A federal court in Georgia held that Metroplitan Life Insurance Company (MetLife) breached its fiduciary duties under a group life insurance policy when it held life insurance proceeds in accounts from which it took interest instead of paying beneficiaries. The case came about when Laura Owens’s husband died. Mr. Owens was an employee of the property management company, CB Richard Ellis, Inc., and was a participant in the CB Richard Ellis Group Insurance Plan. At the time of his death, Laura Owens was the named beneficiary of a $95,000 life insurance policy through the Ellis Group plan. Metropolitan Life Insurance Company insured the Ellis plan. MetLife agreed to pay the life insurance claim, but it utilized a tactic that life insurers commonly try – instead of sending Mrs. Owens a check, it created an account, and gave Mrs. Owens a checkbook on that account. MetLife never told Mrs. Owens that it was making money with her benefits that it was retaining through interest and other earnings.
MetLife Sued Based on Life Insurance Policy Language
The life insurance policy which MetLife wrote to fund the Ellis plan stated: “We will pay the Life Insurance in one sum. Other modes of payment may be available upon request.” MetLife advised Owens that it created a “Total Control Account” in her name. MetLife sent Owens a booklet of blank drafts, which allowed her to withdraw funds from the Account in increments of $250 or more. There was interest on the account, though it fluctuated, and the annual effective annual interest rate was no lower than 0.50%. The court’s decision explains:
MetLife’s practice is to hold payable benefits in its own general account until called upon to transfer funds to cover drafts drawn on Total Control Accounts… This practice extended to the benefits paid on Plaintiffs claim. MetLife established a TCA for Ms. Owens, paying interest at the rate of 0.50%… The funds remained in MetLife’s general account, earning interest for MetLife at a higher rate than that paid to Plaintiff.
This practice is the basis of Plaintiffs Complaint. Plaintiff alleges that MetLife profited from “investing [Plaintiffs] benefits for its own account.”… Plaintiff further alleges that MetLife did not disclose that profit or similar profits to Ms. Owens or to the Plan’s sponsor or administrator. …Plaintiff claims that this conduct constitutes a breach of fiduciary duty.
She claims Defendant breached its fiduciary duties under ERISA when it opened a TCA in her name and kept a majority of the interest earned on the assets backing the account rather than sending her a single check for the entire amount owed her.
Owens filed a lawsuit under the federal employee benefits law called ERISA. The case centered around whether the creation of the Account satisfied MetLife’s duties to pay benefits as required by the group life insurance policy. In the court’s words, “Thus, the question in this case is whether Defendant’s creation of the TCA constituted payment of the Policy proceeds in one sum. ”
MetLife Did Not Deliver the Policy Benefits When it Created the Account for Owens
The court decided that the group policy language was unambiguous. That means it could only be interpreted one way. MetLife had to pay the benefits, and to do that, it had to deliver the funds to the beneficiary. The Judge in Owens looked to another Georgia case which had considered similar MetLife language called Garrison v. Jackson Nat. Life. Ins. Co., 908 F. Supp. 2d 1293, 1298 (N.D. Ga. 2012). Some key language in Garrison guided the Judge in Owens to conclude that MetLife had in fact violated its fiduciary duties.
By retaining the beneficiary’s money in a Beneficiary Access Account, the insurer kept possession and control over the proceeds, giving the beneficiary only the “ability to request delivery of a quantity of money by writing a draft on the account.”… This did not fulfill the payment requirements of the life insurance policy. While the insurer contended that the Beneficiary Access Account gave effective possession by allowing the beneficiary to access the entire amount by writing a draft on the account, such an interpretation did not align with the plain meaning of the policy’s language, which required actual delivery. … The court noted that if “delivery of effective possession was contemplated by the policy, [it] would expect the policy to say so.”
The court found that “[s]he merely had the ability to request possession by writing a draft on the account.” She was credited with the full amount, but this came to no more than “effective possession,” and “[t]his delivery of effective possession, however, does not comport with the plain language of the Policy’s requirement of delivery of actual possession.”
MetLife Breached Its Fiduciary Duty – It Held on to Plan Money to Generate Revenue for Itself
Instead of paying Mrs. Owens the benefits owed to her, MetLife held those monies in the Account. The court viewed this is as retaining the plan’s assets. They certainly were not distributed to Mrs. Owens. MetLife may have given Mrs. Owens some of the interest, but it kept some interest for itself too. “Even if this was not done in bad faith, Defendant violated ERISA § 406(b)(1) when it used plan assets to generate investment income for its own account.”
Case Continues – Class Action May Be Certified
The court granted judgment to Mrs. Owens on several counts in her Complaint. The case will not end there though. The judge is letting the case proceed to see if a class action should be created for other similarly situation individuals in Georgia.