Technibilt Group Insurance Plan and Technibilt Ltd. v. Blue Cross and Blue Shield of North Carolina, 2020 WL 534951 (W.D. N.C. 2020)
An employer, as sponsor and administrator of its self-insured health plan, and the plan brought fiduciary breach claims against the plan’s third-party administrator (TPA), asserting that the TPA’s failure to timely pay a beneficiary’s $1.6 million claim resulted in unavailability of stop-loss insurance, causing a substantial loss to the plan. The administrative services agreement delegated responsibility to the TPA for certain administrative services, including processing and paying claims, and managing, controlling, and disposing of plan assets. A stop-loss policy would reimburse claim expenses exceeding a stated deductible so long as the underlying claims were processed and paid by a specified date. Despite several notices from the plan regarding this deadline, the TPA timely processed and paid only part of the claim, allegedly causing an $810,471 loss to the plan. The TPA moved to dismiss the suit, asserting that the plan could not bring ERISA fiduciary breach claims because those claims may be brought only by the DOL, or a participant, beneficiary, or fiduciary; the TPA was not an ERISA fiduciary; and the complaint did not sufficiently allege a fiduciary breach.
After noting that existing case law is divided on a plan’s ability to sue and has not addressed the specific circumstances of this case, the court ruled that the plan could assert fiduciary claims under ERISA because denying that right would be inconsistent with ERISA’s primary purpose to protect plan participants and beneficiaries. Moreover, barring the plan from suing under ERISA could leave the plan without a remedy, since the TPA argued that ERISA would preempt any state-law contract claims brought by the plan. Responding to the TPA’s argument that claims processing involves “ministerial” rather than fiduciary acts, the court acknowledged that payment of routine claims might be considered a ministerial task, but the “extraordinary and urgent circumstances” presented in this case could plausibly make the TPA a functional fiduciary. And, the court concluded, those same exigent circumstances could plausibly support claims that the TPA breached fiduciary duties of prudence and loyalty. Consequently, the motion to dismiss was denied.
EBIA Comment: Although this case is at an early stage, this decision reinforces some ERISA fundamentals: Standing to bring ERISA claims is limited; fiduciary status may be inferred from a party’s actions; and the fiduciary standards are exacting. Determining functional fiduciary status is highly fact-specific, and TPAs should consider whether exigent circumstances could transform their routine ministerial tasks into those implicating fiduciary discretion or control. For more information, see EBIA’s ERISA Compliance manual at Sections XXVIII.A (“Overview of ERISA Fiduciary Duties”), XXVIII.B (“Who Is a Fiduciary?”), XXVIII.E (“Delegating Fiduciary Responsibility”), and XXXVI.G (“Who Can File ERISA Benefits Litigation?”). See also EBIA’s Self-Insured Health Plans manual at Section XVII (“Stop-Loss Insurance”).
Contributing Editors: EBIA Staff