CIGNA Ordered to Pay Disabled Claimant a Surcharge Remedy

Rochow v. LINA 2013 FED APP. 0338P(6th Cir 2013). In a groundbreaking decision, the 6th Circuit awarded the Rochow’s estate both disability benefits due plus equitable relief under 502(a)(3). Rochow had been due the benefits since 2002, but had been tied up in legal battles with LINA (a subsidiary of CIGNA) ever since. The disability claim was litigated which resulted in a finding by the district court in 2005 that LINA’s decision was arbitrary and capricious. LINA appealed; however the Sixth Circuit affirmed the district court’s judgment. Upon remand to determine the amount of money due to Rochow’s estate, Rochow demanded an equitable accounting and asserted that LINA must give up (disgorge) the profits that it realized by holding onto the disability benefits ultimately awarded to Rochow. The court cited a recent Supreme Court case,CIGNA Corp. v. Amara, 1312 S.Ct. 1866 (2010) which found the “surcharge” remedy is available in equity to “provide relief in the form of monetary ‘compensation’ for a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment.’ The court noted, “Insulating LINA from disgorgement in this case would exacerbate the existing systemic conflict of interest.” Here the court justified its award, reasoning “LINA breached its fiduciary duty by continually ignoring its own plan definitions which resulted in wrongly denying benefits for five years after the initial request.” Disgorgement of the profits CIGNA earned by holding Rochow’s money was required to prevent unjust enrichment. The court awarded $3,797,867.92.

We at Bonny G. Rafel LLC handle disability cases against Cigna and all insurers, focused on restoring disability benefits and all other ancillary benefits that ended with a claim denial. This case demonstrates a new direction the courts may take under Amara to disgorge profits the insurers earn by wrongly denying claims.