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Labor & Employment – ERISA – Life Insurance – Benefits Denied – Premiums Refunded

McCravy v. Metropolitan Life Ins. Co. (Lawyers Weekly No. 001-095-11, 14 pp.) (Wynn, J.) No. 10-1074, May 16, 2011; USD at Charleston, S.C. (Duffy, J.) 4th Cir. Click here for the full-text opinion.

Holding: A bank employee who paid for life insurance for her daughter through her employee benefit plan, but who was denied insurance benefits when her 25-year-old daughter died, is not entitled to the insurance proceeds as “equitable relief” for the insurance carrier’s breach of fiduciary duty after the daughter was no longer eligible for the insurance; the 4th Circuit says plaintiff only gets a refund of the premiums she paid.

After plaintiff’s 25-year-old daughter was murdered, the insurance carrier, MetLife, denied plaintiff’s claim for benefits on the ground that the daughter did not qualify for coverage under the plan’s “eligible dependent children” provision. The district court granted summary judgment to plaintiff and ordered the carrier to pay her the improperly withheld life insurance premiums.

Plaintiff argues that ERISA, 29 U.S.C. § 1132(a)(3), allows the remedy of surcharge, which would permit recovery of the life insurance proceeds lost by plaintiff because of MetLife’s breach of fiduciary duty. Plaintiff portrays surcharge as having a distinctly restitutionary focus and functioning as a sanction.

Plaintiff seeks a monetary award in the amount of the life insurance benefits lost. As MetLife notes, however, plaintiff is not the true owner of any funds in MetLife’s possession. The kind of restitution that plaintiff seeks, therefore, is not equitable.

We hold the district court did not err in limiting plaintiff’s damages to the premiums withheld by MetLife. To the extent plaintiff seeks to sanction MetLife, this remedy is also not allowed under ERISA. We note that our resolution of this issue conforms to that of several other circuits.

Plaintiff next argues this court should “take this opportunity to adjust its precedent and recognize equitable estoppel as part of the common law of ERISA.” Equitable estoppel precludes a party from asserting rights he otherwise would have had against another when his own conduct renders assertion of those rights contrary to equity. Other circuits recognize estoppel in the context of ERISA claims when a claimant relies to his detriment on some misrepresentation of coverage.

The district court ruled that plaintiff’s attempt to rely on estoppel principles would conflict with this circuit’s rule that ERISA does not provide for recovery when the employee alleges that some oral modification was made to the clear written terms of the plan. Equitable estoppel principles have not been permitted to vary the written terms of a plan.

Contrary to the Summary Plan Description, plaintiff did not apply for any individual policy by contacting Metlife within 31 days after her daughter turned 25. Plaintiff attributes this nonfeasance to MetLife’s failure to make her aware that her dependent ceased to be eligible for coverage. Even where the equitable estoppel doctrine is recognized, it requires reasonable reliance by the claimant on a representation of coverage. Plaintiff does not allege MetLife represented to her that she was entitled to conversion coverage benefits for her daughter. Applying estoppel here would obligate MetLife to pay benefits on behalf of a defendant expressly excluded from coverage by the plan in violation of Coleman v. Nationwide Life Ins. Co,i 969 F.2d 54 (4th Cir. 1992). We decline plaintiff’s invitation to use estoppel principles to modify the unambiguous terms of an ERISA plan.

MetLife was not aggrieved by the district court judgment requiring it to repay plaintiff the $311 in premium refunds it already had agreed to pay plaintiff, and we hold MetLife lacks standing to prosecute its cross-appeal.

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