First Circuit Wins for Unum and Sun Life on Retained Asset Accounts

In two separate class actions, in which Pierce Atwood separately represented Unum Life Insurance Company and Sun Life Assurance Company, the U.S. Court of Appeals for the First Circuit held that using Retained Asset Accounts (RAAs) to pay death benefits claims on group life insurance policies does not violate the Employee Retirement Income Security Act (ERISA), where the policies either require or permit payment by RAA.

On July 2, 2014, a unanimous panel of the United States Court of Appeals for the First Circuit held that Unum Life Insurance Company’s practice of using Retained Asset Accounts (RAAs) to pay death benefits claims on group life insurance policies, which specifically provided for the use of RAAs, does not violate the Employment Retirement Income Security Act (ERISA). The decision, which comes after four years of class litigation, brings the First Circuit in line with prior decisions of the Second and Third Circuits involving other insurers, as well as opinions expressed by the Department of Labor. It also clarifies the reach of a prior First Circuit decision, which had held that paying group life benefits through RAAs violated ERISA where plan documents required payment by lump sum. Merrimon v. Unum Life Ins. Co. of Am., 758 F.3d 46 (1st Cir. 2014) cert. denied, 135 S. Ct. 1182, 191 L. Ed. 2d 134 (2015).

Several weeks later, on August 26, 2014, the same First Circuit panel upheld the District of Massachusetts’ ruling that Sun Life’s practice of paying group life claims by RAA does not violate ERISA, where the policies did not specifically provide for RAAs but permitted payment by means other than a lump sum. In the Sun Life decision, which also followed several years of class litigation, the court specifically held that where the policy allows the insurer to choose a payment method, and the choice does not “unfairly diminish, impair, restrict or burden the beneficiary’s rights,” no ERISA breach takes place.  Vander Luitgaren v. Sun Life Assur. Co. of Canada, 765 F.3d 59 (1st Cir. 2014).