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. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

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  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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