Insurer not Bound by Plan Sponsor's Statements, Court Rules

November 1, 2004 ( - A US District Court has ruled that a plan insurer is not bound by misstatements made by the plan sponsor regarding coverage in a long-term disability plan.

>Judge Marvin Aspen of the US District Court for the Northern District of Illinois ruled that Prudential Insurance Co, the plan insurer for Aon Corp., was not bound to provide long-term disability benefits to Aon employee Alan Hedeen. Hedeen’s lawyer Jeffrey Brown had argued that because Aon had made statements regarding his client’s enrollment in the plan, and that Prudential was required to provide them, even if the statements were incorrect. In granting Prudential’s motion for dismissal, Aspen asserted that Prudential was not bound by Aon’s misrepresentations regarding enrollment.

>Aspen also found that Hedeen was not entitled to benefits under the plan because of his failure to enroll within the stated time period, and failing this, his failure to submit evidence of insurability.

>Hedeen, who was hired by Aon in May of 2000, showed up late to a plan enrollment meeting and was unaware of the requirement that he enroll in the company’s long-term disability benefit plan within 31 days. Failing this, he was supposed to provide evidence of insurability in order to be enrolled. After learning in August of that year of the requirement, Hadeen contacted Aon, who told him of the requirements and the need to garner the approval of Prudential.   However, in November 2000, Aon sent Hedeen a form listing his benefits, and incorrectly included the long-term disability benefits.

>Hedeen applied for long-term disability benefits in April 2003, and Prudential denied Hedeen’s claim, since he had never provided evidence of insurability. Hedeen sued Prudential, alleging a violation of the Employee Retirement Income Security Act (ERISA), and Prudential moved to dismiss the suit, arguing that Hedeen had failed to follow the plan’s explicit instructions. In granting Prudential’s motion, Aspen stated that Hedeen did not follow the plan instructions, and was thus not eligible.

>Aspen also rejected Hedeen’s claim that Prudential should be estopped from denying him benefits because of Aon’s misstatements regarding his coverage. Aspen noted that Prudential could not be bound by the claims of another party, and thus denied the estoppel claims. Aspen asserted that Prudential was not bound by the plan sponsor’s words, being the plan insurer.

>The case, Hedeen v. Aon Corp., N.D. III., No. 04 C 3360, 10/27/04, is available at .