This post is for the small number of civil litigators in Minnesota (and other 8th Circuit States) who do ERISA litigation. This past week, U.S. Mag. Judge Katherine Menendez (D. Minn.) held that the “fiduciary exception” applied to the insurer’s asserted attorney-client privilege in Christoff v. Unum Life Insurance Company. The 8th Circuit has yet to weigh in on the question.
Unum Life Ins. Co. of America relied heavily on Wachtel v. HealthNet, a 2007 decision from the 3rd Circuit. That decision, Judge Menendez noted, has been heavily criticized (citing and quoting Stephan v. Unum, 697 F.3d 917, 931 n.6 (9th Cir. 2012) (“Every district court that has considered the question since, however, has rejected Wachtel’s approach and held that the fiduciary exemption does apply to insurance companies.”).
The issue is, however, a tough knot to crack.
Take the Christoff case. Mr. Christoff was a long-time employee of a company that had an ERISA plan. Mr. Christoff was diagnosed with “severe fibromyalgia” in 2001. Unum paid Mr. Christoff’s long-term disability benefits until it cut him off in late 2016.
After the cut-off of benefits, Mr. Christoff hired a lawyer who communicated with Unum about the termination of benefits and an Unum employee communicated with Unum’s in-house lawyers about the lawyer’s request for information about Mr. Christoff’s termination of benefits. Should Mr. Christoff be entitled to see these communications between an Unum employee and Unum’s in-house lawyers?
Because these communications occurred before he submitted his appeal and before Unum made its final decision on that appeal, Mr. Christoff asserts that they are matters of plan administration and the fiduciary exception defeats Unum’s claim of privilege.
The challenge in the ERISA context is that that the insurer is a trustee; as such, it owes a fiduciary duty to plan beneficiaries, which includes a duty of loyalty and a duty of candor, which must be squared with the trustee’s right to the attorney-client privilege vis-a-vis trust beneficiaries.
Judge Menendez concludes:
To summarize, a fiduciary exception to the attorney-client privilege is widely accepted in federal courts. The exception has also been fairly consistently applied in the ERISA context. Courts applying the exception in ERISA cases attempt to differentiate between situations in which an ERISA fiduciary obtains legal advice about matters of plan administration, which must be disclosed, and those where the fiduciary seeks advice for non-fiduciary matters, which remain privileged. The focus in that inquiry is often the point at which an adversarial relationship between fiduciary and beneficiary materialized such that the fiduciary is justified in seeking legal advice for its own benefit. Finally, although the exception has not been expressly adopted by the Eighth Circuit generally or in ERISA cases, its application by a district court in the ERISA context has gone undisturbed.
So, here is a practice pointer for ERISA plaintiffs’ lawyers: be nice, coaxing, and cajoling in letters and communications to ERISA plans about client benefits. If the communications start looking adversarial, you might close the door on information that you could otherwise obtain.