In the wake of Metro. Life v. Glenn, 128 S.Ct. 2343 (2008), many circuits have been revisiting their analysis of ERISA claims. In Doyle v. Liberty Life Assur. Co. of Boston, 2008 U.S.App.LEXIS 19752 (11th Cir. Sept. 18), the panel that had originally decided this case withdrew the court’s original opinion (511 F.3d 1336 (11th Cir. 2008)) and substituted an entirely new ruling based on Glenn, which affirmed the grant of summary judgment in favor of Liberty. The plaintiff in Doyle, a nurse, suffered from severe pain, which was later diagnosed as due to fibromyalgia. Doyle initially qualified for short-term disability benefits for a full 90 day period. However, Liberty refused to pay long-term disability benefits which would have commenced immediately upon the expiration of the short-term disability benefit period. After exhausting internal appeals, Doyle brought suit against Liberty, but her suit was unsuccessful, and the case was appealed.

The court began its opinion by discussing the decisional framework for ERISA claims. Pointing to Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the court acknowledged that when a benefit plan properly reserves discretion, the court reviews the benefit determination under the arbitrary and capricious standard of review, a term used interchangeably with the abuse of discretion standard. The court also noted that Firestone observed when a plan administrator with discretion operates under a conflict of interest, ”that conflict must be weighed as a ‘facto[r] in determining whether there is an abuse of discretion’ ” (quoting Restatement (Second) of Trusts section 187 cmt. d (1959)).

Following Firestone, the 11th U.S. Circuit Court of Appeals, in Brown v. Blue Cross & Blue Shield of Ala. Inc., 898 F.2d 1556, 1561 (11th Cir. 1990), developed an approach to taking the conflict into consideration that heightened the level of review, and shifted the burden to ”the fiduciary to prove that its interpretation of plan provisions committed to its discretion was not tainted by self-interest.” The Brown standard was further refined into a six step analysis by Williams v. BellSouth Telecomms., Inc., 373 F.3d 1132, 1138 (11th Cir. 2004), which first examines the determination de novo, and only then, if the decision is de novo wrong, the court applies a heightened level of review, taking the conflict into consideration.

The district court questioned the Williams approach, finding it inconsistent with Firestone and trust law; and in the initial appeal, the 11th Circuit agreed that it would be appropriate to revisit its analysis, particularly since the Supreme Court was considering the Glenn case. In this ruling, the 11th Circuit departed from Brown and Williams, ruling against the plaintiff. The court reiterated Glenn‘s holding that Liberty’s dual role of insurer and administrator created an inherent conflict; and the court also cited Glenn for the proposition that the conflict is a factor to be considered, ”along with other factors” in evaluating the arbitrariness of a claim determination. Doyle determined that Glenn overruled and conflicted with the ”heightened standard” previously applied by the 11th Circuit since Glenn reaffirmed the viability of a deferential standard of review. The court also stated that its burden-shifting approach was rejected by Glenn; and the court further remarked that its prior standard imposed a ”remarkably difficult burden” upon the administrator to prove its decision was not tainted by a conflict.

Consequently, the court ruled: ”We hold that the existence of a conflict of interest should merely be a factor for the district court to take into account when determining whether an administrator’s decision was arbitrary and capricious. And we hold that, while the reviewing court must take into account an administrative conflict when determining whether an administrator’s decision was arbitrary and capricious, the burden remains on the plaintiff to show the decision was arbitrary; it is not the defendant’s burden to prove its decision was not tainted by self-interest.”

Turning to the particular facts presented, the court then ruled in Liberty’s favor. Liberty had argued its approval of the short-term disability benefit claim proved its claim processes were unbiased, and that its employment of independent physician consultants also insulated the insurer from bias. The plaintiff responded that finding Doyle disabled for 90 days but suddenly cured on day 91 without any explanation of how her condition had changed was arbitrary. Doyle also claimed that hiring the consultants was merely what ERISA requires pursuant to 29 C.F.R. section 2560.503-1(h)(3)(iii) & (v) and 29 C.F.R. section 2560.503-1(h)(4) and did not represent a course of action that insulated Liberty from the conflict. The court rejected both of the plaintiff’s arguments, finding Liberty’s actions appropriate.

The court also overruled Doyle’s claim that Liberty failed to provide any evidence that it instituted procedures to assure accurate claims assessment because that would impose a burden shifting rule that Glenn had rejected. As to the claim of unreasonableness in approving the STD while rejecting the LTD benefits claim, the court accepted Liberty’s explanation of its ”willingness to overcompensate claimants while investigations are pending.”

Finally, the court rejected Doyle’s objection that Liberty favored records pointing to a claim denial, finding Liberty’s preference for objective medical evidence was reasonable, holding that while the parties’ evidence could support a ruling for either side: ”Liberty Life is vested with discretion to determine eligibility under ChoicePoint’s plan; thus we owe deference to its determination. Glenn, U.S. at , 128 S. Ct. at 2350 (‘Trust law continues to apply a deferential standard of review to the discretionary decision making of a conflicted trustee….’). Because the evidence is close, we cannot say, even accounting for the conflict, that Liberty Life abused its discretion in denying Doyle benefits.”

Glenn clearly means that Brown v. Blue Cross and Williams v. Bellsouth are no longer viable in the 11th Circuit. However, the court’s acceptance of Liberty’s determination as ”reasonable” appears to be at odds with Glenn. Given the Supreme Court’s emphasis on the fiduciary duties imposed by ERISA and that ”ERISA imposes higher-than-marketplace quality standards on insurers,” the manner and means utilized by Liberty cannot be accepted as meeting that requirement. Glenn focused on the need to implement procedures that assure accurate claims processing. Moreover, the Supreme Court has cautioned against frequently-hired claim reviewers who ”may have an ‘incentive to make a finding of ”not disabled” in order to save their employers money and to preserve their own consulting arrangements.'” Black & Decker Disability Plan v. Nord, 538 U.S. 822, 832 (2003). The two consultants hired by Liberty, Drs. Silver and Truchelut, have been the subject of numerous reported decisions in which both have offered virtually identical ”no objective evidence” opinions as the ones presented here. While such reports may be superficially attractive as grounds for denying benefits, it is well-established in cases such as Preston v. Secretary of Health and Human Services, 854 F.2d 815 (6th Cir. 1988), that fibromyalgia may be disabling despite physical examinations showing a full range of motion, normal muscle strength and normal neurological testing.

Further, the Supreme Court’s citation in Glenn of Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-417 (1971), and Universal Camera Corp. v. NLRB, 340 U.S. 474, 490, 71 S. Ct. 456, 95 L. Ed. 456 (1951) (128 S.Ct. at 2351, 2352), also unmistakably imposes a much more heightened duty to probe the record under review than to merely assess its ”reasonableness.” According to Overton Park, despite a ”presumption of regularity” to which an underlying ”administrative” decision is entitled, the court should nonetheless conduct a ”substantial inquiry” and a ”thorough, probing, in-depth review.” The court may not ”substitute its judgment for that of the agency,” but is required to ”consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment”; the ”inquiry into the facts is be searching and careful.”

Universal Camera is even more to the point. That ruling expressly rejected the notion that deferential review begins and ends with a search for evidence supporting the reasonableness of the decision under consideration. Rather, a reviewing court must satisfy itself that the determination under review was based on ”adequate proof” in the record. Further, a reviewing court must consider the totality of the evidence, and fully take into account any evidence in the record that is inconsistent with the determination.

Finally, the Universal Camera court directed lower courts to independently exercise their judicial function even while applying a deferential standard of review: ”We conclude, therefore, that the Administrative Procedure Act and the Taft-Hartley Act direct that courts must now assume more responsibility for the reasonableness and fairness of Labor Board decisions that some courts have shown in the past. Reviewing courts must be influenced by a feeling that they are not to abdicate the conventional judicial function. Congress has imposed on them responsibility for assuring that the Board keeps within reasonable grounds. That responsibility is not less real because it is limited to enforcing the requirement that evidence appear substantial when viewed, on the record as a whole, by courts invested with the authority and enjoying the prestige of the Courts of Appeals.”

Although ERISA is neither governed by the APA nor the Taft-Hartley Act, the Supreme Court’s citation to Universal Camera suggests the term ”plan administrator” be substituted for ”Board” or ”Labor Board” in the preceding passages, thus necessitating a more penetrating scope of judicial review than has previously been utilized, even while giving deference to the claim decision. Thus, the paramount importance under a law enacted for the protection of participants in employee benefit plans (29 U.S.C. ‘§ 1001(b)) of ”accurate claims processing” requires that plan administrators do more than hire a doctor with a history of anti-claimant bias to review the file. As remarked in an administrative law context, but which has equal applicability to ERISA claims, ”[d]eference is earned; it is not a birthright.” Kadia v. Gonzales, 501 F.3d 817, 821 (7th Cir. 2007).

This article was initially published in the Chicago Daily Law Bulletin.

Related Articles

Understanding Government and Church Plan Exceptions to ERISA

Understanding Government and Church Plan Exceptions to ERISA

The Employee Retirement Income Security Act (ERISA) is a landmark piece of legislation enacted in 1974 to safeguard the interests of employees who participate in retirement and health benefit plans offered by their employers. ERISA sets standards for these plans, ensuring transparency, fiduciary responsibility, and fairness in their administration. […]

ERISA 2023 Year in Review

ERISA 2023 Year in Review

Introduction The Employee Retirement Income Security Act of 1974 (ERISA) [1] directly impacts the lives of most Americans, yet few are familiar with ERISA despite its governance of pensions and retirement plans, along with other employer provided fringe benefits such...