MetLife Loses Case Over Unfair Life Insurance Disbursement Practices

In Owens v. Metropolitan Life Insurance, Judge Richard Story of the Northern District of Georgia Federal Court found that MetLife breached its duty to Laura Owens and similar beneficiaries. In April of 2012, Robert Owens died, leaving Laura a widow. Through his employer, Robert had life insurance from MetLife.

MetLife approved Laura Owen’s life insurance claim and established a “Total Control Account” (TCA) in Owen’s name. Under this arrangement, MetLife retained custody and control over Owen’s money, leaving Owens with the ability to make incremental withdrawals from the account over time as needed.

At issue was the fact that MetLife failed to pay Owens the interest this account accrued. Moreover, MetLife did not disclose to Owens that it was profiting by collecting this interest for itself. Owens claimed that this practice violated MetLife’s fiduciary duties and duty of loyalty under ERISA. After exhausting her administrative remedies, Owens brought a claim pursuant to ERISA on behalf of herself and other beneficiaries similarly situated.

Under ERISA, insurers have a duty of loyalty to put the interests of beneficiaries ahead of their own and a fiduciary duty to act honestly and in good faith. In the claim, Owens claimed that MetLife breached its duty of loyalty by creating a TCA instead of paying her a lump sum, and that MetLife breached its fiduciary duties by failing to pay her the interest her money had accrued.

Court Finds Met Life had Fiduciary Duty Under ERISA

Beginning its analysis, the court acknowledged that MetLife was a fiduciary under ERISA because it was “exercising discretionary authority and control” over Owen’s plan. However, the court noted that acting adversely to a beneficiary’s interest is only a breach of duty if the fiduciary is carrying out its “fiduciary function.” In this case, the court determined that “once benefits are paid in conformance with the policy, all of the insurer’s fiduciary duties have been fulfilled.”

At issue, then, was whether the benefits were “paid in conformance with the policy” when the TCA was created or when the funds were actually disbursed to Owens. The court determined that funds must be paid in full to a beneficiary to conform with the policy, and thus found that MetLife was still performing its fiduciary function while it administered the account.

Court Finds Withholding Interest a Breach of Fiduciary Duty Under ERISA

The court left open the question of whether the creation of a TCA itself is a breach of the duty of loyalty under ERISA. However, the court found that a failure to pay a beneficiary interest accrued by a TCA was a breach of the fiduciary duty imposed by ERISA.

Moreover, the court found that even if MetLife wasn’t intentionally doing something wrong, they were still liable under ERISA. The court held that: “Even if this was not done in bad faith, Defendant violated ERISA when it used plan assets to generate investment income for its own account.”

The court also found that the actions of MetLife violated a Georgia state law that requires insurers to pay beneficiaries any interest accrued on accounts between the time an insurance claim is made and the time it is paid in full.

This case was not handled by Dell & Schaefer, but we feel it can be instructive for others who are receiving money from a TCA. If you have a question about this case, or any other issue concerning life insurance or disability benefits, contact one of our attorneys today for a free consultation.

Comments (9)

  • Loretta: It’s not clear in what context you are looking for a 1099 but you would need to request that from the insurance carrier.

    Jay Symonds Jul 22, 2022  #9

  • How do I get a copy of the 2020 1099-Misc. The IRS says they received one for my mom, but she did not get one so it was not reported on her taxes. The IRS says she owes taxes, but she did not get any money or any 1099.

    Loretta Jul 21, 2022  #8

  • Philip. You would have to consult with an accountant or financial advisor on that issue.

    Jay Symonds Mar 10, 2021  #7

  • A client presented to me the 1099-Misc she received from Owens QSF. Is all or a portion of this settlement taxable? It seems like some of this settlement is interest.

    Philip A. Mar 9, 2021  #6

  • Yesterday I received a check for 658 dollars 68 cent from owens qsf c/o settlement adm. Is this a good check?

    Joyce Jun 23, 2020  #5

  • Leticia: This appears to be the payout on a resolved class action lawsuit. You should contact the office of the attorneys that handled the matter if you have additional questions.

    Jay Symonds Jun 22, 2020  #4

  • Why did I receive a 12.05 check? From Owens vs Metlife.

    Leticia G. Jun 22, 2020  #3

  • Carolyn: This was a class action lawsuit. You should contact the office of the attorneys that handled the matter.

    Jay Symonds Jun 19, 2020  #2

  • My son Nathan had Metlife insurance policy and he died. How do I know if I will be contacted on this lawsuit?

    Carolyn S. Jun 19, 2020  #1

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