Meet Todisco v. Verizon Communications Inc., ___ F.3d ___, 2007 U.S. App. LEXIS 18621 (1st Cir. 2007). It nicely illustrates what lousy remedies exist in a lousy statute. Richard Todisco had life insurance through a goup insurance policy provided through his employer, Verizon. He wanted to know if he could obtain additional insurance. He called the Verizon employee benefits hotline and was told that he could get the additional insurance he sought if he requested it and paid the extra premium. The person on the telephone never told him that he had to submit to the insurer information about his health history and that insurer would evaluate that and had the right to turn down his request for extra insurance if it didn't like what it saw. Todisco requested the additional coverage and acknowledged that he was willing to have the extra premium taken out of his paychecks. The problem was that the Verizon hotline person provided bad information to Todisco. The policy gave the insurer the right to obtain information about Todisco's medical history and turn down the request for additional coverage. But Todisco relied on the bad information. Although he applied for the extra coverage, he never submitted any health history information. Shortly thereafter, he died. His wife, Diane, submitted a claim and the insurer denied it. She sued and asked the court to use its equitable power to order the insurer to pay the claim. Using the doctrine of equitable estoppel, she requested that the court deny the insurer the ability to rely on the policy language stating that the insurer could evaluate Richard's health history and refuse to provide him with the additional coverage he requested. In light of what Richard was told by the Verizon benefit people on the telephone and his reasonable relience on that information, Ms. Todisco argued that it wouldn't be fair to allow the insurer to deny the claim. The trial court dismissed Ms. Todisco's claim. It stated that ERISA did not allow her to use the language in ERISA's remedies section referring to a court's ability to provide "appropriate equitable relief" to recover any money. The U.S. Court of Appeals for the First Circuit affirmed. The appeals court was not totally unsympathetic. It acknowledged that the result was unfair. But it went on to say that it felt its hands were tied by Supreme Court precedent. It stated that the solution to Ms. Todisco's problem was to get Congress to amend ERISA to provide more complete remedies.

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Don Levit 11/17/2008 01:47 PM
Brian: I am curious what your complaint is against the insurer? This was not a guaranteed issue type of policy. I remember reading through this case. Did the insurer accept the premiums paid? The complaint should really be directed at Verizon, rather than the insurer, although Verizon may have no fiduciary responsibilitites in the matter. Don Levit
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Brian S. King 11/17/2008 01:47 PM
Hi Don-- You are right, the problem lies with Verizon rather than the insurer. But Verizon was clearly acting on behalf of either the insurer or the plan when it conveyed the bad information to Todisco. Principles of common law provide remedies for detrimental reliance by people who act reasonably based on the information other people provide that turns out to be wrong. But for ERISA, you would pretty clearly have the possibility of a remedy against either the Plan, or, to the degree the Verizon employee was acting on behalf of the insurer, against the insurer. You would have to do some discovery to find out the relationship between Verizon and the insurer to get to the bottom of it.
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