First Reliance cannot maintain a claim for contribution or indemnification against Armani. In Kim v. Fujikawa, the court concluded that 29 U.S.C. § 1109, as referenced in 29 U.S.C. § 1132(a)(2), “cannot be read as providing for an equitable remedy of contribution in favor of a breaching fiduciary.” 871 F.2d 1427, 1432 (9th Cir. 1989) (emphasis omitted); see also Call v. Sumitomo Bank of Cal., 881 F.2d 626, 631 (9th Cir. 1989) (rejecting arguments that ERISA authorizes contribution among co-fiduciaries and noting “[t]he Kim opinion is unambiguous and undistinguishable”).
Cho v. First Reliance Standard Life Insurance Co. (9th Cir. July 9, 2021)

This unpublished opinion presents an opportunity to take a look at the law of contribution in the context of ERISA fiduciaries and non-fiduciaries. The plaintiff sought group term life benefits on her spouse under dependent coverage. The insurance carrier denied the claim because the required evidence of insurability had not been provided at the time of enrollment.

The group term policy, although “sloppily drafted”, included a clause stating the the requirement could not be waived. Yet, the employer had collected the premium for almost a year without requiring evidence of insurability. “For over a year Armani accepted Cho’s premiums without any submission of evidence of insurability though it ‘knew or should have known’ the terms of the plan required such evidence.”

Judgment Against Insurer Affirmed

The Ninth Circuit held that the plaintiff was entitled to the benefits for which she paid. Because the plan was self-administered and Armani handled “nearly all the administrative responsibilities,” its “direct interaction with plan participants” would have suggested it was acting with “apparent authority on the collection of evidence of insurability.”

The insertion of the non-waiver clause did not change the result. The Court held that giving that one sentence provision effect would vitiate the Ninth’s Circuit incorporation of agency law into ERISA common law. (see, Salyers v. Metropolitan Life Insurance Company, 871 F.3d 934 (9th Cir. 2017).

Judgment Dismissing Cross Claim Affirmed

The Court held that 29 U.S.C. § 1109, as referenced in 29 U.S.C. § 1132(a)(2), “cannot be read as providing for an equitable remedy of contribution in favor of a breaching fiduciary.” (citing, Kim v. Fujikawa, 871 F.2d 1427, 1432 (9th Cir. 1989)). Thus, the Court affirmed dismissal of the insurer’s third party complaint against the employer.

Note: The Court applied Ninth Circuit authority in foreclosing a claim by Reliance under 29 U.S.C. § 1132(a)(3).against the employer, Armani. stating, “there is no indication that Congress, in the course of enacting a comprehensive scheme for the protection of ERISA plans and beneficiaries, intended to “soften[] the blow on joint wrongdoers.” Kim, 871 F.2d at 1433.

Remedies For Fiduciary Breach

Congress created two mechanisms under ERISA for holding fiduciaries responsible for a breach of duty: section 409 for a fiduciary’s own breaches, 29 U.S.C. § 1109, and section 405 for enabling or participating in another fiduciary’s breaches, 29 U.S.C. § 1105. No specific provisions within ERISA provides a right of indemnification or contribution among fiduciaries.

The circuits are divided on the question of contribution.

  • Pro-contribution

Chesemore v. Fenkell, 829 F.3d 803, 811-13 (7th Cir. 2016) (“ERISA’s grant of equitable remedial power and its foundation in principles of trust law permit the courts to order contribution or indemnification among cofiduciaries based on degrees of culpability”) and Chemung Canal Trust Co. v. Sovran Bank/Maryland, 939 F.2d 12, 15-18 (2d Cir. 1991) (“incorporating traditional trust law’s doctrine of contribution and indemnity into the law of ERISA is appropriate”), with

  • No contribution

Travelers Cas. & Sur. Co. of America v. IADA Services, Inc., 497 F.3d 862, 867 (8th Cir. 2007) (“ERISA does not create a right of contribution for Travelers against IADA Services, another fiduciary”), and Kim v. Fujikawa, 871 F.2d 1427, 1432-33 (9th Cir. 1989) (“we cannot agree with Fujikawa’s contention that Congress implicitly intended to allow a cause of action for contribution under ERISA”).

Further Split In Authorities

And in circuits where the issue remains undecided, the lower courts are split as well. For example, as noted in Remy v. Lubbock Nat’l Bank, 403 F.Supp.3d 496 (E.D. N.C. 2019) (allowing contribution), district courts in the Fourth Circuit have reached differing conclusions.

Likewise, district courts within the Fourth Circuit have not reached consensus. Compare Cooper v. Kossan, 993 F. Supp. 375, 376-77 (E.D. Va. 1998) (finding right of contribution, noting “the contribution claim does not conflict with ERISA’s enforcement scheme, and it promotes both the enforcement of strict fiduciary standards of care as well as the beneficiaries’ best interests”) and Perez v. Silva, No. CV JKB-15-3484, 2017 WL 713759, at *3 (D. Md. Feb. 23, 2017) (“As did the court in Cooper, this Court finds more persuasive the rationale of courts that allow a claim for contribution …. One reason for finding such a right is that, in enacting ERISA, Congress was focused on providing remedies for plan beneficiaries and participants and was content on letting courts applying traditional principles of trust law to fill the gaps.”) with Openshaw v. Cohen, Klingenstein & Marks, Inc., 320 F. Supp. 2d 357, 363-64 (D. Md. 2004) (“[T]here is no indication that Congress intended th[e] portion of trust law [allowing a cause of action for contribution] to be incorporated into ERISA.”) and NARDA, Inc. v. Rhode Island Hosp. Tr. Nat. Bank, 744 F. Supp. 685, 697 (D. Md. 1990) (“It thus appears that the failure to include the rights of contribution and indemnity in ERISA was intended by Congress and the omission of those rights is not an unaddressed detail or gap to be filled by a federal common law.”).