Employee’s widow can sue Walmart for life insurance benefits – 6th Circ

The logo of a Walmart Superstore is seen during the outbreak of the coronavirus disease (COVID-19), in Rosemead, California, U.S., June 11, 2020. Picture taken June 11, 2020. REUTERS/Mario Anzuoni

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  • Lower court dismissed ERISA claims, saying Walmart was merely performing a ‘departmental function’
  • The appeals court said Walmart did not qualify for this defense since it controlled the benefits plan

A federal appeals court on Tuesday revived much of the lawsuit brought by the widow of a Walmart host who accuses the mega-retailer of voiding her husband’s life insurance policy and overcharging him for disability insurance premiums.

The 6th US Circuit Court of Appeals says a lower court erred in dismissing Ruth Mae Chelf’s claims for breach of fiduciary duty based on the ‘ministerial function’ exception to ERISA, the federal law governing employee benefit plans.

This defense was not available to Walmart because it only protects those “who do not have the authority to make decisions about planning policy, interpretations, practices, or procedures” from being held to the standard of care. high required of trustees, Circuit Judge Jane B. Stranch writes for the appeals court.

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“On the contrary, (Walmart) was a fiduciary because it unquestionably exercised control over the assets of the plan when it managed Mr. Chelf’s bonuses, exercised control over the disposition of the assets of the plan and had discretion over the plan administration. Stranch wrote, joined by circuit judges Karen Nelson Moore and Eric Clay.

Walmart and its attorney, J. Gordon Howard of Russell Oliver & Stephens, did not immediately respond to requests for comment.

Ms. Chelf’s lawyers at Grabhorn Law|Insured Rights also did not have an immediate response.

According to an online obituary, Elmer Chelf worked in Kentucky as a Walmart front desk for 16 years after retiring from his career as an insurance salesman. He died in 2016 at the age of 80.

Ms. Chelf sued Walmart and Prudential, which underwrote Walmart’s insurance benefits, in federal court in Louisville in 2017.

The lawsuit alleged that Walmart and Prudential shared responsibility for canceling a $25,000 supplemental coverage policy without notice at some point before her husband’s death; that Walmart had not disclosed information on various options for keeping the policy active, such as applying its unused vacation to cover the premium; and that he had been overcharged for 18 months of disability insurance.

Prudential settled with Ms Chelf after the judge dismissed her claims against Walmart. She did not participate in the call.

The 6th Circuit revived Ms Chelf’s claims that Walmart breached its fiduciary duties by mismanaging plan assets (for example, by ‘diverting’ disability premiums rather than applying them to the insurance policy -life).

He upheld the denial of her non-disclosure requests, but said the judge could decide on remand whether she should be allowed to refine them with an amended complaint.

The case is Ruth Mae Chelf v. Prudential Insurance Co, Administrative Committee for Associates Health and Welfare Plan, Wal-Mart Associates Inc, 6th U.S. Circuit Court of Appeals No. 20-6097.

For Chelf: Andrew Grabhorn and Michael Grabhorn of Grabhorn Law | Rights assured

For Walmart: J. Gordon Howard of Russell Oliver & Stephens

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