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On July 24, 2019, the United States Court of Appeals for the Fourth Circuit held in Dawson-Murdock v. Nat’l Counseling Group, Inc. that being an ERISA plan’s “named fiduciary” is sufficient to allege fiduciary status for virtually any ERISA fiduciary claim.  The court also applied an expansive definition of functional fiduciary status that may encompass acts that are carried out by the plan’s administrative staff.

In the Dawson-Murdock case, the plaintiff, who was the wife of a deceased employee of the defendant employer, National Consulting Group, Inc. (“NCG”), brought two claims for breach of fiduciary duty against NCG after being denied life insurance benefits.  The summary plan description for the life insurance plan defined NCG as both the “plan administrator and named fiduciary” of the plan.  This is consistent with ERISA § 402(a)(1), which requires every ERISA plan to designate one or more named fiduciaries who have the authority to control and manage the operation and administration of the plan.

The plaintiff claimed that NCG breached its fiduciary duties to the deceased employee when it did not advise him of his options to maintain his life insurance coverage (either by converting it or “porting” it) when he transitioned from full-time to part-time status.  The plaintiff also claimed that NCG breached its fiduciary duties to her when the company’s vice president repeatedly represented that her life insurance claim would be paid and that it was not necessary to appeal the denial to the insurer.  NCG allegedly continued to tell the beneficiary that no appeal was required until after the time for her to appeal had expired – only then did NGC inform her that the claim would not be paid.

After the lawsuit was filed, NCG moved to dismiss, arguing that it was acting in an administrative, as opposed to a fiduciary, capacity.  The United States District Court for the Eastern District of Virginia agreed and granted NCG’s motion.  But the Fourth Circuit reversed, holding that NCG’s status as the “named fiduciary” in the plan was sufficient for the plaintiff’s claims of fiduciary status to be plausible.

The Fourth Circuit also held that the plaintiff had sufficiently alleged, in the alternative, that NCG was liable as a functional fiduciary.  It held that NCG’s alleged role in verifying employee eligibility was sufficient to state a fiduciary breach claim that it either failed to inform or that it provided misinformation to the decedent regarding his continued eligibility under the plan.  The court also held that the complaint adequately alleged that, by responding to the plaintiff’s request for assistance and offering her tailored advice regarding whether to appeal the denial of benefits, one of NCG’s officers was acting as a functional fiduciary when he advised her not to appeal the insurer’s denial of her claim.   The court concluded, accepting the allegations as true for purposes of the motion, that the officer was acting under the authority of NCG and was exercising NCG’s discretion.  It is the fact that the conduct was discretionary rather than ministerial that makes it fiduciary in nature.

While this case arose in the context of a single employer plan, nevertheless Boards of Trustees and other fiduciaries of multiemployer plans should evaluate the extent to which their actions – and in particular the actions of plan staff, especially those who may communicate directly with participants and beneficiaries – are likely to be deemed fiduciary actions with respect to a plan.

Please contact Slevin & Hart for more information about this case and how it could affect your obligations as an ERISA fiduciary.

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