Can I Challenge a Denial of Benefits Under ERISA?
Yes. Under the Employee Retirement Income Security Act of 1974 (“ERISA”), a person denied benefits under an employee benefit claim is permitted to challenge that denial in federal court. 29 U.S.C. § 1001; § 1132(a)(1)(B)).
What Standard of Review Applies To The Denial of Benefits Under ERISA?
Importantly, based on the Plan, the Court reviewing the denial of benefits by an ERISA plan administration will apply a de novo standard of review or a review for an abuse of discretion. The importance of this distinction cannot be understated.
If the benefit plan affords the claims administrator for the plan the discretionary authority to determine one’s eligibility for benefits, the Court applies the “deferential, abuse of discretion standard of review.” Singletary v. Prudential., Case No. 14-2648 (E.D. La. Aug. 5, 2015). Unless such discretion or deference is given to the plan administrator or fiduciary, a de novo standard of review will apply.
- Under a de novo standard of review a court reviews the dispute as if it were for the first time; the court affords no deference to the decision(s) below.
- Under an abuse of discretion standard of review, the court will review the decisions below to determine whether the administrator’s decision was “arbitrary and capricious.” Anderson v. Cytec Indus. Inc., 619 F.3d 505, 51 (5th Cir. 2012) (reviewing an ERISA-governed policy’s determination of benefits).
The Singletary Case
In Singletary, the Court reviewed a life insurance’s company denial of benefits because the plaintiff’s spouse did not meet the Plan’s definition of a qualified dependent at the time of his death.
By way of background, an employee sued her employer, the United Parcel Service (“UPS”) and the insurer of its ERISA-governed life insurance plan, Prudential Life Insurance (“Prudential”). The plaintiff-employee worked for UPS, a company which permitted its employees several life insurance coverage options including dependent life, which covers the death of an employees’ spouse.
The Plan that the employee chose listed an exception-an exclusion from coverage—which stated as follows:
FOR DEPENDENTS TERM LIFE COVERAGE:
(1) YOUR SPOUSE OR DOMESTIC PARTNER IS NOT YOUR QUALIFIED DEPENDENT WHILE ON ACTIVE DUTY IN THE ARMED FORCES OF ANY COUNTRY;
Here, the Plan provided as follows:
AS CLAIMS ADMINISTRATOR, PRUDENTIAL HAS THE DISCRETION TO DECIDE CLAIMS AND APPEALS. THE PLAN’S SUMMARY PLAN DESCRIPTION STATES:
CERTAIN BENEFITS OFFERED UNDER THE PLAN ARE PROVIDED THROUGH AN INSURANCE CONTRACT ISSUED TO UPS BY AN INSURANCE CARRIER. IN THIS CASE, THE INSURANCE CARRIER IS THE APPLICABLE CLAIMS FIDUCIARY WITH RESPECT TO CLAIMS FOR BENEFITS PROVIDED UNDER THE INSURANCE CONTRACT. THIS MEANS THAT THE INSURANCE CARRIER – NOT THE UPS CLAIMS REVIEW COMMITTEE – HAS THE DISCRETIONARY AUTHORITY TO DETERMINE BENEFITS THAT ARE INSURED BY THE INSURANCE CARRIER.
(internal quotations omitted).
The Court found that the Plan indisputably conferred on Prudential, as the Plan administrator, the discretionary authority to render benefit decisions. In turn, the Court would review the denial of benefits for an abuse of discretion. Accordingly, the burden-shifting framework places the burden on an ERISA claimant to show that the administrator abused its discretion. George v. Reliance Standard Life Ins. Co., 776 F.3d 349, 352-53 (5th Cir. 2015).
Evidence offered in support of the Plan administrator’s Motion for Summary Judgment demonstrated that the adverse benefits determination was made based on a reasonable investigation. The investigation centered around whether the employee’s spouse was on “active duty” in the military at the time of his death. If he was on “active duty” the Plan was clear that the group life insurance policy excludes coverage for dependent life insurance benefits.
The deceased spouse was killed in a motor vehicle accident in Texas, away from the base. Although off-duty, he was still listed as being on “active duty” at the time of his death. The Plan administrator communicated and corresponded with the United States Army’s Human Resources department and there was no dispute that he was on “active duty” even though he was not at war. According to the “Report of Casualty” from the Department of the Army the employee’s spouse was on “active duty.” Singletary at *16.
A federal court is limited on its review of an ERISA determination on eligibility of benefits. A court does not consider factors of fairness or the impact it may have to an employee who lost a loved when it comes to the terms of a policy’s exclusion. The Court in Singletary was limited to a review of whether Prudential, as the Plan administrator, abused its discretion in determining that the plaintiff’s deceased spouse was on “active duty” with regard to his military status. Finding that it was, the Plan administrator denied the employee’s benefits under the group life insurance.
This decision serves as illustration of how one may challenge a Plan administrator’s denial of benefits. Although the result in this lawsuit was unfortunate and negatively impacted the employee, we are afforded an opportunity to see how important Plan Documents truly are. The Plan administrator, under this Plan for example, was given discretion and authority to determine eligibility for benefits and to construe the terms of the plan. Therefore, the federal court reviewing this determination was limited to a review based on an abuse of discretion not a de novo review of the determination.