1st Circuit Tweaks Benefits Denial Case Law
May 15, 2009 (PLANSPONSOR.com) - After tweaking
their standard for how federal judges should handle employee
benefits denial cases involving a conflicted plan
administrator, federal appellate judges have ordered more
hearings in just such a case.
The 1
st
U.S. Circuit Court of Appeals sent back to a lower
court
Denmark v. Liberty Life Assurance Co. of
Boston
with instructions to gather more evidence on the
issue of why disability benefits were denied in a case that
has made several trips through the federal judicial
system.
In
Denmark
the lower court found the denial of long-term
disability was supported by substantial evidence and within
the plan administrator's discretion, and ruled for the
insurance company.
Senior U.S. Circuit Judge Bruce M. Selya, writing
for the court, said the appellate panel felt its latest
holding in
Denmark
kept case law in the circuit in line with the U.S.
Supreme Court's closely watched benefits denial case
in
Metropolitan Life Insurance Co. v. Glenn
released last year. The Boston-based 1
st
Circuit hears federal court appeals from Maine,
Massachusetts, New Hampshire, Puerto Rico and Rhode
Island.
In
Glenn
, the Supreme Court ruled that a conflict of interest by a
benefits decisionmaker
does not change how a reviewing court should
consider the legal issues - the "standard of
review." The high court said a conflict arising from
the decisionmaker's dual role as reviewer of benefits
claims and payor of claims must simply be considered as a
factor when applying the review standard of whether the
decisionmaker abused hiror her discretion.
Selya explained in the ruling that the 1
st
Circuit panel opted to make two tweaks to the case law
prevailing in the circuit:
-
The court decided that it could no longer
disregard a structural conflict of interest simply
because market forces arguably prevented insurers
from abusing their discretion when making benefit
determinations.
-
The court explicitly recognized that if a
conflict "infects" a benefit-denial
decision, that may justify a conclusion that the
denial was arbitrary and capricious.
"While the refinements are modest, this case
is hair's-breadth close," Selya wrote. "Given
that precarious balance, even a slight adjustment in the
mix of factors or in the weight of a single factor may
make a decisive difference. Hence, we think it incumbent
upon us to remand the case and permit the district court
to reconsider its decision in light of
Glenn
."
The 1st Circuit opinion is
here
.
Fred Schneyer
editors@plansponsor.com