A recent 11th Circuit Court of Appeals decision reminds us of the importance of plan administration particularly when it rises to the level of fiduciary duty. ERISA requires plan fiduciaries to act with care, skill, prudence, diligence and solely in the interest of plan participants and beneficiaries.
The facts of this case are as follows:
Justin Polga, a medical doctor employed by NCHMD, Inc. signed up for basic life insurance coverage in the amount of $150,000 and $350,000 in supplemental life insurance coverage. To receive the supplemental insurance, Polga need to submit an evidence of insurability form. The form was not included with the enrollment paperwork and HR did not notify him the form was necessary or missing.
NCHMD provided Polga with a benefits summary stating that he had $500,000 in coverage and deducted premiums reflecting $500,000 in coverage. Polga died and his surviving spouse sued to recover the $350,000 of supplemental life insurance due under the terms of the plan.
The Court of Appeals determined that the individual has the right to make the case for equitable relief in the amount of the lost life insurance proceeds. The Court found it compelling that the employer failed in its duties to effectuate the insurance. The Court also found it compelling that failure to give the plaintiff an opportunity to seek equitable relief would result in no benefit to the individual.
This case serves as an important reminder to plan fiduciaries that each duty must be carried out carefully and with full attention to detail.
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