Plaintiff, Mr. Delker, brought suit against his late wife’s employer, MasterCard International, Inc. for breach of fiduciary duty under ERISA as it pertained to life insurance benefits.
Mrs. Delker and her husband thought they had elected life insurance coverage with Prudential for up to three times her annual salary, funded solely by her employer. Based on this belief, they did not buy any additional life insurance. Mr. Delker was named the life insurance beneficiary.
After Mrs. Delker’s passing, MasterCard repeatedly told Mr. Delker (via telephone and letter) that he was entitled to a life insurance benefit three times his wife’s salary. However, when the claim was submitted to Prudential, Prudential determined that contrary to MasterCard’s statements, Mr. Delker was only entitled to one time his wife’s salary.
MasterCard then changed their tune, echoing Prudential’s statements to Mr. Delker. It attributed its previous misstatements to “administrative error.” Mr. Delker then brought suit against MasterCard under ERISA for breach of fiduciary duty, among other causes of action.
The case made its way up to the appellate court. The appellate court was tasked with determining whether Mr. Delker stated a plausible claim for MasterCard’s breach of fiduciary duty.
Generally, an insurer, rather than an employer, is the proper defendant in a life insurance case. However, here, Mr. Delker’s suit against his wife’s employer is proper because MasterCard was a “functional fiduciary.”
A key component of being an ERISA fiduciary is to act in the sole interest of the plan participants and beneficiaries. Making materially misleading statements constitutes a violation of a fiduciary's duties.
To fulfill one’s fiduciary duties, a fiduciary has a duty to answer questions about a plan, convey changes in the plan, and disseminate information directly to plan participants concerning their rights within the plan, including information that could adversely impact the participant or beneficiary.
The appellate court here was reviewing only the lower court’s dismissal of Mr. Delker’s claim, and therefore, its only issue was whether Mr. Delker’s allegations are plausible. The appellate court held that when considering the evidence in the light most favorable to Mr. Delker, it was plausible that his wife made an election for a life insurance benefit worth three times her salary due to the structure and ambiguous wording of the forms.
The appellate court also held that if his wife’s benefit election was for whatever reason deficient, Mr. Delker plausibly alleged detrimental reliance, because MasterCard's statements caused his wife to reasonably believe that she had elected three times her salary in life insurance benefits (with premiums paid by her employer), and she relied upon that belief when she did not purchase additional life insurance.
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