On June 22, 2011, an en banc panel of the Ninth Circuit Court of Appeals issued its much anticipated decision in Cyr v. Reliance Standard Ins. Co., 642 F.3d 1202 (9th Cir. 2011) (en banc). Considering the issue of whether ERISA section 1132(a)(1)(B) authorizes actions to recover plan benefits against an insurer, the Court overruled prior decisions and held that a claimant may sue an insurer directly for unpaid benefits, even if that insurer is not the plan administrator.
In that case, Plaintiff Laura A. Cyr (“Cyr”) collected long-term disability benefits based on her compensation. While on long-term disability, Cyr sued her former employer for pay discrimination because of her sex. Cyr and the former employer settled that claim and the former employer retroactively adjusted Cyr’s salary. Cyr then approached the long-term disability insurer, Defendant Reliance Standard Life Insurance Company (“Reliance”) about adjusting her disability payments accordingly. Reliance denied the request and Cyr sued Reliance.
The specific statute involved, 29 U.S.C. § 1132(a)(1)(B), provides: “A civil action may be brought . . . by a participant or beneficiary . . . to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.”
In the district court, Reliance argued that it was not a proper party-defendant under § 502(a)(1)(B) pursuant to prior Ninth Circuit precedent which held that suits under 29 U.S.C. § 1132(a)(1)(B) may only be brought against the plan or plan administrator, but that an ERISA participant or beneficiary could not sue a plan’s insurer for benefits. See, e.g., Ford v. MCI Communications Corp. Health and Welfare Plan, 399 F.3d 1076, 108 (9th Cir. 2005); Everhart v. Allmerica Financial Life Ins. Co., 275 F.3d 751, 754 (9th Cir. 2001); Gelardi v. Pertec Computer Corp., 761 F.2d 1323, 1324 (9th Cir. 1985).
In overruling these decision, the Cyr court looked to Harris Trust & Savings Bank v. Salomon Smith Barney, Inc., 530 U.S. 238 (2000), where the Supreme Court addressed the question of who can be sued under a different subsection, subsection 1132(a)(3). Section 1132(a)(3) permits civil actions: “by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.”
The Supreme Court in Harris “rejected the suggestion that there was a limitation contained within section 1132(a)(3) itself on who could be a proper defendant in a lawsuit under that subsection,” reasoning as follows: “[Section 1132(a)(3)] makes no mention at all of which parties may be proper defendants—the focus, instead, is on redressing the ‘act or practice which violates any provision of [ERISA Title I].'” 29 U.S.C. § 1132(a)(3) (emphasis added).
Other provisions of ERISA, by contrast, expressly address who may be a defendant. See, e.g., § 409(a), 29 U.S.C. § 1109(a) (stating that “[a]ny person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable” (emphasis added)); § 502(l), 29 U.S.C. § 1132(l) (authorizing imposition of civil penalties only against a “fiduciary” who violates part 4 of Title I or “any other person” who knowingly participates in such a violation). And § 502(a) itself demonstrates Congress’ care in delineating the universe of plaintiffs who may bring certain civil actions. See, e.g., §502(a)(3), 29 U.S.C. § 1132(a)(3) (“A civil action may be brought… by a participant, beneficiary, or fiduciary…” (emphasis added)); (“A civil action may be brought… by the Secretary…” [Harris, supra at 246-47; emphasis added]
The Ninth Circuit found “no reason to read a limitation into § 1132(a)(1)(B) that the Supreme Court did not perceive in § 1132(a)(3).” Cyr, 642 F.3d at 1206.
The Ninth Circuit also found support for its holding in section 1132(d)(2) which provides: “[a]ny money judgment under this subchapter against an employee benefit plan shall be enforceable only against the plan as an entity and shall not be enforceable against any other person unless liability against such person is established in his individual capacity under this subchapter.” [Emphasis added.]
According to the Ninth Circuit, the “‘unless’ clause [of Section 1132(d)(2)] necessarily indicates that parties other than plans can be sued for money damages under other provisions of ERISA, such as § 1132(a)(1)(B), as long as that party’s individual liability is established.” Cyr, 642 F.3d at 1206-1207.
In their unanimous decision that Cyr sued an appropriate defendant, the Ninth Circuit wrote: “Reliance denied Cyr’s request for increased benefits even though, as the plan insurer, it was responsible for paying legitimate benefits claims. Reliance is, therefore, a logical defendant for an action by Cyr to recover benefits due to her under the terms of the plan and to enforce her rights under the terms of the plan, which is precisely the civil action authorized by § 1132(a)(1)(B).” Cyr, 642 F.3d at 1207.