erisa-fiduciary-breach-when-your-health-plan-violates-its-duty-to-you">ERISA Fiduciary Breach: When Your Health Plan Violates Its Duty to You

Most people think of an insurance denial as a coverage dispute — a question of whether a service is in the plan or not. But some denials aren't just wrong on the merits; they reflect a fundamental failure by the people running your plan to act in your interest. Under ERISA, that failure can be a breach of fiduciary duty, and it comes with its own legal consequences.

Understanding when fiduciary duties apply — and when they're violated — gives you an additional lever to challenge wrongful denials.

What Is a Fiduciary Under ERISA?

Under ERISA §3(21) (29 U.S.C. § 1002(21)), a person is a fiduciary to the extent they:

• Exercise discretionary authority or control over the management of a plan or its assets
• Exercise authority or control over the administration of a plan
• Have discretionary authority or discretionary responsibility in the administration of a plan

Who typically qualifies as a fiduciary?

• The plan administrator (usually the employer, or a committee designated by the employer)
• Claims administrators and third-party administrators (TPAs) when they exercise discretionary authority over benefit determinations
• Insurance companies acting as claims fiduciaries for self-funded plans

Note: Not everyone involved with a plan is a fiduciary. Service providers performing purely ministerial functions — processing forms by rote, for example — generally are not fiduciaries. But if a TPA has discretion to approve or deny claims, it almost certainly qualifies.

Core Fiduciary Duties Under ERISA

ERISA §404 sets out the duties owed to plan participants:

Duty of loyalty: A fiduciary must act solely in the interest of plan participants and beneficiaries — not in the interest of the employer, the insurer's shareholders, or the fiduciary's own financial interests.

Duty of prudence: A fiduciary must act with the care, skill, prudence, and diligence of a reasonable person acting in a similar capacity.

Duty to follow plan documents: A fiduciary must administer the plan in accordance with its governing documents (unless those documents violate ERISA).

Duty to diversify assets: Primarily relevant to pension plans, but applicable to health plan assets in certain contexts.

Common Fiduciary Breaches in Health Plan Administration

Denying claims to protect the plan's financial position. If there is evidence that a TPA or insurer is systematically denying high-cost claims — not because participants fail to meet medical necessity criteria, but to protect financial interests — that may constitute a breach of the duty of loyalty.

Failing to disclose material information. Fiduciaries must proactively share information that participants need to protect their interests. Burying exclusions, failing to explain appeal rights, or misrepresenting coverage can constitute a breach.

Applying clinical criteria not in the plan. Using proprietary internal criteria to deny claims that aren't disclosed to participants — particularly in mental health or substance use disorder cases — may violate fiduciary duties and Mental Health Parity Act (MHPAEA) Explained" class="auto-link">MHPAEA.

Conflicts of interest. If the TPA shares in the plan's savings from claim denials (a "shared savings" arrangement), its denials may be tainted by a conflict of interest constituting a breach of the duty of loyalty.

Procedural violations. Repeated failure to comply with ERISA's claims and appeals regulations — missed deadlines, inadequate denial letters, failure to produce claim files — can rise to the level of fiduciary misconduct.

Plan Administrator vs. Insurer Liability

It's important to understand who is responsible for what:

Plan administrator liability. The employer acting as plan administrator is ultimately responsible for the plan's compliance with ERISA. If the employer delegates claims administration to a TPA, the employer may still be liable if it fails to adequately oversee the TPA's conduct.

TPA/Insurer liability as a functional fiduciary. If the TPA exercises discretionary authority over claims, it's a functional fiduciary and can be sued directly under ERISA §502(a)(3) for breach of fiduciary duty. However, ERISA limits the remedies available — typically to equitable relief rather than money damages.

The Great-West limitation. The U.S. Supreme Court's decision in Great-West Life & Annuity Insurance Co. v. Knudson (2002) significantly limited money damages under ERISA §502(a)(3). In practice, fiduciary breach claims often seek equitable remedies like plan reformation, disgorgement of profits, or injunctive relief, rather than compensatory damages for harm.

How to File a DOL EBSA Complaint

If you believe your plan fiduciary has breached its duty, report it to the DOL Employee Benefits Security Administration:

1. Go to dol.gov/ebsa and use the online complaint form
2. Or call the EBSA Benefits Advisor hotline: 1-866-444-3272
3. Provide documentation: your SPD, denial letters, claim file, and a description of the conduct you believe constitutes a breach

DOL investigations can result in plan corrections, civil penalties, and in serious cases, criminal referrals. DOL cannot recover your specific benefits on your behalf, but its involvement creates regulatory pressure and a paper trail valuable in litigation.

Fight Back With ClaimBack

When your health plan's conduct goes beyond a simple coverage dispute, ERISA's fiduciary framework gives you additional tools. ClaimBack helps you identify potential fiduciary violations and build a comprehensive appeal strategy.

Start your appeal at ClaimBack

Related Reading:

• How to Write an Insurance Appeal Letter
• Internal vs. External Insurance Appeal
• Common Reasons Insurance Claims Are Denied