 8, 2010 ( – The U.S. District Court for the Western District of Wisconsin has found that an employer did not breach its fiduciary duties by failing to inform a former employee and his wife about all of their benefit options.

U.S. District Judge William M. Conley said in his opinion that because Jeanette Pfeil did not show that her husband’s group life insurance plan’s summary plan description (SPD) misled or inadequately advised her and her husband about the right to accelerate life insurance benefits, 7th Circuit case law compels a finding that Edward Kraemer & Sons, Inc. met its fiduciary duty despite failing to remind the Pfeils about the availability of those benefits. According to Conley, previous 7th Circuit rulings concluded that if the SPD conveys benefits information such that an average person would understand the benefits, then anything said or omitted by a fiduciary in later conversation is irrelevant.   

Although Mrs. Pfeil argued that she had to hire an attorney to understand the SPD, she points to no specific wording in the Living Benefits provision that creates ambiguity or leads to the possibility of more than one interpretation, much less that is misleading, Conley said.  

The court did find that the SPD is ambiguous regarding the precise termination date of the group life insurance benefits; however, Conley said Mrs. Pfeil has not shown that Edward Kraemer & Sons interpretation of the termination date was wrong, even though it differed from the interpretation of the plan provider.  

Mrs. Pfeil also did not show that she that she relied on the information to her detriment. According to the opinion, she did not claim, nor could she credibly claim, she and her husband would have elected to continue coverage if they had been told the termination date was one month later. Conley agreed that the argument that Mrs. Pfeil and her husband would have continued to pay the life insurance premiums if they had known about the option for Living Benefits is likely, he said the fact that the SPD straightforwardly explained the right to elect Living Benefits imposes no duty on a fiduciary to explain further.  

Jeanette Pfeil’s husband Dennis was a former employee of Edward Kraemer & Sons, which sponsored a Group Life Plan for life insurance benefits. The plan’s SPD explains that only active employees are eligible for coverage, but also provides that an employee may continue insurance after it would otherwise end when an employee becomes totally disabled. When an employee’s Group Life coverage ends, the employee may convert that coverage into an individual life insurance policy.

In addition, the plan provides for “Living Benefits,” which allow for acceleration of benefits during a participant’s lifetime under certain conditions. Living Benefits are available to an employee with a terminal condition who requests the payment of these benefits during his lifetime.   

After being diagnosed with duodenal cancer, Mr. Pfeil soon became disabled. An HR representative advised him of his right to convert to the group policy to an individual policy, but didn’t point out the option of receiving living benefits. Mr. Pfeil was considered totally disabled as of July 21, 2006, and was advised of his conversion rights in August 2006.   

The Pfeils did not submit a conversion application or premium payment to continue Mr. Pfeil’s group life insurance as an individual policy, presumably because the group life premiums would have required a new out of pocket expense previously paid by the employer, according to the opinion.  

After Mr. Pfeil died, Mutual of Omaha denied Ms. Pfeil’s claim because it had no record of them converting the coverage to an individual policy.  

The case is Pfeil v. Edward Kraemer & Sons Inc., W.D. Wis., No. 09-cv-390-wmc, 6/1/10.