ERISA beneficiary can recover as “appropriate equitable relief” benefits lost due to fiduciary breach

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The Eleventh Circuit joined all other appellate courts in considering the issue in ruling that an ERISA beneficiary can recover under Section 1132(a)(3) of ERISA, which allows an action for “appropriate equitable relief”, the benefits lost as a result of a breach of fiduciary duty. Gimeno vs. NCHMD, Inc.38 F.4e 910 (11th Cir. June 28, 2022).

Justin Polga was a physician employed by NCHMD, Inc. When Dr. Polga was hired, he elected to add $350,000 in supplemental life insurance to his benefits, and NCHMD human resources staff assisted him in complete the insurance registration documents. Polga received a benefit summary indicating that he had the supplemental coverage, and the premiums for the supplemental coverage were deducted from his salary. But he never received from NCHMD – and therefore never completed – an evidence of insurability form required by the insurer. When Dr. Polga died, the insurance company denied his wife’s claim for additional benefits because she had never received the required form.

Dr. Polga’s wife, Gimeno, sued NCHMD and her relative under ERISA Section 1132(a)(1)(B), which permits an action “to recover benefits owed to [a beneficiary] in terms of [an ERISA] plan.” Gimeno alleged that the defendants failed in their fiduciary duties to properly administer the plan, inform Dr. Polga of his rights and benefits, and ensure that all required forms were submitted. order requiring payment of the $350,000 supplementary insurance benefit.

The defendants sought dismissal, arguing that they were not insurers and therefore had no obligation to pay benefits. Gimeno responded with a request to amend its complaint to assert its claims under ERISA Section 1132(a)(3), which permits claims for “appropriate equitable relief.” The district court granted the motion to dismiss and denied leave to amend, finding that amending the complaint would be futile because the award of insurance benefits was not a fair remedy.

The Eleventh Circuit, in an opinion written by Judge Brasher and joined by Judge William Pryor and Judge Rosenbaum, vacated. The court began by noting that “equitable relief” refers to relief that was generally available in equity and that the category includes certain types of monetary relief. “Courts in equity could order the return of ‘particular funds or property in the possession of the defendant,'” the court noted, and could also “impose an equitable surcharge – an order requiring a trustee to indemnify a beneficiary of the trust for a loss due to breach of fiduciary duty.” In CIGNA Corp. against Amara, 563 US 421 (2011), the court observed, the Supreme Court reversed a decision that relied on Section 1132(a)(1)(B) of ERISA to order a plan administrator to pay higher benefits, but also noted, for the benefit of the referring court, that the remedy sought closely resembled that of an “equitable surcharge”, which might be available under section 1132(a) (3). Since then, every circuit court assigned to deal with the matter has held that Section 1132(a)(3) creates a cause of action for monetary relief for breach of fiduciary duty. The Eleventh Circuit joined this group, finding that it was an error on the part of the district court to find that it would be futile for Gimeno to amend its complaint to add a claim under section 1132(a) ( 3).

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