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Compliance: Cigna v. Amara and how ERISA summary plan descriptions have changed

Amara teaches that plan sponsors and insurers should review their plan documents to determine if there are important plan terms found only in the SPD

Before the Supreme Court issued its 2011 opinion in Cigna v. Amara, an ERISA plan’s summary plan description (SPD) was widely considered to be part of the plan’s governing documents. Plan terms found only in the SPD were enforceable just like the provisions of the group policy and certificate of insurance. In Admin. Comm. of Wal-Mart Stores, Inc. Assocs.’ Health and Welfare Plan v. Gamboa, the 8th Circuit ruled, “Where no other source of benefits exists, the summary plan description is the formal plan document, regardless of its label.”

That all changed, however, with the Amara decision. In that case, the Supreme Court rejected the argument that SPD terms were enforceable, holding that “the summary documents, important as they are, provide communication with beneficiaries about the plan, but . . . their statements do not themselves constitute the terms of the plan.”

The Supreme Court determined that while ERISA required an SPD, there was no statutory basis to conclude that SPD terms themselves were enforceable. The court also expressed concern that if SPD terms were enforceable, plan drafters might frustrate ERISA’s objectives by using more complex language in describing the SPD terms. The court’s opinion was also motivated by a desire to avoid the situation where the plan administrator, rather than the plan sponsor, controlled the terms of the plan.

In the aftermath of Amara, the general consensus among the lower courts has been that an SPD is still considered a plan document if the plan documents unambiguously provide that the SPD is part of the plan.

For example, in Eugene S. v. Horizon Blue Cross Blue Shield of N.J., the 10th Circuit interpreted the holding in Amara to mean either that SPD terms are only unenforceable when they conflict with governing plan documents; or that an SPD cannot create terms that are not authorized in (or at least reflected in) the governing plan documents.

The 10th Circuit, however, ultimately held that it need not determine if either case applied because the SPD itself was the governing plan document. Specifically, “[t]he SPD clearly state[d] in the Introduction that it, along with the individual ‘Certificate of Coverage . . . form[s] [the] Group Insurance Certificate;’ that it ‘is made part of the Group Policy;’ and that ‘[a]ll benefits are subject in every way to the entire Group Policy, which includes’ the SPD.” The court also noted that nearly identical language was found in the certificate of coverage.

Conversely, where the plan, by its terms, only consists of the group policy and certificate of insurance, the 9th Circuit in Oldoerp v. Wells Fargo & Co. Long Term Disability Plan refused to enforce discretionary language affecting the standard of federal judicial review that was found only in the SPD. This also held in Cosey v. Prudential Ins. Co. of Am., (discretionary language in an SPD that is not explicitly part of the plan was not enforceable) and Sullivan v. Prudential Ins. Co. of Am. (discretionary language in the SPD not enforceable where the SPD stated that is was not part of the group insurance certificate.)

Thus far, it is clear that after Amara courts are willing to treat an SPD as part of the plan if there is explicit language in either the SPD or other plan documents stating that the SPD is a plan document. The burden is on the party relying on the SPD’s terms to show that the SPD was integrated into the plan and contained the terms of the plan.

A handful of post-Amara cases have held that the terms of an SPD — even though not integrated into the plan — are enforceable so long as they do not conflict with the governing plan documents. These include Langlois v. Metro, Life Ins. Co. (reading Amara to stand for the proposition that “the terms of the SPD are legally enforceable elements of the plan to the extent that they do not conflict with the terms of the plan itself”); Nalbandian v. Lockheed Martin Corp. (noting that certain SPD language was not in conflict with the plan terms, “even if some participants could be confused by the distinction” made in the SPD); and Bonanno v. Blue Cross & Blue Shield of Mass., Inc. (finding no inconsistency between the plan and the SPD that summarized it). Cases such as these provide a fall back argument where the plan at issue lacks a clause integrating the SPD.

Amara teaches that plan sponsors and insurers should review their plan documents to determine if there are important plan terms found only in the SPD. Such terms likely will not be enforceable unless the plan documents contain a clause integrating the SPD into the plan documents or if the plan documents are rewritten to include the terms previously found only in the SPD. While it is possible that terms found only in an unintegrated SPD may be enforceable so long as there is no conflicting provision in the plan documents, the safest and most reliable course of action is to add a provision to the policy or SPD stating that the SPD is part of the plan.

Contributing Author

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James A. Hazlehurst

James A. Hazlehurst is a litigator with the Newport Beach office of Barger & Wolen.He handles ERISA-government and state law insurance coverage disputes (primarily life...

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