On July 11, 2012, the US Court of Appeals for the Sixth Circuit issued an opinion in Walker v. Federal Express Corp. The key issue was whether a life insurance beneficiary could recover benefits under the ERISA Section 502(a)(2) remedy provision for an employer's alleged breach of fiduciary duty.

The beneficiary's spouse in this case was employed by Federal Express (FedEx) for almost 20 years and was a participant in the company's life insurance plan. The spouse suffered a stroke and was terminated by FedEx when he failed to return to work. The beneficiary claimed that FedEx failed to demonstrate that it provided the participant a required life insurance form needed to convert his group insurance coverage to an individual policy. However, FedEx asserted that it notified the participant, through COBRA election packets sent by its third-party administrator (TPA), that his termination entitled him to convert his coverage.

The participant died without converting his insurance coverage and FedEx ultimately rejected his beneficiary's claim for benefits under the policy, following administrative review. The beneficiary sued FedEx and the TPA, alleging that they breached their ERISA fiduciary duties. The US District Court for the Western District of Tennessee granted summary judgment in favor of FedEx, finding that:

Affirming the district court on appeal, the Sixth Circuit held that ERISA Section 502(a)(2) did not permit the beneficiary to receive individual relief in the form of life insurance benefits. ERISA Section 502(a)(2) allows participants and beneficiaries to seek appropriate relief under the liability-creating provisions of ERISA Section 409, which involves breaches of fiduciary duties that harm plans. According to the Sixth Circuit, however, Section 409:

The Sixth Circuit rejected the plaintiff's argument that the Supreme Court's decision in LaRue v. DeWolff, Boberg and Associates, Inc. allowed her to recover life insurance benefits from FedEx. In LaRue, the Court held that an individual 401(k) plan participant could sue his employer to recover damages caused by the employer's breach of fiduciary duty regarding the plan. In that case, the participant asserted that a plan administrator's failure to follow his investment instructions resulted in significant investment losses. However, the Sixth Circuit agreed with the district court that LaRue applies only to defined contribution pension plans, and not to life insurance benefits. Therefore, the beneficiary's claim was outside the scope of LaRue and unavailable under ERISA.

Also, the Sixth Circuit agreed with the district court that ERISA does not require post-termination notice of life insurance conversion rights. The Sixth Circuit noted that:

Rather, according to the court, the participant was notified of his conversion rights on two separate occasions in mailings sent to his last known address. The employer and TPA had no reason to believe that the participant never received these notices. Because the participant did not convert the group policy to an individual policy, the beneficiary was not entitled to life insurance benefits.

This case is of interest to employers, plan administrators and TPAs for its limited reading of LaRue as applying only to defined contribution pension plans. At least one other circuit court of appeals has concluded that LaRue does not open the door to individual relief under Section 502(a)(2) in the welfare plans context. It remains to be seen whether other circuits will also adopt this view.