Justia Insurance Law Opinion Summaries

Defendants, the chairman and chief executive officer of Lunde Electric Company ("company"), appealed convictions stemming from the misappropriation of employee 401(k) contributions to pay the company's operating expenses. At issue was whether there was sufficient evidence to support defendants' convictions under 18 U.S.C. 664, for embezzlement or conversion of elective deferrals, and 18 U.S.C. 1027, for false or misleading statements in a required Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C 1001 et seq., document. The court held that there was sufficient evidence to support defendants' convictions on Counts 17 and 18 under section 664 where there was sufficient evidence for the jury to conclude that the 1991 Profit Sharing Plan had been restated before defendants retained their employees' elective deferrals in the company's general account; where defendants commingled their employees' contributions with the company's assets to prop up their failing business and therefore, intentionally used their employees' assets for an unauthorized purpose; where they sent participants account statements showing 401(k) balances which were in fact non-existent; where defendants' decision to deviate was the wilful criminal misappropriation punished by section 664; and where defendants were alerted repeatedly about their obligation to remit the deferrals and defendants hid their actions from employees. The court also held that there was sufficient evidence to support defendants' convictions on Count 21 under section 1027 where defendants' initial decision to mislead their own employees about the solvency of their retirement plans by filing false account statements and false Form 5500s were the behaviors targeted by section 1027.

Plaintiff sued defendant alleging breach of fiduciary duty and sought damages under the "other appropriate equitable relief" provision of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. 1132(a)(3), where defendant denied plaintiff's life insurance coverage claims for her deceased daughter on the grounds that her daughter did not qualify for coverage under the plan's "eligible dependent children" provision. At issue was whether section 1132(a)(3) allowed the remedy of surcharge, which would permit recovery of the life insurance proceeds lost by plaintiff because of defendant's breach of fiduciary duty. Also at issue was whether the court should recognize equitable estoppel as part of the common law of ERISA. Further at issue was whether the district court erred in granting plaintiff's motion for summary judgment. The court held that the remedy of surcharge was not available under section 1132(a)(3) and that the district court did not err in limiting plaintiff's damages to the premiums withheld by defendant where plaintiff sought a legal, not equitable, remedy, and that, to the extent plaintiff sought to sanction defendant, this remedy was also not allowed under ERISA. The court also declined to use estoppel principles to modify the unambiguous terms of an ERISA plan. The court further held that the district court did not err in granting plaintiff's motion for summary judgment where defendant lacked standing to prosecute its cross-appeal where defendant was not aggrieved by a judgment requiring it to pay an amount that it always agreed that it owed and where defendant already refunded the premiums.

Respondents, on behalf of beneficiaries of the CIGNA Corporation's ("CIGNA") Pension Plan, challenged the new plan's adoption, claiming that CIGNA's notice of the changes was improper, particularly because the new plan in certain respects provided them with less generous benefits. At issue was whether the district court applied the correct legal standard, namely, a "likely harm" standard, in determining that CIGNA's notice violations caused its employees sufficient injury to warrant legal relief. The Court held that although section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1022(a), 1024(b), 1054(h), did not give the district court authority to reform CIGNA's plan, relief was authorized by section 502(a)(3), which allowed a participant, beneficiary, or fiduciary "to obtain other appropriate relief" to redress violations of ERISA "or the [plan's] terms." The Court also held that, because section 502(a)(3) authorized "appropriate equitable relief" for violations of ERISA, the relevant standard of harm would depend on the equitable theory by which the district court provided relief. Therefore, the Court vacated and remanded for further proceedings.