ERISA beneficiary loses case against insurer but employer must pay!
On January 24, 2022, the Federal District Court for the Eastern District of Tennessee ruled that Reliance Standard Life Insurance Company got the benefit of the doubt, called "deferential review," and as a result did not have to pay Alicia Johnson additional long-term disability benefits -- even though her plan interpretation made sense. So long as Reliance Standard's interpretation as well as hers also was reasonable, because the plan gave Reliance "discretion," it was free to go.
HOWEVER, Johnson's claim for breach of fiduciary duty against her former employer, Ballad Health, fared better. Ballad breached its fiduciary duty by providing Johnson a misleading plan description concerning what benefits Johnson was paying for when she opted and paid for additional benefits.
The Confirmation Summary provided by Ballad to Johnson corroborated Johnson's interpretation. As a result, Ballad must now pay Johnson the additional benefits she reasonably believed she bought. (And it did not matter whether Ballad intentionally or mere;y negligently made the misleading statements.)
Comment: ERISA plays a significant role in shielding the insurance company from liability here. Because both the insured's and the insurer's interpretations were reasonable, the ordinary rule finding ambiguity against the drafter, the insurer, does not apply. Instead the reverse holds true. The ambiguity benefited the insurance company. That complete role and result reversal is due to the "grant of discretion." Who granted Reliance discretion? Answer: Reliance Standard itself!
The employer, however, is not so lucky. Because ERISA requires employer's accurately to describe the benefits of the plan -- and this plan description clearly did not --, the employer bears the burden of anteing up the additional amount which the employee reasonably thought she was paying for.
See Johnson v. Ballad Health and Reliance Standard Life Ins. Co., Case No. 2:21-cv-50 (U.S. D. C., E.D. Tenn. Jan. 24, 2022).