Group life is the redheaded stepchild of employee benefits, often added on by insurers on top of the primary products being sold to plan sponsors and employers, such as disability insurance. There is nothing inherently wrong with that, except that problems tend to crop up in the administration of group life plans and in the payment of claims due to nothing more than the lack of attention that comes with being a relative afterthought. In fact, off the top of my head, I would guestimate that whether advising sponsors on issues related to those plans, defending insurers or plan sponsors against claims involving those benefits or the occasional times I have represented plan participants seeking payment of those benefits, the underlying issue has always been an oversight and nothing more.

When it comes to denied claims for group life insurance benefits, and litigation to overturn denials, typically either the denial was right in the first place, or the cause of the erroneous denial was some form of a “left hand, right hand” problem in the interaction between the employer and plan sponsor, who is managing enrollment and payroll aspects of the benefit, and the insurer, who is overseeing both underwriting of the risk in the first place and decisions over whether a claim is covered.

A few examples from cases where I have represented either the participant, the plan sponsor/employer or the insurer are probably sufficient to make my point. (Note that I have changed the details somewhat, as well as left out any identifying information, to protect all involved, as well avoid any privilege or confidentiality issues). In more than one case, a terminally ill employee left his position with the employer, not realizing that before doing so, he should have converted his group life to an individual policy, and as a result forfeited the coverage. The mistake occurred, almost certainly, because the plan documents did not assign responsibility for advising the employee of that option to anyone in particular, neither the plan sponsor, the insurer nor the plan administrator, and the ball simply got dropped. In a number of other cases, employers had deducted premium dollars from paychecks for the group life benefit, but the necessary medical underwriting was never finished that was needed to trigger the benefit under the insurer’s policy – leading to two questions that are at the heart of all such cases, which is, first, who is responsible for that mistake (the employee, the plan sponsor/employer or the insurer), and second, is the employee’s beneficiary entitled to that life insurance payment if the mistake is chargeable to the plan sponsor/employer and/or the insurer itself.

In my experience, courts have often found for the existence of coverage in these factual scenarios without a clear doctrinal basis for doing so – in at least one such case, the Court essentially ruled that the events at issue had to have constituted a fiduciary breach and therefore the employee’s beneficiary was entitled to the benefit at issue without explaining the conclusion beyond that finding. This was in the early days after the Supreme Court first breathed new life into equitable remedies under ERISA in its decision in Amara, but before subsequent decisions would really give a doctrinal foundation for how those equitable remedies might be used to address that type of a fact pattern, so the Court’s cursory treatment of that issue is both understandable and easily excused.

Since that time, however, it has become more and more clear that such claims can find a comfortable home in the elements of both surcharge and estoppel, depending on how the error came to be in a given case. The Fifth Circuit just added some precedential weight to the argument that these types of “drop the ball” errors in providing group life insurance – in particular where premium dollars for the benefit have been deducted from paychecks but the terms of coverage were never actually fully satisfied – justify an award of the group life benefit to the beneficiary, in its very recent decision in Edwards v. Guardian Life Insurance. Interestingly, though, the Court, as has often been the case in the history of these types of claims, focused on the factual history, rather than on the doctrinal basis under ERISA for requiring payment. That said, though, estoppel, a theory of liability under ERISA generally approved of by the Supreme Court in Amara, or waiver – or both – is the underpinning of the decision.