On October 19, 2021, the Fifth Circuit Court of Appeals denied a widow supplemental group life insurance benefits of $300,000 upon her husband’s death even though he had paid the premiums for the coverage for four years through payroll deductions by his employer, National Oilwell Varco.  The case, Talasek v. National Oilwell Varco, L.P., appealed a motion for summary judgment filed by the employer and Unum, the insurer.  The only issue before the Court was whether the surviving spouse had made a proper estoppel claim under ERISA for recovery.  In the Fifth Circuit, an ERISA claim for benefits based on estoppel requires (1) a material misrepresentation made to the plaintiff and (2) both reasonable and detrimental reliance on the misrepresentation.  Claims for ERISA breach of fiduciary duty and negligence had been earlier dismissed from the case.

The Court readily found that four years of making and reporting payroll deductions for the coverage constituted a misleading representation by the employer and that the plaintiff presented a genuine issue of fact about whether she relied to her detriment on the misrepresentations.

However, the Court held that the surviving spouse and her husband failed the reasonable reliance requirement because the misrepresentations were contrary to what the Court described as “unambiguous terms” in the plan documents.  The Court stated that Unum’s “Summary of Benefits” was the “governing document.”  Because that Summary provided that evidence of insurability was required for the coverage and because the deceased husband had in fact received, three years before his death, a letter from Unum denying the coverage because of abnormal lab results, reliance on the employer’s misrepresentations for four years was held not to be reasonable.

The decision is questionable because the facts include more than a mere misrepresentation.  The employer actually deducted the premiums from the deceased’s wages and then paid them to Unum for multiple years.  Yet, the Court does not weigh this actual payment of premiums against the early written denial of coverage to determine whether, under ERISA or state insurance law, the coverage was valid.  Nor does the Court explain why it considers the Summary of Benefits the controlling plan document that trumped the misrepresentations and the payment of the premiums.  It is not identified as the ERISA summary plan description, and it was not the group policy document.

The Fifth Circuit is fairly described as an employer-friendly court.  It may well be concluded that other federal circuits would have likely come to a different decision.  Nevertheless, the case does seem to teach that, in the Fifth Circuit at least, clear wording of the conditions for coverage and payment of plan benefits in even ancillary plan documents can overcome significant detrimental employer and insurer misrepresentations and actions.