We all are seeing more “breach of fiduciary duty claims” asserted in lawsuits seeking ERISA-governed benefits.  As you know, ERISA allows participants, beneficiaries, and the Secretary of Labor to obtain relief against ERISA fiduciaries for breaching the fiduciary duties they owe to the plan or its participants. ERISA fiduciaries can also be liable under § 502(a) for engaging in certain types of specified self-dealing and prohibited transactions under ERISA § 406 that are per se fiduciary duty violations.

But what is a “fiduciary duty”?  Do repeated calculation errors, or the failure to audit for calculation errors, involve “fiduciary duties”? NO. 

This new case highlights the point:  Morris v. Aetna Life Insurance Company, 2021 WL 3509553 (C.D. California August 9, 2021)(“…miscalculation [of benefits], the repeated affirmation of the miscalculation, and the failure to audit to catch miscalculations—all are inextricably entwined with the ‘calculation of benefits,’ which is ‘a ministerial function that does not have a fiduciary duty attached to it.’”)(Emph. added).

FACTS:  In 2009, Morris sought ERISA-governed long term disability benefits during chemotherapy treatments for cancer.  Aetna approved benefits, concluding she was totally disabled.  Over the next ten years Aetna paid Morris based on the assumption that her employer paid Morris bi-weekly (26 paychecks a year)… but the employer had paid Morris bi-monthly (24 paychecks per year). Aetna’s repeated ten-year calculation errors resulted in an overpayment to Morris totaling $56,478.

So, when Aetna discovered its repeated calculation errors and overpayment, it began reducing monthly payments to Morris.  Morris sued alleging she was entitled to the higher benefit, and also asserted an ERISA 502(a)(3) claim seeking equitable remedies, like estoppel and waiver, claiming Aetna breached its fiduciary duties to her.

ISSUE: Whether Aetna breached its fiduciary duty because of repeated calculation errors overpaying Morris, and for seeking reimbursement of the overpayment?

DISTRICT COURT HELD: Aetna wins summary judgment: Repeated calculation errors, and failure to audit to catch miscalculations, do NOT involve fiduciary duties.

1. “In every case charging breach of ERISA fiduciary duty…, the threshold question is not whether the actions of some person employed to provide services under a plan adversely affected a plan beneficiary’s interest, but whether that person was acting as a fiduciary (…performing a fiduciary function) when taking the action subject to the complaint.”  Op. at 8-9.
2. “[T]he calculation of benefits according to a pre-set formula was not a fiduciary function under ERISA.” Op. at 9 (Citing Bafford v. Northrop Grumman Corp., 994 F.3d 1020, 1028 (9th Cir. 2021) (Emph. added)).
3. “The alleged breach of fiduciary duties—resulting from the miscalculation, the repeated affirmation of the miscalculation, and the failure to audit to catch miscalculations—all are inextricably entwined with the ‘calculation of benefits,’ which is ‘a ministerial function that does not have a fiduciary duty attached to it.’”  Op. at 9-10.
4. “Claims for estoppel and waiver fail for another reason: ‘The concepts of waiver or estoppel cannot be used to create coverage beyond that actually provided by an employee benefit plan.’”  Op. at 10.