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North Carolina Court Awards $41 Thousand-Plus Penalty for Failure to Produce Documents Requested by Plan Participants

Section 104(b)(4) of ERISA provides that a plan administrator must respond to a written request for certain documents (including the plan documents and summary plan description) by a participant or beneficiary by providing the requested documents.  Section 502(c)(1) of ERISA and Regulation § 2575.502(c)-1 provide that a plan administrator who fails to do so within thirty days is liable to such participant or beneficiary in an amount (as determined by the court in its discretion) of up to $110 per day.   A recent decision by the United States District Court for the Western District of North Carolina, Charlotte Division (Kinsinger v. Smartcore LLC, 2019 US Dist. LEXIS 145052 (August 27, 2019)), vividly illustrates the perils in failing to comply with document requests by participants.

Kinsinger involved an employer’s establishment of a group health plan and subsequent failure to pay the premiums.  Ultimately the carrier cancelled the coverage for nonpayment and several individuals (including plaintiffs) had unpaid medical claims.  During this process, on June 3, 2016, plaintiffs requested from the plan administrator many documents within the scope of ERISA Section 104(b)(4), (including the summary plan description, plan document and underlying insurance contracts).

The Plan Administrator never responded to the plaintiffs’ document request.  Although plaintiffs sued for wrongful denial of benefits on November 1, 2017, they did not add a claim for violating ERISA Section 104(b)(4) until March 19, 2018.  The requested documents were not provided to plaintiffs until July 25, 2018, when they were produced in discovery some 748 days after the initial 30-day period had expired!

The Court had little trouble finding for plaintiffs on their claim under ERISA Sections 104(b)(4) and 502(c)(1), The Court’s analysis provides some interesting insight.  The Court noted that the plaintiffs were substantially prejudiced by defendants’ conduct because they were “left in the dark” about the correct appeal process, and also noted that the “failure to provide the requested documents frustrated plaintiffs’ ability to litigate” their dispute due to the lack of essential facts contained in the requested documents.

In response to defendants’ claim that they had produced some of the documents before the initial June 3, 2016, request, the Court found that nothing in the statute “absolves an administrator from their duty to respond to requests for documents because they previously provided participants the documents requested.”  The Court also cited Circuit Court authority (Davis v. Featherstone, 97 F.3d 734, 738 (4th Cir. 1996)) providing that “when there is some doubt about whether a claimant is entitled to the information requested, the Supreme Court has suggested that an administrator should err on the side of caution.”

Regarding the amount of the per day penalty, the court initially cited defendants’ “willingness to exploit plaintiffs’ lack of these documents in litigation” as evidence of their bad faith and malfeasance.   The Court also acknowledged that some delay in producing the requested documents was attributable to factors other than defendants’ conduct; this included plaintiffs’ delay in filing suit initially and subsequently amending their complaint to add the document request claim some four months later.  Ultimately, the Court awarded plaintiffs’ $55 (half of the maximum $110 per day penalty) for each of the 748 days late, for a total of $41,140.

Kinsinger provides a few lessons for plan administrators.  First and foremost, document requests under ERISA Section 104(b)(4) must be promptly addressed and acted upon in good faith.  The best advice?  As noted in Kinsinger, “when there is some doubt about whether a claimant is entitled to the information requested, the Supreme Court has suggested that an administrator should err on the side of caution.” Davis v. Featherstone, 97 F.3d 734, 738 (4th Cir. 1996), citing Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 118 (1989).

Jackson Lewis P.C. © 2019

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About this Author

Robert R. Perry, Jackson Lewis P.C., labor, employment, benefits, lawyer
Principal

Robert R. Perry is a Principal in the New York City, New York, office of Jackson Lewis P.C. He has more than 20 years of experience in the area of employee benefits law.

Mr. Perry’s practice includes counseling clients on all aspects of employee benefits and executive compensation. Mr. Perry also advocates on behalf of clients in benefits-related disputes, as well as in administrative proceedings before the Internal Revenue Service, the United States Department of Labor and the Pension Benefit Guaranty Corporation.

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