Two Circuits Change Standard of Review Based on Glenn Decision
Estate of Schwing v. Lilly Health Plan, 2009 WL 989114 (3rd Cir. 2009)
The circuit courts continue to address the U.S. Supreme Court’s Glenn decision on the standard of review applicable in ERISA benefits litigation. The more deferential standard applies if the plan document gives the plan decision maker “discretionary” authority to make benefit decisions. In Glenn, the Supreme Court held that a decision maker’s conflict of interest does not change the standard of review, but must be considered as a factor when applying the abuse of discretion standard.
In Schwing, the court held that Glenn overruled the “sliding scale” approach previously used by the Third Circuit. Applying Glenn to a plan administrator’s denial of a former employee’s claim for severance benefits, the court noted that the two conflicts raised were not serious enough for the court to find that the plan administrator had abused its discretion. One of the alleged conflicts was that the employer’s attorney also advised the plan administrator. The court concluded that although the attorney was not independent, she acted only as an advisor and her actions were “altogether appropriate.” The other conflict was that the employer both funded and administered the plan. Together, the court concluded, those conflicts were insufficient to indicate an abuse of discretion given the abundant evidence of the employee’s misconduct.
Chronister v. Unum Life Ins. Co. of America, 2009 WL 1150325 (8th Cir. 2009)]
In Chronister, the court noted two ways in which the Glenn decision changed the Eighth Circuit’s approach to the abuse of discretion standard. First, Glenn allows courts to assume that a financial conflict of interest exists when a plan administrator is also the insurer. Second, Glenn allows courts to take a financial conflict into account even if the claimant cannot show that the conflict caused the contested benefit denial. Taking these changes into account, the court found that the insurer abused its discretion when it denied the employee’s disability benefit claim. Not only did the insurer have a financial conflict, but it had a history of arbitrarily denying claims. The insurer also failed to explain why it rejected the Social Security Administration’s disability determination, despite procedures in the insurer’s own claims manual that substantially limited its ability to reject a Social Security disability determination and required a full explanation whenever a Social Security determination was rejected.
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