District Judge Lets Some ERISA Claims Against Independence Administrators Stand

A federal judge in Philadelphia allowed most of an Aramark Corp.⁠ lawsuit against QCC Insurance Co., a subsidiary of Independent Blue Cross doing business as Independence Administrators, to proceed. The food and facilities services company was found to have plausibly alleged that the third-party health-plan administrator was acting as a fiduciary under the Employee Retirement Income Security Act when it made decisions about payment of claims and other decisions involving Aramark plan assets.

U.S. District Judge Gerald Pappert, presiding in U.S. District Court for the Eastern District of Pennsylvania, on August 13 granted in part and denied in part the defendants’ motion to dismiss in Aramark Services Inc. et al. v. QCC Insurance Co. d/b/a Independence Administrators et al. The ruling allowed four counts alleging QCC’s breaches of fiduciary duty and prohibited transactions under ERISA to continue. Two Aramark health plans were dismissed as plaintiffs, and Independence Blue Cross and Independence Health Group were dismissed as defendants, all without prejudice. Pappert also dismissed a declaratory relief claim without prejudice and struck Aramark’s jury demand.

Case Background

Aramark filed the complaint in March, alleging that it entrusted QCC with hundreds of millions of dollars to pay medical providers caring for employees, retirees and family members. The administrator is accused of paying false, fraudulent or otherwise improper claims, charging excessive or undisclosed fees, and restricting Aramark’s ability to examine how plan money was being used. The complaint alleges those practices cost Aramark tens of millions of dollars.

At the center of Pappert’s ruling was QCC’s status as an ERISA fiduciary for the conduct Aramark challenged.

Pappert concluded that Aramark plausibly alleged fiduciary status on multiple grounds. The parties’ 2018 administrative services agreement expressly identified QCC as the “Named Claims Fiduciary” and delegated final discretionary authority over benefit determinations, claims payments and participant appeals.

Although a 2022 agreement contained seemingly conflicting provisions—one saying the plan sponsor, rather than Independence Administrators, was the claims fiduciary and another calling QCC the “named claims fiduciary”—Pappert said those inconsistencies created factual questions inappropriate for resolution on a motion to dismiss.

Pappert also found QCC was plausibly a “functional” fiduciary because the agreements gave it discretion in administering claims. Under the contracts, QCC could determine whether claims should be paid, could investigate their validity and could decide how much should be paid. ERISA, Pappert wrote, does not require a service provider to have ultimate decisionmaking power before it can be a fiduciary; discretionary authority or responsibility can be enough.

A separate focal point involved QCC’s control over plan money. Under the aforementioned 2022 agreement, Independence Administrators provided the checking account through which benefits were paid and had sole authority to sign checks. Aramark alleged QCC pulled money from the plans, placed it in accounts under Independence’s control and used those funds to pay claims.

ERISA Threshold Cleared

Pappert wrote that those allegations cleared ERISA’s relatively low threshold for fiduciary status, based on control over plan assets. The judge noted that QCC allegedly had authority to write checks on the plan account and to control where plan funds were deposited. Exactly which funds ultimately qualify as plan assets remains a factual question that can be addressed later in the case, he wrote.

Aramark accuses QCC of widespread claims mismanagement, improper billing and diverting plan funds for its benefit, including practices such as cross-plan offsetting and less rigorous claims review. Pappert found these allegations—such as paying improper or excessive claims and charging hidden fees—sufficient to support a claim of fiduciary breach at this stage. Additionally, Pappert ruled that Aramark could seek remedies such as surcharge and disgorgement for any losses or profits resulting from QCC’s alleged misconduct.

Aramark and the Aramark Benefits Compliance Review Committee are represented by law firms McKool Smith P.C. and Duane Morris LLP. QCC and the dismissed Independence entities are represented by Miller & Chevalier.

According to the most recent Form 5500 data, the Aramark Services Inc. Group Health Plan had 25,615 participants at the end of 2024.