Fourth Circuit Extends Amara to Recognize a Broader Scope of Equitable Remedies in ERISA Litigation
In its recent decision in McCravy v. Metropolitan Life, the Fourth Circuit has read Amara as authorizing plaintiffs to pursue claims under ERISA's "other appropriate equitable relief" provision, even when that equitable relief will take the form of monetary recovery. This decision will impact ERISA litigants in the Fourth Circuit and elsewhere because some courts will allow plaintiffs to ask for such traditional equitable remedies as estoppel or surcharge in breach of fiduciary claims, including monetary relief for losses sustained as the result of fiduciary breach. McCravy's discussion of equitable estoppel may also suggest an additional burden on insurers who may be required to advise beneficiaries about lack of coverage or the porting or conversion of coverage.
The United States Supreme Court's decision in Cigna Corp. v. Amara, 131 S. Ct. 1866 (2011) discussed the possibility of broader equitable relief in ERISA litigation, without specifically holding exactly what relief might be appropriate, or when. The Fourth Circuit has now become the first appellate court to read Amara as mandating such equitable relief, as evidenced by its recent decision in McCravy v. Metropolitan Life Insurance Co., Nos. 10-1074 & 10-1131 (4th Cir. July 5, 2012). Specifically, theMcCravy court held that Amara authorizes plaintiffs to pursue claims under ERISA's "other appropriate equitable relief" provision, 29 U.S.C. § 1132(a)(3), even when that equitable relief will take the form of monetary recovery.
Plaintiff Debbie McCravy participated in her employer's life insurance and accidental death and dismemberment ("AD&D") plan, which MetLife insured and administered. Under the plan, a participant could purchase coverage for "eligible dependent children," which included "children of the insured who are unmarried, dependent upon the insured for financial support, and either under the age of 19 or under the age of 24 if enrolled full-time in school." McCravy purchased coverage for her daughter, Leslie. MetLife continued to receive and retain premiums from McCravy even after Leslie exceeded the age of 19 and moved past age 24, and continued to receive premiums right up until Leslie was tragically murdered at age 25. McCravy, the beneficiary, filed a claim for benefits. MetLife denied the claim because McCravy's daughter was not eligible for benefits as at age 25, she was neither under the age of 19, nor under the age of 24 and enrolled full-time in school. MetLife offered instead to return the overpaid premiums.
McCravy brought suit to obtain relief, filing a host of state law and federal claims, including claims under ERISA § 502(a)(2) or (3), 29 U.S.C. § 1132(a)(2) or (a)(3). The district court held that ERISA preempted McCravy's state law claims. The court also held that McCravy could not recover benefits under ERISA Section 502(a)(2). The district court ruled that McCravy could recover under the "other appropriate equitable relief" provision of ERISA Section 502(a)(3), but held that her remedy was limited to a return of the premiums wrongfully retained by MetLife for coverage that McCravy's daughter did not in fact have.
The Fourth Circuit initially affirmed the district court's ruling on May 16, 2011, the same day the U.S. Supreme Court decided Amara. After the Amara decision was released, McCravy filed a petition for rehearing.
On rehearing, the Fourth Circuit held that Amara authorizes broader relief under ERISA section 502(a)(3) than had previously been thought, including monetary relief. Calling Amara "[a] striking development," the McCravy court held that the equitable remedies available to an ERISA plaintiff under Section 502(a)(3) include "make-whole relief" derived from the law of trusts, such as a surcharge. Such relief is intended to "make the plaintiff whole" for losses wrongly caused by the defendant. The Fourth Circuit, quoting the district court, described the conduct considered to be a breach of fiduciary duty:
With their damages limited to a refund of wrongfully withheld premiums, there seems to be little, if any legal disincentive for plan providers not to misrepresent the extent of plan coverage to employees or to wrongfully accept and retain premiums for coverage which is, in actuality, not available to the employee in question under the written terms of the plan.
The Fourth Circuit agreed with McCravy that she may surcharge MetLife in the amount of life insurance proceeds lost because of MetLife's breach of fiduciary duty should she prevail on her claim in the district court. The Court further agreed with McCravy that she could seek the remedy of equitable estoppel, which would "operate to place the person entitled to its benefit in the same position he would have been in had the representations been true." The Court was unpersuaded by MetLife's argument that Amara's 502(a)(3) discussion was dicta, and instead acknowledged that the expansive discussion of ERISA's equitable remedies inAmara was controlling in the Fourth Circuit.
The Fourth Circuit remanded the case to the district court for further consideration of the appropriate remedy in light of its holdings. In particular, the district court was deemed the proper venue to determine, in the first instance, whether McCravy was entitled to estoppel and surcharge remedies under Section 502(a)(3).
McCravy is of import to ERISA litigants in the Fourth Circuit and elsewhere, because some courts are now allowing plaintiffs to ask for such traditional equitable remedies as estoppel or surcharge. McCravy also suggests that, to the fullest extent permitted by Amara, ERISA plaintiffs may ask for equitable monetary relief for losses sustained as the result of fiduciary breach, as part of the "other appropriate equitable relief" afforded by Section 502(a)(3). While the practical effect of that suggestion will be played out in the district courts, the Fourth Circuit has concluded that Amara paved the way for remedies tied to the actual losses suffered by participants due to fiduciary breaches.
McCravy and similar decisions that extend equitable estoppel to section 502(a)(3) claims may impact how courts view insurers' conduct regarding the conversion or porting of coverage. While the burden of converting or porting coverage has fallen generally on the insured, McCravy suggests a shift in burden where insurers may be required to advise beneficiaries about lack of coverage or the porting or conversion of coverage.