'Clear Notice' Standard Adopted by 6th Circuit, Plan Administrator Liable for Stiff ERISA Penalty

Author: Gloria Ju

June 5, 2014

In Cultrona v. Nationwide Life Insurance Co., et al., the 6th Circuit Court of Appeals upheld an $8,910 penalty against a benefits plan administrator that violated the Employee Retirement Income Security Act (ERISA) by failing to properly respond to a beneficiary's request for plan documents. Although the beneficiary's request was unclear, the administrator knew, or should have known, which documents were being requested, the court ruled.

The case arose when Nationwide Life Insurance Company (Nationwide) twice denied a claim for accidental death benefits that a beneficiary filed in regard to her late husband. In November 2011, her attorney appealed the decisions denying benefits and requested "all documents comprising the administrative record and/or supporting Nationwide's decision." The Nationwide Benefits Administrative Committee (BAC) did not provide the attorney with a copy of the accidental death policy until June 2012, a period of almost seven months.

In January 2012, the BAC denied the appeal. The beneficiary subsequently filed a lawsuit claiming, in part, that the BAC violated ERISA by failing to provide the accidental death policy in a timely manner. ERISA requires plan administrators to furnish certain documents to a plan participant or beneficiary upon written request. A penalty of up to $110 per day applies if a plan administrator fails to do so within 30 days of receiving a request.

The 6th Circuit held that the beneficiary's "broadly worded" request included the accidental death policy. In so ruling, the court adopted the standard applied in similar cases by several other federal courts (i.e., the 3rd, 5th, 7th and 10th Circuits), which requires those requesting plan documents to provide "clear notice" of the desired information. The key question under the standard is whether the plan administrator "knew or should have known" which documents were being requested.

Although the 6th Circuit agreed with the BAC's argument that the beneficiary's request did not meet the clear notice standard, the court was hard-pressed to believe that the BAC could not have known that the accidental death policy was the key document that supported its decision to deny the claim. In fact, the court pointed out, records showed that an employee had proposed sending a copy of the policy to the beneficiary but was instructed to send only the amendment.

Employers faced with an unclear benefits document request can simply ask the requester to be more specific, concluded the court.