The threshold issue in every Employee Retirement Income Security Act (ERISA)-governed benefit dispute is the standard of review utilized by the court in adjudicating the claim. Following the Supreme Court’s ruling in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), a veritable land rush ensued as insurers and plan administrators sought to either amend their plans to incorporate language that would trigger a deferential standard of review or try to convince courts that existing language met the Firestone standard. In a recent ruling issued by a district court in Pennsylvania, Frey v. Herr Foods, Inc. Employee Welfare Plan, 2012 U.S.Dist.LEXIS 176505 (E.D.Pa. Dec. 12, 2012), the court determined that not only does the right language have to be included, but it also needs to be in the right place.
The plaintiff, Barry Frey, worked as a peeling room operator for Herr Foods until late 2009 when he had to cease working due to the effects of a stroke that left him with numbness and weakness on the left side of his body. Frey also suffered from severe neck pain and limited range of motion due to degenerative arthritis of his cervical spine. Frey’s treating doctor deemed him disabled, however, his employer questioned the disability and a peer review report obtained by the disability plan administrator concluded that neither the stroke nor the spinal impairment would preclude Frey from working. Ultimately, the dispute reached the federal court, which, in this ruling, determined the applicable standard of review.
According to Viera v. Life Ins. Co. of N. Am., 642 F.3d 407 (3d Cir. 2011), the burden of establishing an entitlement to deferential review is on the plan administrator, and if that burden cannot be met, the default de novo standard applies. Although the defendant pointed to language in the summary plan description (SPD) as the basis for triggering a deferential standard of review, as the court pointed out, the recent Supreme Court ruling in Cigna Corp. v. Amara, 131 S.Ct. 1866, 179 L. Ed. 2d 843 (2011) made it clear that plan summaries cannot create rights which are not enumerated in the actual plan document.
Viera established that plan language requiring that the insured submit “satisfactory proof” of a claim is inadequate to trigger a deferential review. The 3rd U.S. Circuit Court of Appeals deemed that terminology ambiguous and, while the court found that no “magic words” are necessary, a plan could avoid doubt and unmistakably reserve discretionary authority by including the following language: ‘”Benefits under this plan will be paid only if the plan administrator decides in [its] discretion that the applicant is entitled to them.”‘ 642 F.3d at 417 (quoting Herzberger v. Standard Ins. Co. 205 F.3d 327, 331 (7th Cir. 2000)).
However, that did not end the discussion. Although the court deemed plan provisions requiring satisfactory proof inadequate, the court paused at the following provision:
“In carrying out their respective responsibilities under the plan, the plan administrator and other plan fiduciaries shall have discretionary authority to interpret the terms of the plan and to determine eligibility for and entitlement to plan benefits in accordance with the terms of the plan. An interpretation or determination made pursuant to such discretionary authority shall be given full force and effect, unless it can be shown that the interpretation or determination was arbitrary and capricious.”
That terminology, however, followed a provision reading, “This is the end of the certificate. The following is additional information.”
Thus, the court deemed the discretionary language inoperative because it was not incorporated as part of the plan. Other courts have reached similar conclusions: Schwartz v. Prudential Insur.Co. of America. 450 F.3d 697 (7th Cir. 2006); Ringwald v. Prudential Ins. Co. of Am. 609 F.3d 946, 948-949 (8th Cir. 2010) and Jobe v. Medical Life Ins.Co. 598 F.3d 478 (8th Cir. 2010). However, other courts have found the summary plan description can provide rights if the SPD is explicitly described in the plan as an independent source of benefit rights – See, e.g., Eugene S. v. Horizon Blue Cross Blue Shield of New Jersey. 663 F.3d 1124 (10th Cir. 2011); Tetreault v. Reliance Standard Life Ins. Co. No. 10-11420, 2011 U.S. Dist. LEXIS 152252, 2011 WL 7099961 (D. Mass. Nov. 28, 2011).
Here, though, the court’s ruling rejecting a deferential standard was based on the absence of unambiguous, discretion-granting language in the plan itself and because the critical required language appeared only in the summary plan description which was not incorporated into the plan document. Thus, followingAmara, the court applied the de novo standard of adjudication.
Buttressing the court’s ruling were several post-Amara decisions cited in the ruling, including: Shoop v. Life Ins. Co. of N. Am. 839 F. Supp. 2d 830, 837 (E.D. Va. 2011)(discretionary language appearing only in summary document could not trigger deferential review); Kaufmann v. Prudential Ins. Co. of Am. 840 F. Supp. 2d 495, 499 (D. N.H. 2012) (appeal procedures contained only in summary plan document but not in actual plan document not binding); Merigan v. Liberty Life Assurance Co. of Boston 826 F. Supp. 2d 388, 396-97 (D. Mass. 2011) (appeal deadline set forth in the summary plan document was unenforceable when deadline not contained in plan document).
I represented the plaintiff in the Herzberger decision quoted in the court’s ruling and I represented the plaintiff in the Schwartz case cited above.
This article was initially published in the Chicago Daily Law Bulletin.