The United States Court of
Appeals for the Seventh Circuit recently held that a group health
plan participant may seek "make-whole" monetary damages
under ERISA against a plan fiduciary for a misrepresentation that
causes the participant harm.
In Kenseth v. Dean
Health Plan, a plan participant sought verbal confirmation from
the group health plan's insurer as to whether an expensive surgical
procedure would be covered. The procedure was recommended by the
participant's treating physician to correct serious health conditions
that were caused by a gastric band procedure which the participant
underwent 18 years earlier to treat obesity.
During the phone call with
the insurer's Customer Service Department, the participant was
informed that the procedure was covered. In providing this
information, the Service Department failed to warn the participant
that she could not rely upon advice provided over the phone. Further,
the Service Department failed to ask whether the procedure was
related to treatment for obesity, a condition specifically excluded
under the group health plan's contract.
The insurer's Certificate of
Insurance was ambiguous as to whether the recommended procedure was
covered, and failed to provide a means by which plan participants
could obtain authoritative determinations on coverage. Additionally,
while the Certificate of Insurance invited participants to call
Customer Service with coverage questions, it failed to warn that they
could not rely on any advice received.
The participant underwent
the second surgery and proceeded to file a claim with the health plan
based upon the information she had received from the Service
Department. The insurer denied coverage, claiming that the surgery
was related to treatment for obesity.
In response, the participant
sued, claiming a breach of fiduciary duty under ERISA based on the
provision of misleading information and the denial of coverage.
In reviewing the
participant's appeal, the Seventh Circuit held that, in accordance
with the U.S. Supreme Court's decision in CIGNA Corp. v. Amara,
appropriate equitable relief for ERISA claims may include make-whole
monetary relief, including the recovery of medical expenses.
Therefore, the Seventh Circuit remanded the case to the district
court to determine whether the insurer had breached its fiduciary
duties and, thereby, harmed the participant. If so, the Seventh
Circuit directed the district court to fashion an appropriate
equitable remedy to redress the participant's injury.
Kenseth establishes that a group health plan participant
may be entitled to receive make-whole monetary relief under ERISA
where a breach of fiduciary duty involves the provision of incorrect
or misleading information about the scope of benefits under the plan.
To avoid similar situations, employers should: (i) review their plan
documents to ensure that they are clear and unambiguous; (ii) ensure
that employees who communicate directly with plan participants
receive adequate training and provide correct information; and (iii)
advise plan participants and beneficiaries in the plan's summary plan
description that the only representations regarding coverage that may
be relied upon are those made in writing by an authorized person.