In Humana Health Plan, Inc. v. Nguyen, 785 F.3d 1023 (5th Cir. 2015), Humana entered into a Plan Management Agreement (“PMA”) with the API Enterprises Employee Benefits Plan. The PMA stated that API had the right to make all discretionary decisions about the plan’s administration and management. The PMA authorized Humana to provide “subrogation/recovery services” to the plan.
Nguyen received benefits under the plan, and also a recovery under Uninsured Motorist (UM) coverage, for injuries suffered in an accident. API told Humana that it did not intend to seek reimbursement out of the UM recovery, because the plan did not allow recovery from UM benefits. Humana decided that it was not bound by the plan’s instruction, and sued Nguyen to enforce an equitable lien; Nguyen deposited the money into court and counterclaimed.
The Fifth Circuit reversed the district court’s finding that Humana was a fiduciary with standing to assert an equitable claim. First, the court noted that service providers can be fiduciaries in one capacity and non-fiduciaries in another, making it important to focus on the specific role that is at issue in the particular case.
Second, the court observed that “not every act that could be described as ‘discretionary’ in the general sense makes the actor a fiduciary under ERISA.” In particular, the court deferred to DOL regulations, which provided that an entity performing ministerial functions, or making recommendations to others for decisions on plan administration, is not a fiduciary. In determining whether a service provider’s functions are ministerial, relevant considerations include whether the administrator has set up “a framework of policies, interpretations, rules, practices and procedures” to be followed, and is actively supervising the provider.
Applying these rules to the case, the court found that Humana was not a fiduciary. First, it rejected the district court’s finding that the PMA gave Humana discretion over subrogation claims, because it did not say who had final authority over whether to investigate or pursue a claim. Second, even if Humana had broad power, “the district court failed to explain why Humana is not a ministerial agent. Humana’s various duties outlined in the subrogation and recovery clause describe the tasks performed by many law firms and collections agencies. And the mere fact that Humana serves as the Plan’s legal or collections agent is insufficient to show that Humana was the Plan’s fiduciary[.]”
The court noted that it is possible for a third-party service provider to be a fiduciary even if it exercises only some discretionary authority, but held that Humana’s services were ministerial because they were governed by the framework set up by the plan, and supervised by API.