Ninth Circuit En Banc Expands ERISA liability

The Ninth Circuit issued an "en banc" opinion to set the law in the Circuit regarding who is a proper defendant in certain ERISA cases.

Laura Cyr worked for CTI as a  vice president.  CTI offered long term disability benefits through Reliance Insurance.  Reliance ultimately controlled whether benefits would be awarded, but it was not the "plan administrator" under ERISA.  Cyr sued CTI for unequal pay, resulting in a settlement and a retroactive adjustment to her salary.   She was on a "long term disability" at the time, and sought an increase to her benefits. Reliance allegeldy denied that application. So Cyr sued CTI as the plan administrator, CTI's Long Term Disability Plan, and Reliance under different sections of ERISA and the common law.

In the 9th Circuit, beneficiaries were limited to suing the plan and plan administrator for denial of benefits under ERISA plans.  But no more.  The en banc court overruled prior decisions to that effect.

We conclude, therefore, that potential liability under 29  U.S.C. § 1132(a)(1)(B) is not limited to a benefits plan or the  plan administrator. Reliance is a proper defendant in a lawsuit  brought by Cyr under that statute.

As a result, insurance companies will now be sued where they have a role in denying benefits independent of the plan administrator, which apparently was the case here.  It's unclear whether this decision will result in increased premiums and legal costs, not to mention conflicts of interest between insurers and employers. We shall see.

The case is Cyr v. Reliance Standard Life Ins. Co. et al. and the opinion is here.