JANUARY 2016 BAD FAITH CASES: BENEFICIARY’S CLAIMS FOR BAD FAITH AND PUNITIVE DAMAGES PREEMPTED BY ERISA (Third Circuit - Pennsylvania)

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In Malishka v. MetLife, the insured brought suit against the insurer, claiming that the insurer improperly denied the insured’s life insurance benefits claim following her son’s death. The insured’s son was a member of a union, and was accordingly given the opportunity to purchase coverage under an employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). The insurer serves as the claims administrator of the plan and has discretionary authority for interpretation and determination of eligibility requirements.

In determining whether the insured’s son was an eligible participant of the plan at the time of his death, the insurer relied on “detail summaries” prepared by the union, and ultimately determined that the insured’s son was not covered. Accordingly, the insurer denied the insured’s claim for life insurance benefits, and the insured brought suit.

Both parties filed motions for summary judgment and the insured moved to amend her complaint to include claims for penalties, attorneys’ fees, and bad faith damages. The court upheld summary judgment in favor of the insurer on appeal, reasoning that the court generally evaluates only the evidence that was before the administrator when it made the decision being reviewed, and the administrator is not bound by the Federal Rules of Evidence. Here, the court found that the insurer reasonably determined from the administrative record that the insured’s son was not eligible for the plan at the time of his death.

The insured’s motion to amend was denied, and on appeal the insured claimed the district court abused its discretion. However, the appeals court noted that only the plan administrator can be liable for statutory penalties for failing to provide plan documents, and ERISA preempts claims for bad faith and punitive damages. Thus, the order denying the insured’s motion for leave to amend her complaint was affirmed.

Date of Decision:  December 23, 2015

Malishka v. MetLife,  No. 14-4195, 2015 U.S. App. LEXIS 22487 (3d Cir. December 23, 2015) (Rendell, J.) (non-precedential)

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