As we noted in our recent discussion of LaRue v. DeWollf, Boberg & Assoc., Inc., the Supreme Court’s highly anticipated decision avoided the troubling issue of what constitutes equitable relief for purposes of ERISA Section 502(a)(3) claims. On March 3, 2008, the Supreme Court signaled that it may be willing to address this issue by inviting the Solicitor General to file briefs in Amschwand v. Spherion Corp., 505 F.3d 342 (5th Cir. 2007). Amschwand v. Spherion Corp., U.S., No. 07-841, request for solicitor general brief 3/3/08.
In Amschwand, Plaintiff’s husband, Thomas Amschwand, was on medical leave for a bout with cancer when his employer, Spherion, switched life insurance carriers from Prudential to Aetna. A provision in the Aetna policy, entitled the “Active Work Rule,” provided that, if an employee was ill or injured and away from work on the date his coverage would have become effective, the effective date of the coverage would be held until the date the employee returned to work for one full day. Aetna and Spherion agreed that this requirement would be waived for employees like Mr. Amschwand who were not working due to a medical condition at the time the transition took place. For unknown reasons, however, Mr. Amschwand never received a waiver of this requirement and remained subject to the Active Work Rule.
Mr. Amschwand enrolled during the open enrollment process and was informed by Spherion on numerous occasions that he was fully covered as he was under the previous plan. Despite Mr. Amschwand’s requests, however, Spherion failed to provide him with documentation of the Aetna policy provisions or with a summary of the provisions. Believing that he was fully covered, Mr. Amschwand continued to pay premiums until he died. Shortly after Mr. Amschwand’s death, Mrs. Amschwand filed a claim with Aetna and was informed that, because her husband had not satisfied the Active Work Rule, he was ineligible for benefits under the policy.
After being denied recovery in the administrative appeals process, Mrs. Amschwand filed suit under ERISA 502(a)(3) seeking monetary losses equivalent to the combined life insurance benefits that she would have received if her husband had complied with the Active Work Rule. Spherion refunded the premium payments but maintained that additional money damages did not constitute “appropriate equitable relief” within the meaning of 502(a)(3). The district court agreed and granted summary judgment for Spherion.
The Fifth Circuit Court of Appeals affirmed the decision of the district court, concluding that it was constrained by the Supreme Court’s decision in Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002), which held that, under 502(a)(3), both the nature of the claim and the relief sought had to be equitable in nature. The Fifth Circuit therefore held that, in applying the rationale of Great-West, obtaining lost policy proceeds was simply a form of “make-whole damages” and such a demand was not equitable in derivation but akin to the legal remedies of extracontractual or compensatory damages that have been historically available.
The Supreme Court’s invitation to the Solicitor to file briefs on the Amschwand case signals that it may now be ready to address the question of whether make-whole relief constitutes appropriate equitable relief under ERISA Section 502(a)(3). If the Supreme Court agrees to decide Amschwand and finds that make-whole relief constitutes equitable relief, another wave of ERISA litigation can be anticipated.