Participant's Equitable Estoppel Claim To Be Pursued

May 7, 2004 ( - A former health-care plan participant may pursue an equitable estoppel claim for lifetime health-care benefits.

The U.S. 3 rd Circuit Court of Appeals ruled a lower court did not fully consider the proper standard of review under the Employee Retirement Income Security Act (ERISA) and remanded the case back to the district court for further development of plaintiff’s equitable estoppel claim.   However, the appellate court did uphold the lower court’s decision denying the participant lifetime benefits under his former employer’s health-care plan.

In the original decision, the District Court for the Eastern District of Pennsylvania raised the issue of equitable estoppel based on the company’s “erroneous interpretation” of a letter it sent to the participant and found that no estoppel claim could be established.    The appeals court, referring to ERISA, said plan beneficiaries are permitted to recover benefits under an equitable estoppel theory, upon establishing a material misrepresentation, a reasonable and detrimental reliance upon the misrepresentation and extraordinary circumstances.    The participant argues that further evidence is required on the question of whether he detrimentally relied on a misrepresentation from his former employer.

Case History

Dr. David Post, was employed as a dentist by KidsPeace Corporation and participated in the company’s health-care plan.    The plan provided five enumerated ways an employee, and the employee’s beneficiaries, could lose their health-care benefits, one of which was termination.

In 1996, KidsPeace distributed a newsletter to its employees announcing various changes and enhancements to the company’s health-care plan.   One of the changes was extending coverage for the entire length of continuous disability.   The same year,   Post developed severe joint problems and was ultimately diagnosed with irreversible arthritis.   Then in September of 1997, KidsPeace issued to its employees a new Summary Plan Description (SPD), which contained an accompanying memorandum with the following language: “Disabled Employees (Effec. 08/96)-on medical leave with full medical benefits until recovery.”

Two years after being diagnosed with arthritis and one year after the health-care plan’s changes went into effect, Post went on short-term disability (STD) because of his arthritis.   When it became apparent Post would not be able to return to work, KidsPeace informed him that he would become eligible for long-term disability benefits on April 21, 1999.

Approximately two months after Post went on long-term disability (LTD), he was notified that he would no longer be eligible for enrollment in the medical plan when he became eligible for Medicare.   In December 2001, Post filed a claim with the District Court for the Eastern District of Pennsylvania seeking health-care coverage under the KidsPeace Health Care Plan, as it existed prior to the denial of benefits.  

The district court held that the terms of KidsPeace’s health plan authorized termination of Post’s medical benefits when he was placed on LTD.   The court granted summary judgment against Post.   Post appealed the decision.

The case isPost v. KidsPeace Corp., 2004U.S. App. LEXIS 8333.   A copy of the ruling can be found at .