You know that claimants seeking ERISA-governed benefits sometimes assert “breach of fiduciary” duty claims under ERISA Section 502(a)(3)(b).

This case highlights some arguments that can be used to defeat breach of fiduciary duty claims. Staropoli v. Metro. Life Ins. Co., 465 F. Supp. 3d 501 (E.D. Pa., June 8, 2020).

Key takeaways:

• To be a proper defendant in a breach of fiduciary duty claim the entity must do more than merely “ministerially apply[] the unambiguous neutral rules of the plan.”
• “‘[A] fiduciary has a legal duty to disclose to the beneficiary only those material facts known to the fiduciary but unknown to the beneficiary, which the beneficiary must know for its own protection.’”
•  A claims administrator owes no fiduciary duty to an insured when it “was not a fiduciary at the time of a triggering event and had no knowledge of the triggering event.”

FACTS: Staropoli sought ERISA-governed supplemental death benefits after her former husband (they divorced in 2013) passed away in 2018. Staropoli alleged her two children had been designated as beneficiaries of Mr. Staropoli’s $300,000 in death benefits. MetLife denied the claim because ex-spouses were not eligible for coverage under the policy. Staropoli then sued the plan sponsor, JPMorgan Chase Bank, and MetLife (claims administrator) alleging breach of fiduciary duty, and detrimental reliance claims.

DISTRICT COURT HELD: Breach of Fiduciary Duty Claims Dismissed

1. JPMorgan Chase Bank was not a proper defendant.  “The proper defendant in an ERISA claim for wrongful denial of benefits is ‘the plan itself or the person who controls administration of benefits under the plan…. Exercising control over the administration of benefits is the defining feature of the proper defendant….’” “[T]he plan documents explicitly limit this authority to the JPMorgan Chase U.S. Benefits Executive as the plan administrator and to MetLife as the claims administrator.” Op. at 6-7.
2. At best “JP Morgan would have simply been ministerially applying the unambiguous neutral rules of the plan regarding eligibility of spouses,” which is insufficient control to be deemed a fiduciary. Op. at 7.
3. “…[ERISA] Section 502(a)(1)(b) does not create a private cause of action for breach of fiduciary duty.”  Op. at 9.
4.  Breach of fiduciary duty claim under ERISA Section 502(a)(3)(b) dismissed.
   • The Court rejected the agency argument. Plaintiff alleged MetLife breached its fiduciary duty in part by virtue of conduct of the “agent” employer, JPMorgan Chase Bank, by misleading Ms. Staropoli that Mr. Staropoli was covered under the policy and accepting premiums for that coverage. Op. at 12.

• • “[S]tate agency law allowing an employer to be deemed agent of an insurer in administering group insurance policies [is] preempted by ERISA because ‘it relates’ to employee benefit plans.” Op. at 13.

• • Applying federal common law governing agency, Ms. Staropoli “failed to explain how the facts alleged demonstrate a relationship between JP Morgan and MetLife that satisfies the elements of federal common law agency.”  Op. at 15.

• • The Court concluded Plaintiff’s amended complaint failed to give the defendants proper notice of the misrepresentation claims. Plaintiffs’ amended complaint also violated Rule 8(a) because it used “a pleading style” in which Plaintiffs’ allegations “jump from alleging conduct of one defendant to allegations that both defendants are liable…. This…prevents necessary deconstruction to discern which allegations [apply to which defendant]…. [Plaintiffs’ misrepresentation allegations] ‘fail to provide Defendants with the requisite notice of their alleged improper conduct, in contravention of Rule 8(a).’” Op. at 18.

• • The Court rejected Plaintiffs’ allegation that MetLife breached its fiduciary duties by failing to disclose post-divorce ineligibility. “[A] fiduciary has a legal duty to disclose to the beneficiary only those material facts known to the fiduciary but unknown to the beneficiary, which the beneficiary must know for its own protection.’” Op. at 20 (Emph. in original).

• • MetLife did not become the claims administrator until three years after the divorce.  “MetLife could not have breached a supposed fiduciary duty to notify Plaintiffs that they no longer qualified for life insurance following the divorce [because] MetLife was not a fiduciary at the time Ms. Staropoli provided notice of her divorce and [because] MetLife had no knowledge of the triggering event that rendered Mr. Staropoli ineligible….”  Op. at 20.

• • “[A]n insurer does not have an independent duty to monitor every insured’s marital status.  Such a system would be entirely unworkable….”  Op. at 22 (Emph. added).

• • The Court rejected Plaintiffs’ allegation that MetLife breached fiduciary duty by failing to notify Plaintiff of the right to convert the group policy to an individual life policy.  MetLife did not know about the divorce.  Op. at 25.

• • The Court rejected Plaintiff’s argument that MetLife should be equitably estopped from denying the claim because MetLife continued to accept premiums. “MetLife can hardly be said to have acted in bad faith or conducted itself insidiously where it was never aware of the triggering event that rendered Mr. Staropoli ineligible for coverage.”  Op. at 26-27.