Equitable estoppel is a legal doctrine where a party who relies on the misrepresentation of another should not be harmed as a result. The doctrine has a long history, but limited application in ERISA litigation. ERISA does not explicitly provide for “equitable estoppel” as a remedy for plan participants; however, courts in multiple circuits have ruled in favor of plan participants' claims for equitable estoppel against plan administrators.
Using the ERISA remedy provision found at 29 U.S.C. § 1132(a)(3), a civil action may be brought by a participant, beneficiary, or fiduciary “to obtain other appropriate equitable relief”, to redress violations or enforce the terms of the plan. Most federal circuit courts, including the Ninth Circuit, now recognize equitable estoppel principles as part of ERISA as a form of “appropriate equitable relief.”
In the Ninth Circuit, equitable estoppel is available only where the terms of the plan are unclear or ambiguous. In order to succeed on a cause of action under equitable estoppel, the plaintiff must show:
- A material misrepresentation;
- Reasonable and detrimental reliance upon the representation;
- Extraordinary circumstances;
- That the provisions of the plan were ambiguous such that reasonable persons could disagree as to their meaning or effect; and
- The representations made about the plan were an interpretation of the plan.
Plan participants may allege reliance on misrepresentations made by representatives with their pension or health plan. If the participant relies on this misrepresentation, they may have a claim against the plan administrators under the principle of equitable estoppel. This includes relying on the plan's representation that a participant's pension plan payment will be higher than it is, or that they will be covered by their health insurance for a medical procedure that is not covered.
Plan participants are increasingly asserting equitable estoppel claims against plan providers in ERISA litigation. However, plaintiffs have had limited success in winning equitable estoppel claims. Plaintiffs may have difficulty showing detrimental reliance on the misrepresentation; providing evidence of an intentional misrepresentation; or demonstrating the terms of a plan were ambiguous.
Material misrepresentations made by plan representatives to plan participants can lead to costly litigation. However, plan administrators can help protect themselves from ERISA litigation, in part, by ensuring the terms of the plan are clear and unambiguous. In most situations, where the provisions of the plan are unambiguous and reasonable persons could agree on the meaning and effect of the terms, the plaintiff may not be able to claim equitable estoppel.
Plan administrators should also ensure clear communication with plan participants, including citing the unambiguous terms of the plans. Any changes or updates to summary plan descriptions or communications should be carefully reviewed to ensure participants have accurate, timely, and a clear understanding of the plan's terms.
If you have any questions about ERISA plan documents and their interpretation, Butterfield Schechter LLP is here to help. We are San Diego County's largest law firm focusing its law practice on employee benefits law and ERISA litigation. Contact our office today with any questions on how we can help you and your business succeed.