By: HUB’s EB Compliance Team

On May 7, 2025, a District Court in Colorado decided a case in favor of the plaintiff, and the employer defendant was ordered to pay a total judgment of $633,000 to a life insurance beneficiary due to a failure to act prudently as a fiduciary of the noted ERISA benefit plan.

HUB has written various articles regarding overall fiduciary duties, like this one, as well as an article about a case from March of 2024 also centered around the fiduciary duty of prudence (found here). This new case doesn’t shine a new light on fiduciary duties but serves as a reminder of the practical applications and real-life scenarios that bring rise to such complaints (and sometimes judgments).

Background

The case, Watson v. EMC Corp, was filed by the surviving spouse of a former EMC Corp employee. The employee left employment and was entitled to post-employment benefits under a separation agreement. The post-employment benefits began with a period of pay plus benefits, and then a period after the pay ended where health benefits could be continued.

The event that triggered the eventual claim involved the former employee sending an email to the company once the pay ended asking about how to pay for the health benefits moving forward. At that time, the employer responded that the former employee would receive a bill. The former employee soon after passed away.

The former employee, however, was not just covered by health insurance through the company. He was also covered by the employer’s group-term life insurance. And before his passing, he had not converted that life insurance to an individual policy, so the coverage was not in effect when he passed away.

The Claim

The former employee’s spouse argued that, as a prudent fiduciary, the company should have informed her husband that he needed to convert his life insurance policy when he asked the question about how to continue his benefits in that email. The company argued that the former employee had been separately provided information about the life insurance policy in the separation agreement, the certificate of coverage, and also the Notice of Group Life Conversion Privilege, all of which were sent to the former employee.

However, the Court decided that the former employee’s email asking about continuing benefits meant ALL of the company’s benefits, not just the health insurance. And therefore, the company had a fiduciary duty to respond to that email with full information about all of the benefits, which would have included the life insurance policy that was still within the window to convert at that time.

Takeaways

The employer here did many things right. They sent all the appropriate notices to the former employee and had proof of those mailings. They also responded to the former employee’s request when it was made. However, this case is an example of just how far the duty of prudence may reach. The Court determined that the employer was expected to communicate thoroughly and with foresight, not just with a basic answer to the question posed.

In this way, employers can take a lesson from this case that the best way to fulfill fiduciary duties in an ERISA plan may be to think through the interactions with participants at every stage, and make sure processes and internal requirements match with the intent of providing proper service to participants. Doing so will help ensure that the employer is meeting the full expectations of them as the plan’s fiduciary.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.