Beneficiaries of group life insurance policies must be fully paid the policy benefits upon proof of their claim, the First Circuit has ruled in Mogel v. UNUM Life Ins. Co., No. 08-1334 (November 6, 2008). UNUM issued group insurance policies to employees at a number of companies. Plaintiffs were beneficiaries of those policies and presented proof substantiating their benefits claims. However, instead of paying the policy benefits, UNUM sent the beneficiaries a checkbook and a letter advising them that (1) their benefits had been deposited in a "UNUM Security Account"; (2) checks from $250.00 up to the balance of the account could be written; and, (3) interest on the account would be paid at a varying rate.
The court ruled that UNUM breached its fiduciary duty by retaining control and use of the beneficiaries' money in what the court referred to as a "euphemistically named 'Security Account.'" Sending the beneficiaries a checkbook "was no more than an IOU which did not transfer the funds to which the beneficiaries were entitled" and constituted a breach of UNUM's fiduciary duties under ERISA.
Robert L. Abell
