As a participant in her employer’s ERISA plan, McCravy enrolled her daughter for dependent life insurance and accidental death insurance before the daughter’s nineteenth birthday. She continued paying premiums for the dependent coverage until her daughter was murdered at age 25.
When McCravy submitted a claim for benefits under the plan, MetLife denied the claim, because the daughter no longer was eligible for dependent coverage – which was available only for unmarried, dependent children under age 19, or under age 24 if enrolled in school full-time.
MetLife refunded the premiums paid for the daughter’s coverage, but McCravy refused to accept the refund and filed suit. The federal district court reluctantly held that McCravy was limited as a matter of law to a refund of the premiums withheld for her daughter’s coverage.
On appeal, the Fourth Circuit initially affirmed that decision, but the court granted McCravy’s petition for rehearing after the Supreme Court decided CIGNA Corp. v. Amara, 131 S.Ct. 1866 (2011).
According to the Fourth Circuit, the Supreme Court made clear in Amara that both surcharge – which the court referred to as “make-whole relief” – and equitable estoppel were appropriate equitable remedies under ERISA, 29 U.S.C. § 1132(a)(3). “We therefore agree with McCravy,” the court said, “that her potential recovery is not limited, as a matter of law, to a premium refund.”
The court remanded the case to the district court to consider the merits of McCravy’s breach of fiduciary duty claim and to decide whether surcharge or equitable estoppel would be appropriate remedies under the circumstances of the case.
The Fourth Circuit viewed Amara as bringing to an end the existence of “perverse incentives” for insurance companies “to wrongfully accept premiums” for “non-existent benefits” and “enjoy essentially risk-free windfall profits,” with the only risk being “the return of their ill-gotten gains.”
Click here to view the full August 2012 Edition of the ERISA and Life Insurance News.