Minnesota Law Review

Note, Embracing Equity: A New Remedy for Wrongful Health Insurance Denials

Through benefit decisions, health insurance companies have the power to refuse treatment to insured persons. Individuals harmed by denials that are unjustified or violate the insurance contract may have no recourse. The federal Employee Retirment Income Secuirty Act (ERISA) governs all health insurance plans provided through employers. With ERISA, Congress in tended to protect workers from the risk of default or misadministration of their retirement plans. However, the Court has narrowly construed ERISA to exclude most, if not all, consequential damages for those harmed by wrongful healthcare denials. Moreover, patients cannot sue under common law or state law causes of action because the Court has ruled that ERISA preempts such claims. As a result, a “regulatory vacuum” exists in which victims of such denials have little opportunity for relief. Most commentors assume that this vacuum will remain until the Court overturns its precedents or Congress amends ERISA.

However, patients may not need to look to Congress for a solution. The Supreme Court will allow relief under ERISA if both the basis for the claim and the category of remedy were historically available in equity. Due to these requirements, the Court will likely reject most proposed remedies that provide compensation under ERISA, such as retitution, reinstatement, and make-whole relief for breach of fiduciary duty.

Plaintiffs may find acceptable ERISA remedies, though, by embracing the Court’s command to examine the practice of historical courts of equity. Surcharge is a remedy granted in equity for breaches of fiduciary duty. it requires the fiduciary to compensate the victim for costs incurred, income lost, and gains foregone because of the breach. This remedy fulfills the Court’s requirements for “equitable relief” under ERISA and meets the objections the Court has raised to other forms of compensatory relief. Most importantly, it may offer a last chance at compensation for victims of wrongful health insurance denials.

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