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from Spencer’s Benefits Reports: An employer and a plan administrator did not breach their fiduciary duties under ERISA when they refused to pay life insurance claims for a newly hired employee who had not elected coverage prior to a fatal accident. This was the decision of the First Circuit U.S. Court of Appeals in Green and Renfro v. ExxonMobil Corporation, et al. (No. 06-1452).
In April 1996, Robert Renfro began working for Mobil Oil Corporation as a contract physician at the company’s Beaumont, Texas, oil refinery. Then, in the fall of 2000, Mr. Renfro sought a full-time, salaried position as a staff physician with ExxonMobil Corporation. Mr. Renfro received a letter confirming his appointment to that position on Jan. 15, 2001, and he began working for ExxonMobil on February 19 of that year. However, on Feb. 25, 2001, Mr. Renfro was injured in an automobile accident, and he died the following day.
At the time of his death, Mr. Renfro was age 57, divorced, and had two grown children, Rachelle Green and Byron Renfro. ExxonMobil’s employee benefits plan included life insurance coverage, and Mr. Renfro became a covered employee as of Feb. 19, 2001, when he began working for the company. Under the plan, Mr. Renfro was automatically entitled to 200% of his base salary (then $157,000 per year) and with a similar payment for basic accidental death coverage. His two children received $628,000 in benefits under the plan. Additional group life and voluntary accidental death and dismemberment coverage would have been available if Mr. Renfro had elected and paid for the benefits.
On Feb. 26 and 27, 2001, after learning of Mr. Renfro’s death, an ExxonMobil benefits supervisor and a corporate attorney attempted to retroactively elect maximum supplemental group life and voluntary AD&D coverage for Mr. Renfro. Then, on April 11, 2001, an ExxonMobil benefits counselor sent Mr. Renfro’s children a letter with an attachment labeled “Estimate of Survivor Benefits,” which stated that the children would receive $628,000 for the basic coverage, $785,000 for group life benefits, and $1.256 million for voluntary AD&D benefits. However, the letter also included a disclaimer, which stated, “In the event of any inconsistency between the information contained in this statement and the provisions of the plans, the plans, as well as any applicable administrative regulations, will govern.”
ExxonMobil’s insurer for the group life and voluntary AD&D benefits, Metropolitan Life Insurance Company, refused to pay life insurance claims for someone who had not elected coverage prior to a fatal accident. At that point, ExxonMobil’s plan administrator, Janet Madigan, consulted an ExxonMobil attorney, who stated that only Ms. Madigan could approve a retroactive election. Ms. Madigan then declined to do so, and on May 10, 2001, she sent a letter to Mr. Renfro’s children stating that, contrary to the earlier letter, Mr. Renfro was not eligible for group life and voluntary AD&D benefits because he had not signed an election form. Thereafter, Mr. Renfro’s children filed suit against ExxonMobil and Ms. Madigan in the U.S. District Court for the District of Rhode Island, alleging that the defendants had breached their fiduciary duties under ERISA. However, both the district court and the First Circuit ruled in favor of the defendants.
On appeal, Mr. Renfro’s children argued that subordinate ExxonMobil employees had made a valid and binding benefits election on behalf of Mr. Renfro that could not be undone. In rejecting that argument, the First Circuit stated, “Under the plan, group life and voluntary accidental death and dismemberment benefits required an election. Nothing in the plan explicitly provides for someone else (except an assignee) to make an election for the employee, let alone to do so retroactively after an accident has occurred. Further, under the plan, [Ms.] Madigan had the requisite authority to interpret and apply the plan—a decision to which we ordinarily defer unless it is unreasonable. [Ms.] Madigan’s decision that subordinates had no authority to make a retroactive election for [Mr.] Renfro is far from unreasonable.
“Nor is such a ruling inconsistent with [the plaintiffs’] contention that some of the lower-level employees exercised ‘discretion’ in various matters concerning benefits. In all likelihood some of them did. But this does not answer the question whether their discretion extended to making a post-accident election for an employee who had not himself made one or committed himself to pay premiums—certainly an eyebrow-raising event in the administration of an ERISA plan.”
Alternatively, the plaintiffs argued that ExxonMobil caused or contributed to Mr. Renfro’s failure to complete the election forms by failing to provide them at the outset of his employment. However, the First Circuit likewise rejected that argument, concluding, “Of course, an outright refusal of ExxonMobil to provide forms for an extended period could well constitute improper behavior; but in this case the only issue is whether a failure to provide the forms on the day of employment or within a week thereafter was so improper as to excuse the need for an election. Nothing in the plan or any representation by the company specified a fixed date for supplying the election documents to [Mr.] Renfro, nor does anything suggest that the delay in his case was deliberate or extraordinary. In a perfect universe, [Mr.] Renfro would perhaps have received the forms before he began work, but perfection is not a feasible standard of care. [Mr.] Renfro was never promised that enhanced life insurance coverage would necessarily be in force on the first day of work, nor was he inaccurately told that he had coverage when he did not. In sum, we agree with the district court that [Mr.] Renfro was not deprived by ExxonMobil of benefits due him under the plan.”
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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