U.S. District Judge William J. Martini agreed with John Hancock’s argument that plaintiffs’ Employee Retirement Income Security Act (ERISA) claims are derivative, meaning they belong to the plans, so the plaintiffs must first make demand upon the trustees of the plan to file suit. The court found no such demand was made, nor are the trustees listed as defendants in the action. Martini pointed out that the 2nd U.S. Circuit Court of Appeals has held that in relation to an ERISA § 502(g) claim, which is akin to the Section 502(a) claims in the current suit, “[a] participant in a fund governed by ERISA can sue derivatively on behalf of the fund only if the plaintiff first establishes that the trustees breached their fiduciary duty.” According to Martini, arguably, this would seem to preclude suit here – because plaintiffs’ complaint makes no allegations against the plans’ trustees.
Also, Martini said, the appellate court was applying the rule mandating demand on the trustees, except when such demand is futile. Martini found that plaintiffs made no allegations against the trustees or that demand is otherwise futile.
Insurance companies will give employers the impression that they are watching out for them and their employees. This case proves insurance will tell employers they are protected from liability when they are in fact not. In the end you stand alone.
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- States reach insurance agreement with John Hancock (seattlepi.com)