A recent Fourth Circuit Court of Appeals decision warrants the attention of ERISA plan administrators and fiduciaries. 

In the matter of Dawson-Murdock v. National Counseling (Appeal No. 18-1989, July 24, 2019. 4th Cir.), a widow sought to receive a life insurance benefit as the named primary beneficiary of her husband’s life insurance policy.  As background, her husband had been employed by National Counseling and covered under a Unum group life insurance plan.  He moved from a full time to part time status and continued to pay premium for the life insurance coverage.  However, the change in employment status made him ineligible to continue participation in the group plan in accordance with the terms of the plan.  His employer/plan administrator failed to notify him of the ineligibility to the benefit due to his change in employment status, which would have allowed him to convert to an individual policy.   Upon his death, the widow sought the life insurance benefit from Unum.  She was contacted by HR representative from National Counseling who initially stated that Unum denied the claim.  The HR representative assured her that the company would ensue resolution with Unum to ensure she received the benefit so that she need not appeal Unum’s decision.  A few months later, the HR representative advised that the company would not pay it, and by that time, she missed the opportunity to appeal Unum’s decision.  The spouse sought legal proceedings against the company in its failure, as a fiduciary, to notify the employee of his ineligibility and right to convert the policy, as well as advising her not to appeal Unum’s decision. The Fourth Circuit Court returned the case to a lower court for further evaluation. 

The take away for an employer/plan administrator is to be diligent in benefit plan administration, and be fully cognizant that each act taken could constitute a fiduciary act, whether as a named fiduciary or a functional fiduciary.

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