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In a long running legal battle over an insureds long-term disability benefit, the full Sixth Circuit ruled last week that Daniel Rochow’s estate was not entitled to a disgorgement of profits in relation to benefits due on Mr. Rochow’s behalf. By way of background, Daniel Rochow filed a claim for long-term disability benefits in 2002 with his carrier, the Life Insurance Company of North America (“LINA”). LINA initially denied Mr. Rochow’s claim for disability benefits. Mr. Rochow proceeded to appeal and LINA proceeded to uphold their denial three more times. Finally, in 2004, Mr. Rochow filed suit in the United State District Court for the Eastern District of Michigan against LINA’s parent company, Cigna Group Insurance.

The District Court found that LINA acted arbitrarily and capriciously in denying Mr. Rochow’s disability benefits and granted summary judgment for Mr. Rochow by awarding him the disability benefits he was due. A panel of the Circuit Court then affirmed the District Court’s decision. Following this ruling, Mr. Rochow’s estate filed motions for attorneys’ fees and costs, an equitable accounting, and a request for disgorgement, arguing that LINA had breached its fiduciary duties and “to prevent LINA’s unjust enrichment resulting from profits it earned on the wrongfully retained benefits.”¹

The District Court granted the Rochow estate’s motion for an equitable accounting of profits and disgorgement and following additional arguments, accepted the Rochow estate’s method of accounting determining the profits. Finally, in December 2013, a panel of the Sixth Circuit affirmed the District Court’s disgorgement award. The Sixth Circuit panel held “that disgorgement was properly ordered under ERISA § 502(a)(3) for LINA’s breach of fiduciary duty and that Rochow’s claim for such relief was not an impermissible repackaging of a claim for wrongful denial of benefits under § 502(a)(1)(B).”² Following the panel decision, LINA petitioned for a rehearing before the full Sixth Circuit.

Last week, the Sixth Circuit issued its ruling, vacating the panel decision, in ruling the Rochow estate was not entitled to a disgorgement of profits. The Circuit Court summed up the question before it as follows: “Is Rochow entitled to recover under both ERISA § 502(a)(1)(B) and § 502(a)(3) for LINA’s arbitrary and capricious denial of long-term disability benefits?”³ Essentially, § 502(a)(1)(B) allows a person to recover benefits due to him under the terms of his long-term disability plan and § 502(a)(3) allows a person to obtain other appropriate equitable relief.

The Circuit Court explained, “a claimant cannot pursue a breach-of-fiduciary-duty claim under § 502(a)(3) based solely on an arbitrary and capricious denial of benefits where the § 502(a)(1)(B) remedy is adequate to make the claimant whole.”⁴ The Circuit Court reasoned that Mr. Rochow was already made whole when the District Court determined LINA had acted arbitrarily and capriciously and awarded Mr. Rochow his disability benefit and attorney fees. The Circuit Court stated that absent a showing that the award of benefits and attorney’s fees, and the prejudgment interest that may be awarded are unable to make Mr. Rochow whole, then he is not entitled to “further equitable relief.”

Essentially, Rochow’s estate was arguing that when LINA denied his disability benefits, and continued to deny the disability benefits, it was continuing to make a profit on the money it was not paying out to Mr. Rochow. The Rochow estate was arguing that LINA should not have been entitled to this profit. The Circuit Court disagreed, finding this would be a duplicative or redundant remedy pursued to redress the same injury, which is impermissible. The Circuit Court explained that LINA’s denial of benefits was the injury Mr. Rochow suffered and withholding the disability benefit was just the continuing effect of the same denial, not a separate second injury.

Finally, the Circuit Court ruled that prejudgment interest could be awarded to Rochow at the discretion of the District Court and remanded the case for the District Court to make this final determination.

¹Rochow v. Life Ins. Co. of N. Am., No. 12-2074, 2015 WL 925794, at *3 (6th Cir. Mar. 5, 2015)↩
²Id. at *4↩
³Id.↩
⁴Id. at *5↩