ERISA policy holders have very few legal remedies
Dying of cancer, Thomas Amschwand did everything he was told to make sure his wife would collect on the life insurance policy he had through his employer. “He was obsessed with dotting every i and crossing every t,” Melissa Amschwand-Bellinger recalled about her husband, who died in 2001 at age 30.
But Spherion Corp., the temporary staffing company where Amschwand worked, told Amschwand-Bellinger she would not receive any of the $426,000 in benefits she believed she was due. When she went to court, Spherion succeeded in getting her lawsuit thrown out. The Supreme Court on June 27 refused to review the case.
Amschwand-Bellinger received a refund of the few thousand dollars in insurance premiums she and her husband dutifully had paid. The total, she said, would not cover the costs of his funeral.
The story has played out often under the federal Employee Retirement Income Security Act. Designed to protect employee benefits, the law has been used by employers as a shield against suits.
Federal appeals courts, interpreting Supreme Court decisions dating to 1993, consistently have said companies that offer health, life and retirement benefits under ERISA cannot be sued for large amounts of money, or damages. Instead, they can be sued only for typically smaller sums such as Amschwand’s insurance premiums.
Several federal judges have bemoaned the unfairness even as they have felt constrained to rule in favor of employers.
“The facts… scream out for a remedy beyond the simple return of premiums,” Judge Fortunato Benavides of the New Orleans-based 5th U.S. Circuit Court of Appeals said in the Amschwand case. “Regrettably, under existing law it is not available.”
The Bush administration has argued that the appeals courts are misreading the precedents and has asked the high court at least twice to clarify the earlier rulings. So far it has refused.
Congress, which could amend ERISA to make clear such suits are allowed, also has taken no action.
The result, in the view of ERISA experts, the administration and some lawmakers, is perverse.
“The beneficiary under the policy didn’t get the promised benefit,” said Colleen Medill, an expert on ERISA at the University of Nebraska-Lincoln. “To say we’re just going to return your premiums, that’s a total farce. That’s not what they paid the premiums for. They paid them for the benefits.”
Sen. Patrick Leahy, chairman of the Senate Judiciary Committee, said at a recent hearing that before ERISA became law, employees clearly could sue for benefits in state courts.
The court rulings, said Leahy, D-Vt., have left people “more vulnerable than they were before the law was passed.”
Spherion’s decision to deny benefits to Amschwand-Bellinger turned on an odd set of facts. Spherion, which employs about 300,000 people, switched insurers after Thomas Amschwand was diagnosed with a rare form of heart cancer. The new policy did not take effect until an employee worked one full day. Spherion never informed Amschwand of the requirement.
Amschwand asked repeatedly whether there was anything else he needed to do and was told no. He asked that the new policy be sent to him. Spherion never did so.
He died without returning to work. His widow said he easily could have worked a day if that was what it took to activate the new policy. Spherion could have waived the one-day-of-work provision, as it did for other employees but not for Amschwand.
Spherion spokesman Kip Havel issued a brief statement when contacted by The Associated Press after the high court declined to review the case. “We are pleased the court has made its decision and the matter has finally been resolved,” Havel said.
The court also recently turned down an appeal from Louis Gerard “Gerry” Goeres, who sued Charles M. Schwab & Co. over hundreds of thousands of dollars in retirement plan benefits.
For 16 months, Schwab mistakenly refused to acknowledge Goeres as the beneficiary in the retirement plan of his domestic partner, Stephen Ward, a Schwab employee who died in 1999. By the time Schwab acknowledged its error, the value of the account had declined by more than $500,000. Goeres sued for the rest. Federal courts dismissed the suit. “Unfortunately, legal relief is not available,” U.S. District Judge Charles Breyer said in ruling against Goeres.
“You know the Schwab commercial, Talk to Chuck?” Goeres said. “I thought if Chuck knew this, he’d say, ‘Oh my God, this is so wrong. I live on naive dreams.'”
Schwab said in court papers that Goeres could have taken legal action soon after Ward’s death, when he first was told he was not the beneficiary.
Amschwand-Bellinger said the cases show the need for either the court or Congress to provide “some sort of meaningful remedy for employees when employers have a breach of fiduciary duty.”
A Texas native who lives in an unincorporated Houston suburb, she has since remarried and has an 18-month-old daughter. She is president and executive director of the Amschwand Sarcoma Cancer Foundation, which she founded with her first husband.
She recognizes that she is more fortunate than many others who have fought similarly futile battles for benefits under ERISA. “What if we had had children and I was a stay at home mom?” said Amschwand-Bellinger, who previously worked for a public hospital system. “What if I was 60 years old, with no skill sets, and I had to go back to work?”