When Employer Mistakes Cost Families Hundreds of Thousands: ERISA Fiduciary Liability in Life Insurance Claims
Most people believe life insurance is simple: You elect coverage, pay premiums, and your family gets paid when you die.
But when life insurance is provided through an employer, that assumption can be dangerously wrong.
In a landmark ERISA case involving Church’s Chicken, a federal court held that an employer—not the insurance company—was financially responsible for a $314,000 life insurance shortfall, all because of egregious plan administration failures.
The case, Van Loo v. Cajun Operating Co., is a powerful reminder that when employers act as ERISA fiduciaries and mishandle life insurance enrollment, they can be held personally liable for the benefits families were promised.
The Shocking Reality Behind Employer-Provided Life Insurance
Employer-provided life insurance often involves:
Multiple coverage tiers
Evidence-of-insurability requirements
HR-managed enrollment systems
Payroll deductions controlled by the employer
When something goes wrong, insurers frequently deny coverage and point to the employer. And in many cases, they’re right to do so.
A Promise Made — and Broken
In Van Loo, the employee did everything right.
He:
Elected supplemental life insurance coverage
Paid premiums for years
Trusted his employer to handle enrollment properly
What he didn’t know was that one critical step was never completed—and that mistake would cost his family hundreds of thousands of dollars.
The Facts of Van Loo v. Cajun Operating Co.
The Employment Relationship
The employee worked for Cajun Operating Company, the operator of Church’s Chicken restaurants. The employer self-administered its ERISA life insurance plan, meaning it handled:
Enrollment
Payroll deductions
Communications with employees
Coordination with the insurance carrier
This detail would later prove crucial.
The Coverage Election
The employee elected:
Basic life insurance (guaranteed issue), and
Additional supplemental life insurance, which required evidence of insurability (EOI)—a medical underwriting step.
The employer:
Accepted the election
Deducted premiums from the employee’s paycheck
Allowed the employee to believe he had full coverage
But the employer never obtained the required EOI form.
The Critical Failure
Despite knowing (or being responsible for knowing) that:
Supplemental coverage required underwriting approval, and
No EOI had been submitted or approved,
the employer:
Continued deducting premiums
Never warned the employee
Never corrected the enrollment error
Years passed.
The Tragic Outcome
The employee later became seriously ill and died.
After his death:
The insurer paid only the guaranteed issue amount
The insurer denied the supplemental portion
The shortfall totaled $314,000
The family was stunned. They had paid for coverage that—according to the insurer—was never actually in force.
The Legal Fight: Who Is Responsible?
The employer tried to shift blame to the insurer.
The insurer pointed to the plan terms:
Supplemental coverage required approved evidence of insurability
That approval never happened
The family sued the employer under ERISA, arguing that:
The employer acted as a fiduciary
The employer made material misrepresentations
The employee reasonably relied on those misrepresentations
The family suffered financial harm
ERISA Fiduciary Status: Why It Mattered
Under ERISA, a party is a fiduciary if it:
Exercises discretionary authority over plan administration, or
Has control over plan communications and enrollment
The court found that Cajun Operating Company:
Self-administered the plan
Controlled enrollment
Managed payroll deductions
Communicated coverage status to employees
That made the employer an ERISA fiduciary—with legal duties to act prudently and honestly.
What the Court Found
The Sixth Circuit affirmed the judgment against the employer.
The court held that:
1. The Employer Made Material Misrepresentations
By allowing the employee to believe he had supplemental coverage—and by continuing to deduct premiums—the employer communicated false information about the existence of coverage.
2. The Employer Breached Its Fiduciary Duties
Failing to:
Obtain required underwriting
Correct enrollment errors
Warn the employee
constituted a breach of ERISA fiduciary duties.
3. The Employee Detrimentally Relied on the Employer
The employee relied on the employer’s representations and:
Did not seek alternate life insurance
Continued paying premiums
Reasonably believed coverage was in force
4. The Employer Was Financially Responsible
Because of that reliance and breach, the court required the employer to pay the $314,000 shortfall—not the insurer.
Why This Case Is So Important
Van Loo is a textbook example of employer liability for life insurance mistakes under ERISA.
It shows that:
Employers cannot hide behind insurers
Accepting premiums without coverage approval is dangerous
HR and payroll errors can become six-figure liabilities
Families can recover even when insurers deny claims
Common Employer Mistakes That Trigger ERISA Liability
This case highlights mistakes courts view as especially egregious:
Accepting premiums without approved coverage
Failing to obtain evidence of insurability
Misrepresenting coverage status
Poor communication about enrollment requirements
Making misleading and wrong statements about life insurance benefits
Computer/system glitches resulting in wrong forms sent
Not providing conversion forms after termination
Self-administering plans without safeguards
When these occur, courts are far more likely to hold employers accountable.
What This Means for Families Facing a Denied Claim
If an insurer denies life insurance benefits and claims:
“Coverage was never approved”
that does not end the inquiry.
Key questions include:
Who handled enrollment?
Who deducted premiums?
What was communicated to the employee?
Did the employer act as a fiduciary?
In many cases, the employer—not the insurer—is the correct defendant.
Why Insurers Often Escape Liability
Insurers typically:
Rely strictly on plan terms
Require underwriting approval
Deny claims when prerequisites were not met
Courts often agree—unless the employer’s misconduct caused the failure.
That distinction is everything.
Legal Strategy Matters in ERISA Life Insurance Cases
ERISA cases are:
Federal
Procedurally strict
Evidence-driven
Families who focus only on the insurer may miss the strongest claim entirely.
Talk to a Life Insurance Lawyer Before Accepting a Denial
If your loved one:
Elected supplemental life insurance
Paid premiums
Was told coverage existed
Later faced a denial after death
You may have a fiduciary breach claim under ERISA.
Call (888) 510-2212 for a free consultation
I represent families nationwide in:
ERISA life insurance denials
Employer enrollment failures
Fiduciary breach claims
Wrongful benefit determinations
Frequently Asked Questions (FAQs)
Can an employer be liable for unpaid life insurance benefits under ERISA?
Yes. If the employer acts as a fiduciary and mismanages enrollment or misrepresents coverage, courts can hold the employer financially responsible.
What is evidence of insurability (EOI)?
EOI is medical underwriting required for certain life insurance coverage levels. Coverage is not effective until approved.
What if premiums were deducted but coverage was denied?
That is a red flag for fiduciary breach. Courts often find detrimental reliance when employers accept premiums without valid coverage.
Does the insurer have to pay if coverage wasn’t approved?
Not necessarily. But the employer may be liable if its actions caused the failure.
What counts as a material misrepresentation?
Any communication or conduct that reasonably leads an employee to believe coverage exists when it does not.
Do I need a lawyer for an ERISA life insurance claim?
Yes. ERISA cases involve federal law, strict deadlines, and complex fiduciary standards.
How long do I have to file an ERISA claim?
Deadlines vary by plan and jurisdiction. Delay can permanently bar recovery.
Call (888) 510-2212 Today to Protect Your Rights
Life insurance disputes involving employer mistakes are winnable—but only if handled correctly.
