The Ninth Circuit reversed prior precedent which had held that ERISA 29 U.S.C. § 1132(a)(1)(B) (which provides for recovery of plan benefits) only authorizes actions to recover benefits against the plan, or the plan administrator. Previously, third party insurance companies acting as claims administrators could not be sued under this ERISA section, because the Ninth Circuit had held this ERISA provision did not extend to other parties despite whether those parties made discretionary decisions as to whether benefits were owed. See Ford v. MCI Communications Corp. Health & Welfare Plan, 399 F.3d 1076 (9th Cir. 2005); Everhart v. Allmerica Financial Life Insurance Co., 275 F.3d 751 (9th Cir. 2001); Gelardi v. Pertec Computer Corp., 761 F.2d 1323 (9th Cir. 1985). In this case, the Ninth Circuit overruled these prior decisions.
In Cyr, the plaintiff sued her employer Channel Technologies, Inc., ("CTI") for long term disability benefits under the group plan insured by Reliance Standard Life Insurance ("Reliance"). Under the terms of the plan, CTI was the plan administrator, and Reliance was the claim administrator which decided the eligibility of long term disability benefits. Reliance approved the payments of her long term disability benefits based on her salary of $85,000. Plaintiff sued CTI for gender discrimination on an unequal pay claim. Plaintiff settled with CTI, which resulted in her receiving a retroactive salary increase to $155,000. Plaintiff then requested Reliance increase her benefits as a result of the retroactive salary adjustment. Reliance declined to do so.
Plaintiff sued Reliance and CTI Long Term Disability Benefit Program, for the increased benefits. Reliance moved for summary judgment, relying on prior Ninth Circuit law that under ERISA provision, 29 U.S.C. § 1132, only the plan or the plan administrator could be held liable, and not a third-party insurer, such as Reliance.
The United States District Court for the Central District of California ruled in favor of Reliance, but after supplemental briefing, reversed and ruled against Reliance. The district court held the ERISA case law "left room for suits against insurers so long as they are functioning as the plan administrator."
Reliance appealed to the Ninth Circuit and oral argument was held. Following oral argument, but prior to a decision, the Ninth Circuit agreed to a full panel review on the limited issue of who was a proper party under § 1132(a)(1)(B). Contrary to its prior decisions, the Ninth Circuit reviewed § 1132(a), and found that the section as a whole, provided a comprehensive list of who could bring a lawsuit, but there were no limits of who could be sued under § 1132(a)(1)(B).
The Ninth Circuit looked to the United States Supreme Court decision in Harris Trust & Savings Bank v. Salomon Smith Barney, Inc., 530 U.S. 238 (2000). In Harris, the Supreme Court rejected the notion "there was a limitation contained within § 1132(a)(3) itself on who could be a proper defendant in a lawsuit under that subsection." The Harris Court reached this opinion by comparing other ERISA sections which specifically identified defendants. Id. at 246-47 (citing as examples, § 409(a), 29 U.S.C. § 1109(a) (authorizing personal liability against any person who is a fiduciary); § 502(l), 29 U.S.C. § 1132(l) (authorizing civil penalties against fiduciary)).
Based on the Harris decision, the Ninth Circuit concluded that just as § 1132(a)(3) had no limitations on who could be a defendant, § 1132(a)(1)(B) also contained no limitations. Further, the Ninth Circuit indicated that § 1132(d)(2) supported its conclusion because that section provides that a money judgment against an employee benefit plan shall be enforceable against the plan as an entity, or any person in his or her individual capacity.
The Ninth Circuit concluded that despite its status as the claims administrator, Reliance was the only logical defendant because it had the discretion to resolve the benefits claim. The Ninth Circuit explicitly overruled its prior decisions, and now holds that 29 U.S.C. § 1132(a)(1)(B), is not limited to a benefits plan or the plan administrator, but to any person or entity, including any third party insurers, that could be held liable for denying benefits to a plan participant or beneficiary.
The practical effect of this decision will not be significant, because plaintiffs in these case settings often name the third party insurers in any event and those insurers typically defend the claims.
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