In Vest v. Resolute FP US, Inc., 905 F.3d 985 (6th Cir. 2018), the Sixth Circuit Court of Appeals upheld dismissal of a claim by the beneficiary of a deceased employee that the employer breached its fiduciary duty under ERISA §502(a)(3), 29 U.S.C. §1132(a)(3) by failing to notify the decedent of his right to port or convert his group life insurance coverage to an individual life insurance policy after he ceased active employment.
Under the governing Plan, employees had the right to port or convert group optional life insurance coverage to individual coverage within 31 days of ending active employment. The decedent did neither, and therefore lost the optional life insurance coverage. After his death, his wife and beneficiary sued the employer, alleging that it did not provide the decedent “with any information concerning his right to port or convert the coverage that ended,” and that such failure constituted a breach of fiduciary duty under ERISA §502(a)(3), 29 U.S.C. §1132(a)(3). The district court held that the employer had no such duty and dismissed the complaint. On appeal, the Sixth Circuit affirmed.
The Sixth Circuit noted that there are three conditions under which a fiduciary may breach its disclosure duty: “(1) an early retiree asks a plan provider about the possibility of the plan changing and receives a misleading or inaccurate answer or (2) a plan provider on its own initiative provides misleading or inaccurate information about the future of the plan or (3) ERISA or its implementing regulations required the employer to forecast the future and the employer failed to do so.”
Applying the foregoing test to the facts in Vest, the Sixth Circuit held that the first condition was not satisfied because “plaintiff does not contend her breach of fiduciary duty claim rests on a request to [the employer]” – in other words, plaintiff does not allege “an affirmative request for information, which was met with an affirmative omission.” The Sixth Circuit held that the second condition was not satisfied because plaintiff failed to allege “either a misrepresentation or inaccurate statement by [the employer] regarding [the decedent’s] conversion rights,” and neither ERISA nor the applicable regulations required the employer to “expressly disclose the information at issue.” The Court also noted that plaintiff “does not contend [the employer] was required to ‘provide information regarding conversion rights beyond that contained in the [summary plan description],’” which detailed that “insurance ‘will cease’ upon termination of active employment, that an employee ‘may convert the amount that ends to an individual Life Insurance Policy,’ and that ‘Totally Disabled’ employees, like [the decedent], ‘may be eligible for continued Life Insurance coverage subject to premium payment.’” The Sixth Circuit further held that the third condition of the three-part test was not satisfied because plaintiff’s claim “plainly” does not concern “not receiving future forecasts required by ERISA or its implementing regulations.” Finally, the Sixth Circuit noted that the complaint “contains no specific facts indicating [the employer] knew the ability to convert the optional life insurance would be important to [the decedent],” and, therefore, plaintiff failed to plead that the employer knew that its “silence might be harmful.”
The holding in Vest is in line with other case law concerning fiduciary duties under ERISA in the context of group life insurance conversion in that “[c]ourts adjudicating apposite claims in that context consistently find no fiduciary duty to provide specific information about conversion rights.” Tuhey v. Ill. Tool Works, Inc., No. 17 C 3313, 2017 U.S. Dist. LEXIS 121802, *22 (N.D. Ill. Aug. 2, 2017). See, e.g., Howard v. Gleason Corp., 901 F.2d 1154, 1161 (2d Cir. 1990) (“We agree with plaintiff that employers could, with little burden or expense, include notices in employees’ final paychecks reminding them that in order to continue their life insurance coverage, they must exercise their conversion privileges; [h]owever, ERISA does not mandate such notice”); Prouty v. Hartford Life & Accident Ins. Co., 997 F. Supp. 2d 85, 91 (D. Mass. 2014) (holding that employer did not breach fiduciary duty under ERISA by failing to provide plan participant with post-termination notice of life insurance conversion rights because “there is no requirement under the statute to provide notice of conversion rights for life insurance policies”); see also Maxa v. Alden Life Ins. Co., 972 F.2d 980, 986 (8th Cir. 1992) (“[T]his Court does not construe ERISA or the regulations under it to require that the appellee had a duty individually to warn, upon their sixty-fifth birthdays, each and all of the members of the plans which it insured that their benefits would be reduced according to the plan’s coordination of benefits provision unless they enrolled in Medicare”).