En Banc Sixth Circuit Ruling on Remedies for Denial of ERISA Welfare Benefits
Earlier this month, in Rochow v. Life Ins. Co. of No. Amer., No. 12-2074, 2015 U.S. App. LEXIS 3532 (6th Cir. March 5, 2015), a divided Sixth Circuit, sitting en banc, rejected a December 2013 panel opinion that, in the views of many ERISA practitioners, extraordinarily expanded ERISA remedies for wrongful denial of benefit claims. In the underlying panel opinion—now vacated—the majority concluded that the plaintiff could recover his long-term disability benefits under ERISA § 502(a)(1)(B) and disgorgement of the money the group disability insurer allegedly earned by keeping the money invested in its general account under ERISA § 503(a)(3). Plaintiff’s expert calculated the latter amount to be millions of dollars, an amount far in excess of the amount of disability benefits allegedly wrongfully denied.
A majority of the en banc court held that plaintiffs such as Rochow were entitled only to recover the amount of denied benefits, and perhaps an award of pre-judgment interest that compensated the plaintiff for the lost interest value of money. It rejected the disgorgement award on a number of different grounds. There was a dissent, in which a number of judges joined.
The case had a long history before the March 5, 2015 en banc opinion. Throughout its history, the district and circuit court judges generally took a dim view of the claims administrator’s conduct and its rationales for denying benefits. But even the dissent implied such circumstances were rare, concluding that “courts will not often come across a case [with factual findings] as troubling as this one.”
So what do we take from Rochow, given its unusual facts, its extraordinary outcome in the district court, and the views expressed in the March 15, 2015 opinion? I have a number of takeaways that require more space than a blog post. But the high-level takeaway is that disgorgement is off the table as an ERISA remedy, particularly when the claim is (or is properly characterized as) a benefit denial (even an arbitrary and capricious one).