(CN) – The 9th Circuit overruled at least four its previous decisions related to employee disability and retirement claims on Wednesday, finding that federal law allows beneficiaries to sue third-party insurers.
After first refusing to hear the case, a full 11-judge panel of the federal appeals court ruled that the Employee Retirement Income Security Act (ERISA) clearly allows members of a particular benefit plan to sue parties other than the plan’s administrator or the plan itself.
“Some of our previous decisions have indicated that only a benefit plan itself or the plan administrator of a benefit plan covered under ERISA is a proper defendant in a lawsuit under that provision,” wrote Judge Richard Clifton for the court, sitting in San Francisco. “We conclude that the statute does not support that limitation, however, and that an entity other than the plan itself or the plan administrator may be sued under that statute in appropriate circumstances. We overrule our prior decisions to the contrary.”
Laura Cyr had sued her former employer, Channel Technologies, for gender discrimination and won a retroactive salary increase, which she claimed applied to her disability payments as well. Her disability plan’s insurer, Reliance Standard Life Insurance, refused to pay the increase and later lost Cyr’s paperwork, according to the ruling.
Cyr then sued Reliance for breach of fiduciary duty, but U.S. District Judge Dean Pregerson ruled for the insurance company. Based on previous 9th Circuit rulings, Pregerson found that Reliance was not a proper defendant because, under ERISA, only the plan or plan administrator could be held liable. But Pregerson later changed his mind and ruled for Cyr, concluding that the circuit’s case law did not necessarily shield third-party insurers from suit.
Reliance appealed, and Cyr petitioned for an initial hearing before a full panel of the 9th Circuit, instead of the usual three-judge panel. The U.S. Secretary of Labor even got involved with an amicus brief defending Cyr’s position.
Nonetheless, the circuit turned Cyr down and the issue went before a three-judge panel. Before the panel could rule, though, the circuit took another look at the case and agreed to a full-panel hearing.
“As a participant in the plan, Cyr is authorized under this provision to bring a civil action to recover benefits and to enforce and clarify her rights under the plan,” the panel found. “By its terms, [the ERISA] does not appear to limit which parties may be proper defendants in that civil action. Nor has the Secretary of Labor promulgated a regulation setting out such limits.”
The ruling states that “any statements or suggestions to the contrary in our prior decisions, including Ford v. MCI Communications Corp. Health & Welfare Plan, 399 F.3d 1076, 1081 (9th Cir. 2005); Everhart v. Allmerica Financial Life Insurance Co., 275 F.3d 751, 756 (9th Cir. 2001); Spain v. Aetna Life Insurance Co., 13 F.3d 310, 312 (9th Cir. 1993); and Gelardi v. Pertec Computer Corp., 761 F.2d 1323 (9th Cir. 1985), are overruled.”
Finding that the case, after all, did “not require the participation of this en banc panel,” the unanimous judges sent the case back to the three-judge panel to which it had been assigned originally.