Imagine this scenario: plan participant calls plan administrator and ask about benefit entitlements under the terms of the plan. Plan administrator gives information and it is wrong or participant either misunderstands what he is told. When participant does not receive the full benefit, he files a lawsuit saying he is entitled to the full benefit because of the representation.

These types of claims tend to give rise to a debate over estoppel as it applies to ERISA plans. In sum, the argument is that the plan is "stopped" from denying the benefit because the participant relied on the statements. While it is generally recognized that a claim for estoppel may be a viable cause of action under ERISA, it is equally clear that an estoppel claim cannot apply where the terms of the plan are clear and unambiguous.

In Regency Hospital v. Blue Cross of Tennessee (2009 US Dist. LEXIS 37111), the Southern District of Ohio looked at a claim by a medical provider alleging that a plan was estopped from denying payment of a claim that was pre-approved. The result of the case was not as significant to me as how they got there. The Court rejected the provider's claim, in part, because the alleged misrepresentation contradicted the clear terms of the plan and refused to allow an estoppel claim to survive. The Court articulated that for an estoppel claim to survive, 5 factors must be met: (1) a representation of fact made with gross negligence or fraudulent intent, (2) made by a party aware of the true facts, (3) intended to induce reliance by the person requesting the information, (4) who is unaware of the true facts and (5) the person reasonably or justifiably relies on the statement to his detriment.

This last factor is the most important because the Court further articulated that a person cannot reasonably or justifiably rely on a statement that counters clear, unambiguous terms of the plan. If the plan terms are correct and thee is no ambiguity subjecting those terms to interpretation, it would appear to be unreasonable to rely on the misrepresentation. In other words, participants are to some extent charged with going and looking up the answer themselves in the plan document rather than simply calling an administrator and asking for an answer.

Certainly people will argue over what is reasonable and justifiable and can dispute the administrators obligation to provide accurate information.  But as a starting point, the administrator's first role is to provide accurate information IN THE PLAN DOCUMENTS.  That language will control.  It should be clear and easily understood and free of ambiguity.  Absent some need to interpret plan provisions, there would be very little opportunity to argue that it was reasonable to rely on the misrepresentation of someone else.

So while this decision can be read for many reasons, I believe it is also reminding plan administrators how important it is to have clear plan documents with unambiguous terms to protect against estoppel claims that may arise.