UNDER ERISA AN INSURANCE COMPANY’S FIDUCIARY DUTIES INCLUDE DISCLOSING MATERIAL INFORMATION TO ITS CLAIMANTS, WHETHER REGARDING LONG-TERM DISABILITY OR HEALTH BENEFITS

As explored in the blog last week, an insurance company, typically the party obligated to pay benefits and the administrator given discretion in construing and applying the provisions of a group health or disability plan and assessing a participant’s entitlement to benefits, is an ERISA fiduciary. However, an insurance company’s duties as an ERISA fiduciary are not confined to reviewing and gathering evidence under a duty of loyalty to its long-term disability or health insurance claimant, where it has to exercise reasonable care in the benefit determination and treat its claimant’s interests equal to its own. Instead, the insurance company is additionally required to provide certain information to its claimants as well. This is because “[t]he duty to disclose material information is the core of a fiduciary’s responsibility, animating the common law of trusts long before the enactment of ERISA.” Eddy v. Colonial Life Ins. Co. of Am., 919 F.2d 747, 750 (D.C. Cir. 1990). This duty obviously includes an obligation not to mislead a plan participant or to misrepresent the terms or administration of an employee benefit plan, including an insurance plan. Mondry, 557 F.3d at 807; Bowerman, 226 F.3d at 590; Anweiler v. Am. Elec. Power Serv. Corp., 3 F.3d 986, 991 (7th Cir. 1993). Significantly, this duty is not limited to that negative command but includes an affirmative obligation to communicate material facts affecting the interests of beneficiaries. Id. “This duty exists when a beneficiary asks fiduciaries for information, and even when he or she does not.” Id. (citing Eddy, 919 F.2d at 750); Solis v. Current Dev. Corp., 557 F.3d 772, 777-78 (7th Cir. 2009); see, Gregg v. Transp. Workers of Am. Int’l, 343 F.3d 833, 845-46 (6th Cir. 2003) (“‘once an ERISA [beneficiary] has requested information from an ERISA fiduciary who is aware of the beneficiary’s status and situation, the fiduciary has an obligation to convey complete and accurate information material to the beneficiary’s circumstance, even if that requires conveying information about which the beneficiary did not specifically inquire'”) (quoting Krohn v. Huron Mem. Hosp., 173 F.3d 542, 547 (6th Cir. 1999)); see also, Unisys Corp. Retiree Med. Benefits Erisa Litig. v. Unisys Corp., 579 F.3d 220, 228 (3d Cir 2009), cert. denied sub nom. Unisys Corp. v. Adair, 559 U.S. 940 (2010) (an ERISA fiduciary “must speak truthfully, and when it communicates with plan participants and beneficiaries it must convey complete and accurate information that is material to their circumstance.”); Blau v. Del Monte Corp., 748 F.2d 1348, 1353 (9th Cir.1984) (“The administrator of an employee welfare benefit plan…has no discretion…to flout the…fiduciary obligations imposed by ERISA, or to deny benefits in contravention of the plan’s plain terms.”); Howard v. Shay, 100 F.3d 1484, 1488 (9th Cir.1996) (The administrator’s “duties are the ‘highest known to the law.”’). Accordingly, if an insurance company fails to satisfy its duty to disclose material information to its claimants (that materially affects their interests), the insurance company is in breach of both its duties as a fiduciary and its obligations under ERISA.