No Breach of ERISA Fiduciary Duty for Employer's Failure to Provide Notice of Life Insurance Conversion Rights

The Sixth Circuit Court of Appeals, in Vest v. Resolute FP US Inc., has affirmed a district court's decision to dismiss a breach of fiduciary duty claim based on a sponsoring employer's failure to disclose information about conversion rights, because the plaintiff's complaint did not contain unique facts and circumstances that showed the employer knew its "silence might be harmful."

Background. In Vest, an employee worked for the defendant/employer and was a participant in its life insurance plan. The defendant's plan provided employees with base coverage equal to their annualsalary and allowed employees to purchase optionalsupplemental coverage. The employee purchased an additional $300,000 ofsupplemental life insurance coverage. Following the onset of complications from diabetes, the employee stopped working in September 2015 and began receiving short- and then long-term disability benefits. Under the defendant's life insurance plan, employees retained their base life insurance coverage while receiving long-term disability benefits, but lost their supplemental life insurance coverage, unless they converted their expiring supplemental group life insurance coverage into individual coverage within 31 days of ending active employment with the Defendant. In May 2016, the defendant ended the employee's supplemental life insurance coverage. The defendant, however, did not provide the employee with information concerning the deadline for him to exercise his right to convert the supplemental coverage that was ending. The employee died in October 2016, and the insurer paid his beneficiary/widow, i.e., the plaintiff in this lawsuit, only the base coverage amount. The plaintiff responded by suing the defendant in federal district court, alleging that it breached its fiduciary duty to disclose information under ERISA by failing to notify her late husband about his conversion rights with respect to the supplemental life insurance coverage. The district court ultimately held that the defendant had no fiduciary duty to inform the decedent about his conversion rights and dismissed the plaintiff's complaint for failure to state a claim. In particular, the district court noted that the plaintiff's complaint lacked specific allegations that the defendant "knew of specific facts related to his health condition...or that he would never return to work." The plaintiff appealed the district court's adverse decision to the Sixth Circuit.

Sixth Circuit. The Sixth Circuit affirmed the district court's decision, noting that ERISA's fiduciary duty to disclose information is well defined. In the instant case, the court found that the plaintiff's claim contained no factual allegations indicating that the defendant knew that the decedent's conversion rights would be important to him and "that [its] silence might be harmful." Moreover, the Sixth Circuit noted that nothing required the defendant to disclose the information at issue, and that neither ERISA nor the DOL's regulations required summary plan descriptions to include information about conversion rights.