Eleventh Circuit Allows ERISA Claim for Monetary Relief Based on Life Plan Enrollment Errors

On June 28, 2022, in Gimeno v. NCHMD, Inc., et al., the US Court of Appeals for the Eleventh Circuit held that an employer could be liable for the value of supplemental life insurance benefits that would have been available absent the employer’s plan enrollment errors.

The plaintiff in this case, Raniero Gimeno, sued his late spouse Justin Polga’s employer, NCHMD, Inc., for mishandling Polga’s supplemental life insurance enrollment. As part of the initial hiring process, NCHMD’s HR staff helped Polga complete enrollment paperwork for life insurance benefits. Polga elected to pay for $350,000 in supplemental life insurance coverage, for which the plan required an evidence of insurability (EOI) form. But Polga never received the EOI form from NCHMD HR, nor was he notified the form was necessary. Nonetheless, for three years, NCHMD deducted premiums for $350,000 in supplemental coverage from Polga’s paychecks. NCHMD also provided Polga a corresponding benefits summary confirming $350,000 supplemental coverage on top of $150,000 employer-paid coverage.

After Polga’s passing, Gimeno filed a claim for benefits with the plan’s life insurance company. The supplemental benefits were denied based on Polga’s failure to submit an EOI form. Gimeno sued NCHMD and its parent company NCH Healthcare alleging they breached their plan administrator fiduciary duties by failing to adequately notify his spouse about the EOI form and providing incorrect coverage information. Gimeno demanded compensation, arguing these breaches of fiduciary duty prevented his spouse from becoming eligible for the supplemental benefits.

First, the court found that both defendants were life plan fiduciaries. While NCH Healthcare was named as plan administrator in the plan documents, NCHMD conducted sufficient enrollment functions to make it a plan fiduciary. Specifically, NCHMD acted as a plan fiduciary by providing Polga with enrollment paperwork, guiding him in completing it, notifying him when proof of dependent eligibility was missing, providing a benefits summary confirming $500,000 in life insurance coverage, and deducting corresponding premiums from his paycheck.

As to remedy, Gimeno conceded that since Polga never provided the EOI form, no supplemental benefits were payable under the terms of the life plan. Thus, there was no claim against the plan for the court to consider. But as to Gimeno’s claims against NCHMD and NCH Healthcare, the Eleventh Circuit found that, in certain circumstances, plan fiduciaries can be sued independently from the plan for equitable relief under ERISA. Appropriate equitable relief would be monetary compensation equal to the insurance benefits lost due to the defendants’ alleged breach of fiduciary duty. The Eleventh Circuit sent the case back to the lower court to determine whether NCHMD and NCH Healthcare breached their fiduciary duties with respect to Polga’s enrollment process.

The Gimeno case serves as another illustration of how mistakes in administering group life plans create substantial liability for employers. The Eleventh Circuit’s ruling here is not unique. Rather, it aligns with every other circuit court that has addressed the issue and found ERISA can provide monetary relief for breaches of fiduciary duties even when there is no claim for benefits under the terms of the plan. Depending on which plan functions an employer controls, it may be unknowingly acting as a fiduciary with liability for plan administration errors. ERISA plan sponsors should always take great care to adequately communicate enrollment requirements and ensure premiums are only collected on verified active coverage.

Gimeno v. NCHMD, Inc., et al.»