A common practice of many employers, insurers, and benefits consultants is to personalize the enrollment materials for employees. This is usually done for two reasons: (1) to simplify the enrollment process for employees and (2) to speed up enrollment meetings. While this is usually not a problem, a recent case, Crosby v. Rohm & Haas Co., out of the Sixth Circuit (which is controlling in Tennessee) provides a cautionary tale. In this case, the facts are somewhat unusual. The employer provided a personalized enrollment worksheet to each employee that listed the coverages in which that employee was currently enrolled. It further stated that the employee would be enrolled in those same coverages for the next year unless the employee made a change during the enrollment process. Unfortunately, the information on one employee’s worksheet was incorrect, showing that the employee had more life insurance than the employee was entitled to under the plan. The employee died later that year, and a lawsuit ensued over the amount of life insurance.
Luckily, the court held that the errors on the worksheet were not binding. Had the court ruled that the employee’s estate was entitled to the additional life insurance, the employer (not the insurance company) would have been liable for the additional amount. Although the court ruled in favor of the employer, this case highlights the potential problems with providing personalized enrollment materials.
COMMENT: If you want to provide personalized enrollment materials, at least make sure that you include a disclaimer on the form, indicating that such coverage is subject to any limitations in the plan documents. In addition, make sure that the actual plan documents do NOT reference any personalized forms. The reason? If the plan document references coverages that are outlined in other documents (such as a personalize benefit statement or worksheet), such documents may become part of the actual documents. Had that been the case in Crosby, the outcome would likely have been different.
One last note of caution. If personalized statements or worksheets are provided, make sure you understand who is responsible for any errors. While errors on health or dental coverage might be easily corrected, other coverages, such as life or disability insurance, might not be correctable. In the event the error cannot be corrected, who is liable?
Posted by Mike Cain.
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