11th Circuit Backtracks on Benefits Denial Review Standard

September 19, 2008 (PLANSPONSOR.com) - Falling in line with a U.S. Supreme Court ruling earlier this year, the 11th U.S. Circuit Court of Appeals reversed its earlier decision relating to how employee benefit plan denials should be judged.

The appellate court’s latest holding deals with instances when the benefits denials were made when plan administrators operate under a conflict of interest and was driven by the Supreme Court’s decision inMetropolitan Life Insurance Co. v. Glenn (See  Supreme Court Considers Conflict for Plan Administrators That are Also Payers ).

While the appellate court had earlier required the use a “heightened” arbitrary and capricious review standard, justices followed a different route in Glenn . ” Glenn implicitly overrules and conflicts with our precedent requiring courts to review under the heightened standard a conflicted administrator’s benefits decision,” said Circuit Judge Emmett Ripley Cox,  writing for the 11th Circuit court.

In Glenn , the high court found that a conflict of interest by an employee benefit plan administrator must be considered as a factor during the arbitrary and capricious review, but emphasized that a conflict of interest does not alter the historical arbitrary and capricious review standard —disagreeing with lower courts that had been applying a heightened review or sliding scale approach.

At issue in the 11th Circuit case was Liberty Life Insurance Co.’s denial of long-term disability benefits to Robin Doyle. After Liberty Life reviewed Doyle’s medical records and retained an independent physician to review the records, it determined that Doyle was not disabled from performing the duties of her own occupation.

After exhausting her administrative appeals, Doyle filed a lawsuit under the Employee Retirement Income Security Act (ERISA). Applying a six-step review process used by federal courts within the jurisdiction of the 11th Circuit, the district court found that Liberty Life operated under a conflict of interest, but instead of applying a heightened arbitrary and capricious review as instructed by the 11th Circuit, the district court applied a “modified” arbitrary and capricious standard.

In January, the 11th Circuit reversed the district court for its failure to adhere to the 11th Circuit’s precedent regarding the heightened arbitrary and capricious review.

Now, in light of Glenn , the three-judge panel that issued January Doyle decision has agreed to rehear the case.

The latest 11th Circuit case is Doyle v. Liberty Life Assurance Co. of Boston, 11th Cir., No. 07-10348, 9/18/08.