Marlowe v. WebMD Health

Background

Rebecca Marlowe sued WebMD, LLC and New York Life Group Insurance Company of New York under the Employee Retirement Income Security Act of 1974 (ERISA). She sought life-insurance benefits payable after the death of her husband, Erin Kelly, under WebMD’s insurance plan. WebMD administered enrollment and claims submissions, while New York Life insured the plan and made benefit decisions.

The plan automatically provided basic life coverage and allowed eligible employees to obtain additional voluntary life coverage. The complaint alleged that Kelly told WebMD’s human-resources department in 2012 that he wanted to increase his coverage after being diagnosed with cancer. WebMD allegedly told him repeatedly from 2012 through 2018 that he could not obtain voluntary coverage without evidence of insurability. In December 2018, however, WebMD allegedly told Kelly and Marlowe that he could enroll in $430,000 of voluntary coverage without that evidence and entered that election into its benefits system. Kelly died on January 1, 2019. New York Life paid $172,000 in basic coverage but did not pay or respond to the claim for voluntary coverage.

Marlowe asserted a claim against New York Life to recover $86,000 based on the alleged 2018 enrollment and asserted a breach-of-fiduciary-duty claim against WebMD seeking $258,000 for earlier missed opportunities to enroll. WebMD moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim, to dismiss the fiduciary-duty claim.

Issues and analysis

The court first ruled that, for this motion, it would consider the complaint and the plan documents but not WebMD’s employee guide or a website pop-up screen. The complaint referred to and relied on the plan documents, but it did not refer to the employee guide, and the policy stated that the policy and related documents formed the parties’ contract. The court also would not consider New York Life’s answer to the complaint.

The court rejected WebMD’s argument that Marlowe had failed to exhaust the plan’s administrative remedies. The court explained that the plan’s appeal process concerned denied claims, while Marlowe alleged that Kelly’s coverage was never properly enrolled and that there was no relevant remedy for the lost opportunity to enroll. The court therefore found no applicable plan remedy that she was required to pursue before filing suit.

The court also rejected WebMD’s argument that Marlowe could not seek money under ERISA’s provision allowing a participant or beneficiary to obtain other appropriate equitable relief for a fiduciary breach. Relying on Supreme Court and Second Circuit decisions, the court held that money relief—sometimes called a surcharge—can qualify as equitable relief when it compensates for losses caused by a plan fiduciary’s breach. The separate claim against New York Life did not prevent Marlowe from pursuing an alternative claim against WebMD, particularly because the New York Life claim concerned the alleged 2019 coverage and might not compensate for the earlier missed enrollment opportunities.

To state a fiduciary-duty claim based on benefits misrepresentations, Marlowe had to plausibly allege that WebMD acted as a fiduciary, made a material misrepresentation or omission, and that Kelly relied on it to his detriment. The court found that providing individualized advice about plan terms and eligibility can be a fiduciary function, even if the administrator lacks authority to interpret the insurance policy. Marlowe plausibly alleged that WebMD’s human-resources personnel repeatedly advised Kelly about his eligibility and later gave him conflicting advice.

The court found the alleged conflicting statements sufficient at the pleading stage to support a possible material misrepresentation. It also found that Kelly’s request for plan documents, followed by WebMD’s alleged delay in providing them until September 2018, supported the allegation that the plan documents did not clearly alert him to the applicable enrollment conditions. Finally, the court found it plausible that Kelly relied on WebMD’s advice by not enrolling in voluntary coverage for several years.

The court distinguished these allegations from Marlowe’s alternative theory that WebMD breached fiduciary duties merely by failing to submit or process the enrollment election and claim. The court held that receiving and recording elections, processing claims, and maintaining records are administrative or ministerial functions, not fiduciary acts. Those alleged failures therefore could not independently support the fiduciary-duty claim.

Disposition

The court denied WebMD’s motion to dismiss the claim that it breached a fiduciary duty to provide Kelly with accurate and complete information about his rights under the plan. The court did not decide whether WebMD ultimately breached its duties or whether Marlowe will recover benefits or money damages. Judge Mary Kay Vyskocil directed the clerk to terminate the motion from the docket.