HR exec found liable in breach of fiduciary duty under ERISA lawsuit

A federal judge recently sided with a widow who was denied her late husband’s life insurance benefits as the beneficiary, finding Tufts Medical Center Physicians Organization Inc. and its human resources department may have been obligated to fully provide her with information to avoid a lapse in coverage.

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The plaintiff, Lisa Erban, sued TMCPO, along with its human resource director, Nicolas Martin, alleging that they breached their fiduciary duty in violation of the Employee Retirement Income Security Act when she was denied basic life and supplement life insurance benefits as the beneficiary.

Her late husband, Dr. John Erban, worked more than 30 years at Tufts Medical Center as a physician specializing in oncology and hematology. He went to the emergency room on Aug. 14, 2019, and was diagnosed with a malignant glioblastoma tumor. He underwent surgery the next day, which left him cognitively impaired because nearly the entire portion of his frontal lobe was removed.

Immediately following his diagnosis, the physician was placed on six months’ medical leave and never returned to work. He earned his full salary and the defendant continued to pay the full amount of his $400,000 basic life insurance premium, and the premium for his $400,000 supplemental insurance was withdrawn from his paycheck. Both policies were issued from The Hartford Life Insurance Co.

Before his six-month guarantee ended, John Erban emailed Martin with questions about his long-term disability benefits, continuing his life insurance coverage, a summary of “any other benefits I am currently receiving that I need to concern replacing,” and indicating that his wife and sister, Barbara Weinstein, would be assisting him, the order said.

Both the wife and sister communicated with the defendants with follow-up questions, requested forms to convert the life insurance policy, and to ensure “there is no lapse in coverage,” the order said.

John Erban died in September 2020. He was 65 years old.

However, Lisa Erban—as the beneficiary—claims she was not informed that her husband was entitled to keep his life insurance policy in place for 12 months after his last day of work if his premiums were paid. Furthermore, she argued that the defendants did not completely and adequately inform her about the deadlines for converting her husband’s plan, according to her complaint.

Tufts argued that Lisa Erban was no longer a beneficiary under the policy on the date of her husband’s death because the insurance lapsed when she and her husband failed to timely convert the group policy to an individual policy. The defendants maintained that they did not violate any provisions in the plan and asked the district court to dismiss for failure to state a claim.

U.S. District Judge Patti B. Saris disagreed, denying Tufts’ motion to dismiss because Lisa Erban pleaded sufficient facts to support the claim that the defendants breached their fiduciary duty by not affirmatively informing her of the option to continue paying premiums or to file the conversion form.

Additionally, Saris concluded that Martin acted as an ERISA fiduciary, as Tufts “directed the Erbans to communicate with the HR department to preserve Dr. Erban’s benefits,” the order said.

“The Complaint alleges that Martin ‘knew that Dr. Erban was terminally ill, would never return to the practice of medicine, was cognitively impaired, and that his life insurance benefits were acutely important to continue or preserve.’ … Martin communicated with Dr. Erban, Ms. Weinstein, and his wife where he answered Dr. Erban’s questions, encouraged Dr. Erban to ask him more questions, and participated in phone calls to discuss the continuation of coverage. Thus, Lisa Erban has made a plausible claim alleging that Martin developed a position of trust with the Erbans, went beyond conducting ‘mere ministerial tasks,’ and affirmatively took on the responsibility in making sure there was no lapse in benefits,” she wrote, citing the U.S. Court of Appeals for the First Circuit’s 2008 holding in Livick v. Gillette in which “the HR representative acted ministerially, from those where an individual may be a fiduciary if they provide the employee with ‘misleading information while seeking advice about the security of his future benefits.’”

The judge said that fiduciaries have an obligation to accurately convey complete and accurate information, even when not specifically asked. “I think the case provides a good summary of the distinction between the duty of a fiduciary under an ERISA plan to provide information generally to employees and that’s limited but once an employee seeks the assistance of the HR department and the HR department tells them that they’re going to assist them and preserving the benefit, then the level of information that they need to provide becomes greater,” said the plaintiff’s attorney, Joseph P. Musacchio, of counsel for Kreindler & Kreindler in Boston.

Musacchio maintains that Tufts owed his client all of the information about her husband’s policies.

“They had a duty to specifically inform the beneficiary, Mrs. Erban, of options to preserve her husband’s policy, which is an important distinction because I think the judge made that ruling based on two factors: Mr. Erban was terminally ill and cognitively impaired throughout this and the Erban family specifically reached out to the HR department for help in preserving the policies and the HR department was actively involved in and agreed to assist in doing that,” he said.