The HR Legal News Blog

Sixth Circuit Imposes Penalties for Not Providing ERISA Plan Documents Upon Request

Lessons plan administrators should learn from Cultrona v. Nationwide Life Insurance Company (6th Cir. 2014):

  1. If a participant requests a document to which he or she is entitled under ERISA, hand it over.
  2. If you can’t figure out which document the participant wants, then the smart thing to do is to ask.
  3. If you don’t hand over the document….be prepared to pay up.

It’s just not that hard to do the right thing.  And it’s cheaper than paying the penalty for noncompliance.

Shawn Cultrona died on the bathroom floor of his home after spending a night out drinking with friends.  At the time of his death, Shawn was a covered person under an accidental death and dismemberment plan maintained by his wife’s employer.  The claims administrator denied Nicole Cultrona’s claim for accidental death benefits on the grounds that “Exclusion 12” precluded coverage.  The denial letter included an excerpt from the text of “Exclusion 12,” which stated that coverage would not be provided for injuries sustained by a covered person who was “deemed and presumed…to be driving or operating a motor vehicle while under the influence of alcohol or intoxicating liquors.”

Since Shawn was not operating a vehicle at the time of his death, Nicole’s attorney challenged the denial of benefits as “completely unfounded” and suggested that the denial was based on a “complete misreading” of Exclusion 12.   In fact, the claims administrator discovered that the language cited in the denial letter came from an outdated version of Exclusion 12.   Instead, Exclusion 12 had been amended a year and a half before Shawn’s death to remove the reference to “driving or operating a motor vehicle.”  The claims administrator apologized for the error and explained that the amended version of Exclusion 12 did indeed support the denial of Nicole’s claim.

The next day, Nicole’s attorney appealed the second benefits denial and, in the same correspondence, requested “all documents that you contend prove that Nationwide provided notice of Amendment No. 1 … and all documents comprising the administrative record and/or supporting Nationwide’s decision.”  The appeal did, in fact, go forward.  The Benefits Administrative Committee denied the appeal two months later.  However, almost seven months passed before the Benefits Administrative Committee provided Nicole’s lawyer with a copy of the accidental death and dismemberment policy.

Both the district court and the Sixth Circuit ultimately agreed with the Benefit Administrative Committee’s denial of Nicole’s claim for accidental death and dismemberment benefits.  However, the seven-month delay in providing Nicole’s attorney with the policy proved a costly error.  The Benefits Administrative Committee argued that Nicole’s request for “all documents” did not provide “clear notice” of which documents were being sought.  The Sixth Circuit observed that “one is hard-pressed to believe that the BAC should not have known that the accidental-death policy was the key document supporting its decision to deny Nicole’s claim.”  As the Sixth Circuit pointed out, if there really had been confusion about which documents Nicole’s attorney wanted, all the defendants had to do was to ask.  Worse yet, an employee of the claims administrator actually proposed sending a copy of the policy and amendment to Nicole’s attorney, but a Nationwide employee intervened and instructed the claims administrator to send  Amendment No. 1 but not to provide the underlying policy.

Section 104(b)(4) of ERISA, 29 U.S.C. 1024(b)(4), requires a plan administrator to provide participants with copies of plan documents and other critical instruments upon written request.    If a plan administrator fails to respond within 30 days, a district court may impose a penalty of up to $110 per day.  See 29 U.S.C. 1132(c )(1)(B);  29 C.F.R. 2575.502c-1.  In this case, the district court ordered the Benefits Administrative Committee to pay Nicole $55 per day as a penalty for the delay.

So here’s the moral of the story.  If the Benefits Administrative Committee had provided the documents which Nicole’s attorney requested, there would have been no penalty.  It’s hard to imagine why they didn’t do so.  If someone asks a plan administrator for a document to which they are clearly entitled, it’s easier and cheaper to do the right thing.  Just give it to them.  Don’t play games.

Lesson learned.