DeBofsky, Sherman & Casciari recently partnered with United Policyholders on an amicus brief urging affirmance in Rochow v. Life Insurance Company of North America (“LINA”), 737 F.3d 415 (6th Cir. 2013). United Policyholders is a non-profit 501c3 organization that serves as a voice and information resource for insurance consumers in all 50 states.

The case, about which we have previously written, concerns whether an ERISA claimant in a suit for benefits can recover $3.8 million in disgorged profits in addition to $900,000 in wrongfully withheld disability benefits. Although the panel-majority in Rochow affirmed the right of the plaintiff to obtain such an award, the Sixth Circuit granted LINA’s petition for rehearing on February 19, 2014, and the case is due to be re-heard by the Sixth Circuit en banc on June 18, 2014.

The amicus brief, written by Mark DeBofsky and Martina Sherman of DeBofsky, Sherman & Casciari with Amy Bach and Daniel Wade of United Policyholders, argues that disgorgement of profits is necessary to deter insurer misconduct in ERISA benefit cases, particularly in cases such as Rochow, where the insurer earned a substantial gain by investing the wrongfully denied benefits. As the panel-majority observed in Rochow, “If no remedy beyond the award of benefits were allowed, insurance companied would have the perverse incentive to deny benefits as long as possible, risking only litigation costs in the process.” 737 F.3d at 417.

States have long addressed this problem through insurance bad faith law, but those laws are preempted by ERISA. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987). However, as the Supreme Court recently clarified in CIGNA Corp. v. Amara, 131 S. Ct. 1866, 1880 (2011), nothing under the ERISA statute precludes a participant or beneficiary from obtaining “monetary ‘compensation’ . . . to prevent a trustee’s unjust enrichment” under ERISA § 502(a)(3) (authorizing suits for “other appropriate equitable relief”). Indeed, even prior to Amara, the Seventh Circuit permitted an ERISA benefits claimant to disgorge profits earned by her employer on her wrongfully denied benefits. See Mondry v. Am. Family Mut. Ins. Co., 557 F.3d 781, 806 (7th Cir. 2009). Accordingly, disgorgement is not only an appropriate remedy under § 502(a)(3) but also a necessary deterrent to insurer misconduct of the sort exhibited by LINA in Rochow.

In addition to United Policyholders, AARP and the National Employment Lawyers Association filed an amicus brief urging affirmance in Rochow v. LINA, while the American Benefits Council, American Council of Life Insurers, America’s Health Insurance Plans and Chamber of Council of the United States of America, and DRI-The Voice of the Defense Bar filed briefs urging reversal.

Related Articles

Update on ERISA-governed insurance benefit claims:  NACLE

Update on ERISA-governed insurance benefit claims: NACLE

ERISA law is constantly changing; and with each new ruling, the scope and context of how issues relating to disability, life and health benefits are resolved by the courts is constantly evolving.  In June of 2021, Mark DeBofsky recorded a continuing legal education program for the National Academy of Continuing Legal Education (NACLE) providing an update on ERISA-governed insurance claims.