Life insurance through an employer is common. Most people do not realize the differences between regular life insurance that is purchased from a local agent or through a mail solicitation and life insurance that is purchased through their employer. The major difference is that life insurance purchased through their employer is often governed by the Employee Income Security Act of 1974 (ERISA), which is a life insurance plan governed by federal rules versus state rules otherwise.
Ben Talasek had purchased life insurance through his employer. He died and a claim was made by Erica for benefits. The actual facts of the case and the procedural history can be read in the opinion.
What needs to be understood here is the way the appeals court looked at the summary judgment motion and how ERISA cases differ from other types of life insurance.
Standard summary judgment rules control in ERISA cases. Thus, the Court reviews the grant of summary judgment de novo, applying the same standard as the district court, and take all inferences in the light most favorable to Talasek.
Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
On appeal, Talasek challenges only the district court’s grant of summary judgment in favor of NOV on her estoppel claim. Therefore, our review of the decision below is so confined. We conclude that she cannot meet the second element of her claim and hold that her claim must fail as a matter of law.
To survive summary judgment on her estoppel claim, Talasek needed to create a genuine dispute of material fact as to whether NOV made a material misrepresentation, on which she reasonably and detrimentally relied, under extraordinary circumstances. Caselaw regarding ERISA estoppel claims is sparse in the Fifth Circuit. Accordingly, the court looked to sister circuits for help in resolving these claims.
Talasek contends that NOV misrepresented the status of her husband’s life insurance coverage by continuing to deduct premiums from Ben Talasek’s paycheck and by confirming these deductions in the annual benefits statements. Material misrepresentations need not stem directly from the insurance plan itself but rather can be made in informal documents, such as NOV’s Benefit Confirmation Statements. And, where “there is a substantial likelihood that a misrepresentation would mislead a reasonable employee in making an adequately informed decision, a misrepresentation is material.
It is difficult to imagine a misrepresentation more likely to mislead a recipient. Every year for four years, Talasek and her husband received statements from NOV, purporting to identify the benefits elected and indicating the amount of the deduction for each element of coverage. Here, the decedent’s employer was actually representing that the plan was offering a new benefit; thus, we find that the representations the employer made were material misrepresentations. The district court acknowledged NOV’s erroneous actions but failed to find that Talasek satisfied the first element of her claim. That omission was error. However, the error was harmless, as Talasek cannot create a genuine dispute of material fact with respect to the remaining elements of estoppel.
Talasek must also have relied—(1) reasonably and (2) to her detriment—on NOV’s material misrepresentation. The district court found that Talasek presented a genuine issue of material fact regarding detrimental reliance. The court agreed. Thus, the crux of the second element is whether that reliance was reasonable.
Our precedent clearly indicates that an employee cannot reasonably rely on informal documents in the face of unambiguous terms in insurance plans. A party’s reliance can seldom, if ever, be reasonable or justifiable if it is inconsistent with the clear and unambiguous terms of plan documents available to or furnished to the party. A party cannot seek to estop the application of an unambiguous written provision in an ERISA plan. When a party seeks to estop the application of an unambiguous plan provision, he by necessity argues that he reasonably and justifiably relied on a representation that was inconsistent with the clear terms of the plan.
The provision of the group life insurance policy that required Ben Talasek to complete an Evidence of Insurability form before coverage could begin was unambiguous. The Summary of Benefits, provided by Unum, is the governing document. It states, in no uncertain terms, that evidence of insurability is required for any amount of life insurance. Ben Talasek was on notice that “coverage applied for during an annual enrollment period” began at midnight following the later of two conditions: (1) the first day of the next plan year; and (2) “the date Unum approved his evidence of insurability form for life insurance.” The Summary of Benefits made clear that this was also the case for changes in coverage.
Furthermore, the Summary of Benefits also made clear that NOV’s representations were not Unum’s. And, perhaps most significant, it delineated when and by whom changes could be made to the terms— restricting those instances to narrow circumstances. Talasek does not argue that she and her husband relied on NOV’s representations to help them interpret an ambiguous or unclear term in the Summary of Benefits. Rather, she contends that it was reasonable to rely on NOV’s representations rather than the unambiguous group policy language. Against this backdrop, the court could not say that Talasek’s reliance on NOV’s statements and deductions was reasonable—no matter how frustrating those misrepresentations were in reality. Thus, Talasek cannot establish the second element of her claim.
Because Talasek cannot create a genuine dispute of material fact over the reasonable reliance aspect of the second element, the court did not consider whether extraordinary circumstances existed.