Widow Awarded $500,000 in Life Insurance Can Sue for Lawyer Fees

The widow of a Cleaver-Brooks Inc. employee who died of brain cancer advanced her lawsuit seeking to force the company to cover the legal costs she incurred in obtaining a $500,000 life insurance payout.

The Nov. 3 opinion by Judge Thomas W. Thrash Jr. focused on whether the widow has a viable claim for equitable surcharge under the Employee Retirement Income Security Act. Cleaver-Brooks, a Georgia-based boiler room systems company, said her lawsuit actually sought compensatory relief that can’t be properly awarded under ERISA.

The judge disagreed, saying that plaintiff Pamela Foughty properly sought equitable surcharge to make up for losses she suffered as a result of the company’s alleged breach of fiduciary duty in handling her late husband’s life insurance benefits. That’s permissible under ERISA, said Thrash, who sits in the US District Court for the Northern District of Georgia.

Foughty’s husband worked for Cleaver-Brooks when he was diagnosed with brain cancer in May 2020. The couple worked “diligently” to ensure that his life insurance coverage would remain active, but Cleaver-Brooks provided “false and misleading information” that led Reliance Standard to deny benefits, according to the lawsuit.

Foughty hired a lawyer to sue Reliance and ultimately received the full amount of her husband’s policy plus interest. She then sued Cleaver-Brooks, saying the company’s missteps caused her to pay “significant” attorneys’ fees in order to receive her benefits.

Cleaver-Brooks said that allowing Foughty to seek equitable surcharge “will encourage fully insured ERISA plaintiffs in similar circumstances to first sue their plan’s insurer to recover their benefit and then proceed against their employer in a separate action to make up any difference in recovery.” Thrash wasn’t persuaded, saying the company offered no legal authority prohibiting such a proceeding.

Evans Warncke Robinson LLC represents Foughty. Jackson Lewis PC represents Cleaver-Brooks.

The case is Foughty v. Cleaver-Brooks, Inc., 2023 BL 397147, N.D. Ga., No. 1:23-cv-03074, 11/3/23.