Fiduciary Nondisclosure and Misrepresentation Claims
Under the Employee Retirement Income Security Act (ERISA), insurers whose plans are covered have strict fiduciary obligations to the plan participants. The imposition of strict fiduciary duty responsibilities on insurers is a critical function of ERISA, and one of the fundamental justifications for its enactment, as the Act is intended to safeguard the interests of plan participants by providing them with a cause of action against the insurer for violations of the fiduciary duty.
Elements of a Breach of Fiduciary Duty Claim
The breach of fiduciary duty cause of action is established by section 502(a)(2) of ERISA, which requires that the plaintiff-participants show:
- That the defendant is a fiduciary of the insurance plan;
- That the defendant breached their fiduciary duty towards the plan participants; and
- As a consequence of such breach, the plan participants (and by extension, the plan itself) suffered losses.
Section 502(a)(2) creates a private right of action that allows the plan participants to restore the losses to the benefit plan that resulted from the fiduciary’s breach of duty. Importantly, though individual fiduciaries can be held personally liable for such losses, section 502(a)(2) actions are necessarily collective, not individual. Another provision of ERISA (section 502(a)(3)) provides an individual cause of action for breach of fiduaciry duty claims, but it has been used primarily in the life insurance context.
Nondisclosure and Misrepresentation
There are a number of different ways in which ERISA fiduciary duties can be breached:
- Engaging in a transaction that reflects a conflict of interest
- Failure to manage plan assets with reasonable care (i.e., by diversifying plan assets)
- Self-dealing with plan assets
- Engaging in illegal or otherwise prohibited transactions
- Failure to keep plan sufficiently funded
- Failure to properly supervise fiduciaries
- Nondisclosure and misrepresentation
A fiduciary may be held liable for breach under ERISA if they fail to disclose material information to plan participants, or if they otherwise misrepresent material information in such a way that misleads plan participants. For example, if a fiduciary fails to disclose that they are making high-risk investments with plan assets, thus substantially increasing the risk profile for plan participants, a court would likely find that the failure to disclose such investment (or misrepresenting such investment as low-risk) would constitute a breach of the fiduciary duty.
If an insurer has failed to disclose pertinent information or has otherwise misrepresented relevant information, you may be entitled to compensation under ERISA, which imposes strict fiduciary duties on insurers and Plan Administrators. Here at Berg Plummer Johnson & Raval, LLP, our attorneys have experience representing employee-claimants in ERISA actions involving fiduciary nondisclosure and misrepresentation claims. We have AV-rated attorneys and lawyers who have been recognized by publications such as Super Lawyers and the Best Lawyers in America, and are more than prepared to handle complex litigation against large companies with substantial resources at their disposal.
We understand that not all litigants have the same budget constraints. To that end, we work closely with our clients to offer customized fee arrangements that are intended to cost-effectively lead to a successful resolution of their claims.