Mom Gets Another Shot to Claim Death Benefits

(CN) - Metropolitan Life may be liable for accepting a mother's insurance payments on behalf of her daughter and then refusing to pay the death benefit when the 25-year-old was tragically murdered.

Debbie McCravy, a full-time Bank of America employee, had a life insurance policy with Met Life that entitled her to buy coverage for "eligible dependent children."

The plan describes this group as children who are unmarried, dependent upon the insured for financial support, and either under the age of 19 or under the age of 24, if enrolled full-time in school.

McCravy bought coverage for her daughter, Leslie McCravy, and paid premiums, which MetLife accepted, from before her daughter's 19th birthday until her 2007 murder at the age of 25.

McCravy's parents say their daughter was the victim of domestic violence. Police reports at the time said that the young woman was found dead in her apartment, apparently shot by a boyfriend who then committed suicide.

McCravy filed a claim on her daughter's policy, but MetLife instead offered to refund the $300 in insurance payments, saying that 25-year-old Leslie no longer qualified for coverage under the plan's "eligible dependent children" provision.

Refusing to accept the check, the mother filed a 2008 federal complaint.

Among other things, McCravy says MetLife breached its fiduciary duty by leading her to believe her daughter was still covered under the policy. Had she known otherwise, McCravy says she could have purchased other life insurance.

McCravy sought recovery under 29 USC Section 1132 (a)(2) or (a)(3), pleading entitlement to recovery under waiver, estoppels, "make whole," and other equitable theories. McCravy also pleaded various claims under state law, including promissory estoppels and breach of contract.

A federal judge in Charleston, S.C., decided that the Employee Retirement Income Security Act pre-empted McCravy's state-law claims.

Regarding her breach of fiduciary duty claim, the judge said McCravy could recoup limited recovery under section 1132 (a)(2), amounting to the wrongfully collected insurance premiums.

Though the 4th Circuit initially affirmed that decision, its May 2011 ruling came on the same day that the U.S. Supreme Court changed the landscape with its resolution of Cigna Corp. v. Amara.

With Amara, the high court expanded the relief and remedies available to plaintiffs asserting breach of fiduciary duty under Section 1132 (a)(3).

The Richmond, Va.-based federal appeals court granted rehearing of McCravy's case on this basis, and reversed its earlier opinion.

"In this case, McCravy first argues that the district court committed legal error by limiting her damages to premiums wrongfully withheld by MetLife because the remedy of surcharge is available to her under Section 1132(a)(3)," Judge James Wynn Jr. wrote for a three-member panel. "Specifically, McCravy contends that she, as 'the beneficiary of a trust,' is rightfully "seeking to 'surcharge' the trustee [MetLife] in the amount of life insurance proceeds lost because of that trustee's breach of fiduciary duty. In light of Amara, we must agree."

"Whether McCravy's breach of fiduciary duty claim will ultimately succeed and whether equitable estoppel is an appropriate remedy in the circumstances of this case are questions appropriately resolved in the first instance before the district court," he added.

"In sum, with Amara, the Supreme Court clarified that remedies beyond mere premium refunds - including the surcharge and equitable estoppel remedies at issue here - are indeed available to ERISA plaintiffs suing fiduciaries under Section 1132(a)(3). "This makes sense - otherwise, the stifled state of the law interpreting Section 1132(a)(3) would encourage abuse by fiduciaries. Indeed, fiduciaries would have every incentive to wrongfully accept premiums, even if they had no idea as to whether coverage existed - or even if they affirmatively knew that it did not. The biggest risk fiduciaries would face would be the return of their ill-gotten gains, and even this risk would only materialize in the (likely small) subset of circumstances where plan participants actually needed the benefits for which they had paid. Meanwhile, fiduciaries would enjoy essentially risk-free windfall profits from employees who paid premiums on non-existent benefits but who never filed a claim for those benefits. With Amara, the Supreme Court has put these perverse incentives to rest and paved the way for McCravy to seek a remedy beyond a mere premium refund."

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