Claims Partially Dismissed Due to Arm's Length Contract Negotiation.


The United States District Court for the District of Columbia grants in part and denies in part the motion to dismiss by the defendant insurance company regarding plaintiff trustees' claims of prohibited transactions, breach of contract and unjust enrichment related to short-term disability (STD) plan services.

The plaintiffs are trustees of a voluntary STD plan that is governed by the Employee Retirement Income Security Act of 1974 (ERISA) and is provided for certain union rail and bus workers. The defendant is the underwriter and claims administrator for the disability insurance benefits provided under the plan.

The plan paid the defendant the premiums deducted from participants' paychecks, and the defendant underwrote the STD benefits and processed claims. The defendant offered its services through a series of one-year contracts and at one point negotiated with the plan to charge higher premiums due to its belief that it was not being adequately compensated.

The plaintiffs argue that the defendant overcharged the plan for the insurance and brings claims of prohibited transaction violations under ERISA, breach of contract and unjust enrichment. The defendant moves to dismiss the claims.

ERISA Section 406(a)(1) prohibits certain transactions between benefit plans and parties in interest, a term defined to include plan fiduciaries and persons "providing services to such plan." Among the transactions prohibited are the "furnishing of goods, services, or facilities between the plan and a party in interest" and "a transfer to ... a party in interest, of any assets of the plan." The plaintiffs argue that by underwriting the insurance the plan provided, processing claims for benefits and being paid for those services, the defendant...

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