Ruling in now-consolidated class-action cases filed by numerous employee benefit plans, a federal judge in New Jersey asserted that the providers did not breach their fiduciary duties through a fee/commission agreement with brokers for employer benefit plan business. Chief U.S. District Judge Garrett E. Brown Jr. of the U.S. District Court for the District of New Jersey granted a request from the defendant insurance providers and dismissed the cases.
The suits claimed that the ERISA fiduciary breaches occurred when the defendants did not disclose the amount of fees/commissions they paid to brokers for the employer plan business. The plaintiffs charged that the fees/commissions should have been disclosed on their Form 5500.
The defendants in the case were Hartford Life and Accident Insurance Co., Prudential Insurance Co. of America, Metropolitan Life Insurance Co., UNUM Life Insurance Co., AIG Insurance Co., and Connecticut General Life Insurance Co.
Brown accepted the insurance companies’ argument that while they may have exercised discretion in making benefit payment decisions, that did not mean they were ERISA fiduciaries in all situations. The court also ruled the plaintiffs had not proven their allegations that the insurance carriers misled them about the fee/commission arrangement when the plaintiffs asked about it.
The ruling in In re Employee-Benefit Insurance Brokerage Antitrust Litigation, D.N.J., No. 05-1079 (GEB), unpublished 1/14/08 is here .
Former New York state Attorney General Eliot Spitzer conducted a wide-ranging probe into the commission/fee practices of insurance companies (See Spitzer Expands Focus in Insurance Probe ) several years ago.