Summary Plan Description – ERISA Defenses Part 2

If you have an injured client and your negotiating down the client's ERISA protected health plan, be sure to examine the SPD (Summary Plan Description) and look for any poorly worded descriptions.

You can use the following example language as a guide:

".... Significantly, of the sixteen references in the SPD, four pertain to healthcare, four to dental insurance, seven to dependent life insurance, and one to long-term care health insurance. As noted above, however, the SIB section of the SPD does not contain a cross-reference to the affidavit requirement. A cross-reference would have required minimal effort and diligence to insert. A plan participant should not be expected to infer the eligibility requirements for SIB by reference to other self- contained benefits sections of the SPD. Cf. 29 C.F.R. § 2520.102- 2(a)-(b) (where a restriction on benefits is not "in close conjunction" with a description of the benefits, cross-referencing is generally required).

.... For these reasons, we find that Kodak's SPD failed to comply with the requirements of ERISA.

.... The statute and the DOL regulations place the burden on employer to draft an SPD that is accurate, comprehensible, and clear regarding restrictions on eligibility for benefits. See 29 U.S.C. §§ 1022(a), 1022(b), 1024(b); 29 C.F.R. §§ 2520.102-2(b), 2520.102-3.The consequences of an inaccurate SPD must be placed on the employer. The individual employee is powerless to affect the drafting and less equipped to absorb the financial hardship of the employer's errors. See Hansen, 940 F.2d at 982.

....This "likely prejudice" standard avoids the use of harsh common law principles to defeat employees' claims based on a federal law designed for their protection. The result is a presumption of prejudice in favor of the plan participant after an initial showing that he was likely to have been harmed. (emphasis supplied)

The Burke case appears to be the most comprehensive discussion of the mandatory nature of 29 CFR 2520.102-2(b) and is therefore likely to be followed by any court reviewing the issue. By not cross-referencing the subrogation provision with the description of benefits in the plan, the union SPD clearly fails to meet this mandatory drafting requirement. Presumably, all union members are prejudiced as a result of the SPD’s failure to cross-reference and thereby more clearly disclose the subrogation provision. The Ninth Circuit also treats this CFR as mandatory. See Arnold v. Arrow Transport, 926 F.2d 782 (9th Cir. 1991) (fn. 4); Scharff v. Raytheon, 581 F.3d 899 (9th Cir. 2009).

Mark C. Blane is a San Diego Personal Injury Attorney, and the managing lawyer of the Law Offices of Mark C. Blane, a San Diego, California Personal Injury Law Firm dedicated to representing families of people injured in personal injury accidents including car accidents, slip and falls, dog bites, product defects, and the like. If you or a loved one has been killed or injured in an accident in San Diego, or Southern California, due to the negligence of another, please order your free copy of Mr. Blane's book, The 10 Secrets You Need To Know About Your Injury Case, BEFORE You Call A Lawyer. It is full of helpful information that will help you protect your legal rights and it normally sells for $16.95.  However, it is free to all California residents, or those injured in an California accident.