ILNews

Court: Company not negligent in trust demise

Jennifer Nelson
January 1, 2008
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The 7th Circuit Court of Appeals upheld a magistrate judge's ruling in favor of a Michigan company on claims that it was negligent in managing an Indiana trust that eventually collapsed.

Magistrate Judge John Paul Godich, of the U.S. District Court Southern District of Indiana's Indianapolis Division, granted summary judgment in favor of Benefit Actuaries on Indiana Funeral Directors Insurance Trust's claims that Benefit violated its fiduciary duty under ERISA, and negligently failed to provide competent advice while managing the trust.

The trust appealed the ruling, Indiana Funeral Directors Insurance Trust, an Indiana trust v. Benefit Actuaries, Incorporated, No. 07-2351, arguing Magistrate Judge Godich erred in granting summary judgment on its claim that Benefit assumed the duty to comply with Michigan law; that Benefit didn't breach its duty to provide competent services as a third-party administrator, insurance broker, and advisor; and the judge erred in finding Benefit didn't breach its duty by failing to advise the trustees about risks or raising stop-loss deductibles and its poor financial situation.

The trust was created in 1972 and administered as a multiple insurance employer welfare arrangement (MEWA) to provide health benefits to funeral home employees. The trustees hired Benefit to serve as the third-party administrator, insurance broker, and advisor.

In the mid-1990s, the trust began to lose money because more claims were filed than the trust had money to cover from its self-funded health plan. The trust maintained stop-loss coverage, which would reimburse the trust for a specific amount it paid a participant over the deductible.

When financial troubles were evident, Benefit suggested the trust switch to a fully insured plan through an insurance provider, but the trust refused because it would raise the premiums substantially.

In 1997, the trust fired Benefit and later switched to a fully insured plan once it was evident the trust could no longer afford to cover the claims.

Magistrate Judge Godich found in favor of Benefit on the trust's claims and granted the Michigan company summary judgment.

The judge was correct in granting summary judgment on the trust's claim that Benefit assumed the duty to comply with Michigan law because there was nothing in the contract between the two companies that said Benefit would follow Michigan law while administering the Indiana trust, wrote Circuit Judge Terrence Evans. Nor does the trust submit evidence to show Benefit assumed the duty to provide competent actuarial advice.

Benefit didn't breach its duty to provide competent services; the magistrate judge based his decision on the testimony of Benefit's president that until 1997, the trust wasn't on the brink of ruin. Also, there is proof the trustees continuously disregarded Benefit's advice in terms of obtaining more stop-loss coverage or switching to a fully insured plan, wrote Judge Evans.
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  1. All the lawyers involved in this don't add up to a hill of beans; mostly yes-men punching their tickets for future advancement. REMF types. Window dressing. Who in this mess was a real hero? the whistleblower that let the public know about the torture, whom the US sent to Jail. John Kyriakou. http://www.nytimes.com/2013/01/26/us/ex-officer-for-cia-is-sentenced-in-leak-case.html?_r=0 Now, considering that Torture is Illegal, considering that during Vietnam a soldier was court-martialed and imprisoned for waterboarding, why has the whistleblower gone to jail but none of the torturers have been held to account? It's amazing that Uncle Sam's sunk lower than Vietnam. But that's where we're at. An even more unjust and pointless war conducted in an even more bogus manner. this from npr: "On Jan. 21, 1968, The Washington Post ran a front-page photo of a U.S. soldier supervising the waterboarding of a captured North Vietnamese soldier. The caption said the technique induced "a flooding sense of suffocation and drowning, meant to make him talk." The picture led to an Army investigation and, two months later, the court martial of the soldier." Today, the US itself has become lawless.

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