You already know that under ERISA the court has discretion to award attorney fees to a party that has “some success on the merits.”

But what happens when the ERISA plan and the insurer are defendants, and the plan disagrees with the insurer’s denial of ERISA-governed disability benefits?

Can the ERISA plan, a nominal defendant, recover attorney fees against the insurer? YES.

This new case illustrates the point: Micha v. Sun Life and Group Disability Benefits Plan for Gynecologic Oncology Associates Partners, LLC, 2015 WL 5732124 (S. D. Cal., September 30, 2015).

FACTS. Group Disability Benefits Plan is an ERISA plan and purchased a disability policy from Sun Life. When Sun Life denied a disability claim brought by John Micha, he brought suit against Group Disability and Sun Life. Group Disability filed an answer admitting Micha’s disability allegations, and then sought indemnification from Sun Life.

After the matter was settled, Group Disability brought a motion for $101,000 in attorney fees against Sun Life.

ISSUE: Whether the ERISA plan can recover attorney fees as a “prevailing party” when the insurer settles a claim by a beneficiary?

HELD: Yes for fees incurred during the litigation on the merits; NO for fees incurred on the appeal.

  1. Under 29 U.S.C. 1132(g), the court in its discretion may allow reasonable attorney fees. “To qualify for an award of attorney’s fees, a party must have “some success on the merits.'” Op. at 4.
  2. The Ninth Circuit had previously determined that Group Benefits, an ERISA plan and a nominal defendant, can be eligible for an award of attorney’s fees under ERISA. Op. at 4.
  3. “If a party has met the burden of showing some success on the merits, the court must examine five factors set forth in Hummell…. None of the Hummell factors is ‘necessarily decisive.’” Op. at 4.
  4. Although Sun Life was required to pay Group Disability’s attorney’s fees for the underlying lawsuit, Sun Life was not required to pay attorney fees arising out of the appeal of that ruling because the appeal presented a novel legal issue. Op. at 6.

KEY TAKE AWAY: This developing line of cases should be considered early on in the case. A proactive approach with the Plan is advised, to avoid the risk of paying for the Plan’s attorney fees.

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Photo of Mike Reilly Mike Reilly

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment advice, and has represented clients in more than 75 jury trials, arbitrations, bench trials and claims before the EEOC and Washington State Human Rights Commission.

Small and large employers retain Mike for his strategic advice and decades of experience in employment issues and litigation, business decisions and litigation avoidance. Mike provides advice in claims involving discrimination, retaliation, wrongful discharge, disability accommodation, ERISA and non-ERISA employee benefit claims, and wage/hour claims. He served as lead counsel in an employee raiding/trade secret case as reported in the Wall Street Journal, and defends employers in class action claims.

Mike’s remarks on employment issues have been quoted in NewsweekCorporate Legal TimesSeattle TimesEmployee Relations Law JournalPuget Sound Business JournalCFO.com, and other professional journals and management publications. Chambers USA’s Guide to America’s Leading Lawyers for Businessrates Mike in the top ranking (band one) for his work in labor and employment law, and has described him as “one of Seattle’s top-rate attorneys” who is “truly phenomenal [with] superb legal instincts” and “an amazingly assertive litigator.” His clients include Nordstrom, Seattle Seahawks, Home Depot, KeyBank, Starbucks, Fred Hutchinson Cancer Research Center, Red Robin and Seattle Chamber of Commerce, among others.