Lack of Notice "Unfortunate", But No Fiduciary Breach

August 12, 2002 ( - Deaconess Waltham Hospital may not have given Larkin Watson IV information about its long-term disability plan when he became eligible, but that doesn't constitute an ERISA fiduciary breach, according to a federal court.

The US First Circuit Court of Appeals ruled that that the hospital would have had to actively conceal the benefits program, acted in bad faith, or committed fraud in order for Watson to make a fiduciary duty case.

“There was no evidence that the hospital acted in bad faith,” the appeals judges wrote. “It appears that Watson simply slipped through the cracks in this system when he switched from part-time to full-time employment status, as unfortunate occurrence but not bad faith, concealment, or fraud.”

In the hospital’s favor was the fact that it had put on a benefits fair to answer employee benefits questions. 

Status Switch

According to court papers, the hospital hired Watson in 1992 as a part-time addition counselor. He was given a list of benefits with an “n/a” notation next to long-term disability.

He went full time a year later, which made him eligible for the long-term disability program. However, Watson alleged that no one informed him that he was eligible for long-term disability benefits, nor was he given a summary plan description or other notice of benefits.

After Watson began having health problems in 1995, he met with his supervisor who encouraged him to switch back to a part-time schedule. Watson alleged that this conversation “induced” him to change his status to part-time employment.

As a result of the part-time schedule, Watson became ineligible for participation in the long-term disability plan. Watson alleged that no one at the hospital informed him of the consequences of his switching back to part-time employment.

Watson sued after becoming disabled in 1999 and being denied disability coverage. A lower court judge agreed with the hospital and Watson appealed.
The case is Watson v. Deaconess Waltham Hospital, 1st Cir., No. 01-2133, 8/8/02.