Judge: Health TPA Liable for Employee's Embezzlement

May 4, 2005 (PLANSPONSOR.com) - Ruling on an issue for the first time among federal courts in the Northwest US, an Alaska federal magistrate has recommended that a health plan administrator be held liable for losses caused by an employee's plan embezzlement.

US Magistrate Judge John Roberts recommended thatUS District Judge Ralph Beistlinea of the US District Court for the District of Alaska rule that Calco Inc., a San Mateo, California employee benefits plan administrator, was liable for losses suffered by a health plan by the alleged embezzlement of Calco employee Caprice Simmons. According to Roberts, Simmons had the authority to rule on heath coverage claims and to write claims checks for the Alaska Public Utilities Insurance Trust, an organization providing health benefits to workers at several Alaska public utilities.

In his recommended order, Roberts said that Calco, a fiduciary for the purposes of the Employee Retirement Income Security Act (ERISA), should be held responsible for Simmons’ actions under the legal theory of respondeat superior. Generally, respondeat superior holds that an employer is responsible for the actions of his or her employees in the course of their employment. Roberts said the Calco case presented the issue for the first time among federal courts covered by the US 9 th Circuit Court of Appeals – seven Northwestern US states as well as Alaska, Hawaii, Guam, and theNorthern Mariana Islands .

Roberts relied instead on cases from the US 10 th Circuit Court of Appeals and the US 5th Circuit Court of Appeals.

“It is axiomatic that at its core ERISA is intended to protect the interests of trust beneficiaries and to provide redress when those interests have not been properly protected by those owing fiduciary duties,” the magistrate said in recommending the case proceed to trial.

The ruling in Gifford v. CALCO Inc., D. Alaska, No. A03-0019 CV (RRB), 4/25/05 is  here .