Edmonson v. Lincoln National Life Insurance
899 F. Supp. 2d 310
E.D. Pa.2012Background
- ERISA case in Third Circuit discusses whether an insurer financing retained asset accounts to pay life benefits acted as an ERISA fiduciary when it held and invested funds for its own profit.
- Plaintiff Edmonson claims Lincoln’s SecureLine accounts and investment of backing funds breached ERISA fiduciary duties of self-dealing and exclusive benefit.
- Policy terms silent on method of payment; maintenance of accounts and investment profits are central to fiduciary status questions.
- Plaintiff received $10,000 via SecureLine; Lincoln created the account, credited it, and provided check-writing access, with funds initially in Lincoln’s general account.
- Court previously denied Lincoln’s motion to dismiss; now decides summary judgment on fiduciary status and plan assets issues.
- Key question: did Lincoln exercise any authority or control over plan assets when retaining and investing funds for its own profit?
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Lincoln act as an ERISA fiduciary when retaining and investing funds backing the SecureLine account? | Edmonson asserts fiduciary status due to control over plan assets and self-dealing. | Lincoln contends no fiduciary status as to plan assets since it lacked authority over disposition of assets. | Lincoln was not an ERISA fiduciary over plan assets. |
| Are the back-up funds in SecureLine plan assets under ERISA? | Funds backing SecureLine are plan assets kept to benefit participants. | DOL interpretation defers that such retained funds may not be plan assets under ordinary property notions. | Funds backing SecureLine are not plan assets. |
| Does the policy silence on payment method require lump-sum payment under ERISA? | ERISA requires lump-sum payment; SecureLine violates that by using accounts. | Silence on method does not mandate lump sums; plan permitted alternative payment method. | Policy silence does not require lump-sum payment; method allowed. |
| Should the court defer to the DOL Opinion Letter in defining plan assets? | DOL interpretation should control or at least persuade the court. | DOL letter is persuasive under Skidmore, but not binding Chevron deference. | DOL Opinion Letter is persuasive and accorded Skidmore deference. |
| If Lincoln transferred practical control to the beneficiary, do ERISA fiduciary duties remain? | Control remained with Lincoln due to funds in general account and investment. | Once SecureLine was established and checkbook issued, practical control shifted to beneficiary. | Practical control shifted to plaintiff; fiduciary duties discharged. |
Key Cases Cited
- Mogel v. UNUM Life Ins. Co. of Am., 547 F.3d 23 (1st Cir. 2008) (retained assets interpreted as plan assets; fiduciary duties depend on asset control)
- Faber v. Metropolitan Life Ins. Co., 648 F.3d 98 (2d Cir. 2011) (plan assets defined by ordinary property notions; post-TCA fiduciary status depends on plan terms)
- Edmonson v. Lincoln Nat’l Life Ins. Co. (Edmonson I), 777 F. Supp. 2d 869 (E.D. Pa. 2011) (ERISA fiduciary status defined by control over plan assets; summary of unresolved issues pre-discovery)
- CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011) (summary plan descriptions not part of the plan; deference considerations)
- Srein v. Frankford Trust Co., 323 F.3d 214 (3d Cir. 2003) (fiduciary status requires more than mere custody; discretion over plan assets matters)
- IT Corp. v. Gen. American Life Ins. Co., 107 F.3d 1415 (9th Cir. 1997) (distinguishes control over cash vs. admin control in ERISA)
- Wettlin Assocs. v. Bd. of Trs. of N.J. Welfare Fund, 237 F.3d 270 (3d Cir. 2001) (automatic fiduciary status tied to control and custody of assets)