Benefits Personnel Sometimes Act Out of Compassion; Therefore Rules On Responsibility Need To Be Clear

Good intentions do not trump the written signature.

A recent case involving ExxonMobil starkly highlights this axiom and also provides a lesson for HR leaders.

After a new employee filled out several employment-related forms, the benefits office prepared a package of optional employee benefit forms for him to complete. Although he was automatically enrolled in some of the benefits, such as the basic life and basic AD&D benefits, he was required to elect the group universal life and voluntary AD&D components.  This could only be done through a signed form that was not mailed for several days.

However, the employee was involved in a car accident and died before the benefits package was mailed to the employee.

Upon learning of the accident, two employees in the benefits office retrieved the package from the outgoing mailbox and enrolled the employee in the universal life and AD&D benefits.

This effort to help the employee’s family was overruled by a court decision that said the staffers had only a "ministerial administrative role.”  The decision said these employees did not have discretionary authority to make benefits decisions.

Moreover, the decision reinforced the concept that only a valid signature by the employee bound the company.

In this lawsuit brought by the children, the court ruled against their claim that the benefits office's decision was irrevocable and cited a letter from the company indicating these benefits would be honored.

Disclaimers Important

The court relied on a disclaimer in the letter saying that in the event of any inconsistency between the letter and the plan, the plan would govern.

After the insurance company indicated it would not pay, the plan administrator determined that the children were not entitled to the additional life insurance benefits because the employee never elected them as required by the plan through a signed form.

Many companies have such agreements that gave only the plan administrator such discretion. 

Another contention by the children, that the employer breached its fiduciary duty by failing to timely provide election forms was also rejected.

The court found instead that the eight-day period that it would have taken for forms to be mailed "does not seem egregiously lethargic or inefficient." Furthermore, there was no evidence that the deceased would have elected benefits if the forms had been delivered sooner.

As experts point out, benefits personnel moved by the emotion of the moment can and will make administrative mistakes. Clearly defining who has discretionary authority over what functions will not only help administrative personnel understand what is within their scope of authority but also may help a court to reach a decision (such as the one in this case) and conclude that staff personnel did not have authority even if they mistakenly exercise it.

For more on this case, see: [Green v. ExxonMobil Corp., No. 02-534L (D.R.I. Feb. 9, 2006]