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.