In the case of Irina Morris v. Aetna Life Insurance Company, the Ninth Circuit Court of Appeals made a significant ruling that favors ERISA plan participants.
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In the case of Irina Morris v. Aetna Life Insurance Company, the Ninth Circuit Court of Appeals made a significant ruling that favors ERISA plan participants. The court's decision in Bafford v. Northrup Grumman Corp. had previously established that a third-party administrator's incorrect plan benefit calculation is not a fiduciary duty breach if it is within the framework of a preset policy. Insurers and administrators relied on this ruling to avoid liability for miscalculating plan participants' benefits.
However, the Morris case expanded the definition of fiduciary function and increased the potential liability for insurers and administrators. The court clarified that an ERISA insurer can still be held liable for fiduciary duty breaches if they exercise discretion in other misconduct related to ministerial benefit calculation errors that harm the plan participant.
Aetna argued that Bafford controlled the outcome of the case because their error was a ministerial calculation mistake. The court rejected this argument, emphasizing that Aetna's subsequent actions, which were discretionary and central to Morris's injury, qualified as fiduciary functions.
The court identified several instances where Aetna performed fiduciary functions involving discretion after its calculation error. They provided Morris with individualized consultations and engaged in extensive communication regarding her monthly plan benefit. Unlike the automated online mechanism in Bafford, Aetna's benefits specialists consulted with Morris by phone, sent letters for her to share with lenders, and communicated with her financial institutions.
Aetna's communication of the incorrect benefit amount to Morris and her lenders was deemed a fiduciary function due to the extent of Aetna's involvement in her financial life. Despite Morris questioning the accuracy of the benefit calculation, Aetna affirmed the erroneous amount for nearly a decade, leading Morris to make significant financial decisions based on the misinformation.
The court also ruled that Aetna exercised discretion and performed a fiduciary function when gathering Morris's earnings information and interpreting the plan's terms to determine her monthly benefit amount. This was different from the ministerial calculations in Bafford, where a third-party administrator followed a preset online formula without discretion.
The Morris Court restated the designated Ninth Circuit ERISA fiduciary duty law, emphasizing that a breach of fiduciary duty must occur in connection with the performance of a fiduciary function. The key question in fiduciary breach cases is whether the fiduciary was performing a fiduciary function when the complained action took place.
The ruling in the Morris case expands the potential liability for ERISA plan insurers and administrators, highlighting the importance of exercising discretion and acting in the best interests of plan participants. With the help of McKennon Law Group PC, an insurance litigation law firm in Newport Beach, California, Irina Morris was able to get the justice she rightfully deserved for her case.
McKennon Law Group PC has a long track record of successfully representing and fighting on behalf of clients dealing with insurance-related disputes. With a pay-if-you-win structure, there is hardly any risk to seeking out their help - no matter how big or small your insurance dispute is. Get in touch with McKennon Law Group PC today at 949-504-5381 to book an initial consultation.
For more information, visit https://mslawllp.com/
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