caring about your standard of care, again

Last Wednesday, petitioners (Xerox’s ERISA plan administrators) contended that the Second Circuit “got it backwards” when it afforded deference to the district court’s – but not the Plan Administrator’s – interpretation of the company’s ERISA plan.

This case continues a recent trend of the Court taking on ERISA cases that pose very finite issues, ones that aren’t likely to recur frequently but that pose the opportunity to present some sense of what are the outer guidelines of ERISA litigation - how broad is deference, does it apply when there is a conflict, what kind of conflict matters, how much room does the administrator get to work with plan language, and what is the proper balance between the plan administrator and the district courts (and eventually the circuit courts) in deciding factual and plan language issues in ERISA cases. Much of this goes back to Firestone, and the universe governing ERISA cases that it spawned; what we are likely to see are cases like this one being decided in a manner intended to reign in the outer limits of the universe spawned by Firestone, which means I call this one for the participants, with a finding that the plan administrator gets deference only the first time around.

Many of the justices seemed to follow what the Chief Justice characterized as “one strike and you’re out” approach, which seemed to be the trend of the Seventh Circuit in Gross as well.

The upshot is, again, like Gross, the 'due deference' that a court is likely to give a plan administrator is not going to be much. Plan administrators are going to need solid cases in making their determinations and not rely on 'arbitrary and capricious standards' to do the work for them.

Conkright v. Frommert (08-810);

caring about your standard of care

One of the enduring sources of work for employee benefits attorneys are clients who fail to follow their own procedures, or follow them in a sham manner. This can happen with employee policies and procedures in promotion, hiring, or administration, and in the administration of employee benefits.

The Seventh Circuit recently issued a rare decision that overturns a decision made by a Plan administor, which ordinarily enjoys an 'arbitrary and capricious' deferential standard of review. The Court focused on tiny details of the administrator’s handling and the the medical review relied on by the administrator, finding that a flaw in the medical review warranted overturning the denial. This is far different from a 'some evidence' standard. The modern trend is to test the quality of that evidence, followed by a decision as to whether the evidence is of a sufficient quality, and not just quantity, to support the administrator’s decision.

Such nit-picking adds to instability in practice in order to promote equity. You would think that an 'arbitrary and capricious' would preserve your client's decision. The upshot is that practicioners increasingly need to treat benefit denial appeals with as much tender loving care, as, say, dismissals in the employment context. Document, document, document, and follow your procedures!

Majeski v. Metropolitan Life Insurance Co., No. 09-1930 (7th Cir. Dec. 29, 2009)