© 2014 by Michael A. McKuin

Attorney at Law

Post Office Box 10577

Palm Desert, CA 92255

(California State Bar No. 103328)

 

The information provided at this website is intended for educational and promotional purposes only. It is strictly general in nature and under no circumstance should it be considered legal advice.  Every case is unique and a competent, qualified lawyer must be consulted for legal advice regarding any specific case. 

The Standard of Judicial Review - Playing Against a Stacked Deck

By: Michael A. McKuin

ERISA’s Elusive Burden of Proof

 

The outcome of an ERISA case can depend upon which standard of review is applied.   Unfortunately, this is an area of the law that gets complicated to the point of distraction.  The reason is due in part to the fact that it has undergone significant and often confusing change over the years.  As a result, much of ERISA litigation has involved a rather technical debate about which standard applies in a given case.  Because of this (and other reasons) even the simplest benefit dispute can take on a ridiculous degree of complexity.  But I will do my best to keep this as simple as possible.

The standard of review in an ERISA case is similar to what’s called the burden of proof in other cases.  Different types of cases have different burdens of proof in court.  For example, most people know from watching crime dramas on television that in a criminal case a prosecutor must prove guilt “beyond a reasonable doubt” in order to convict a defendant.  In a civil case the burden a plaintiff must meet is the lower “preponderance of the evidence” standard, which means more likely than not.  It’s often analogized to a football game where the score is 51-49.   The side with 51 points wins. In keeping with the principle that “close” only counts in horseshoes and hand grenades, the fact that the game was close doesn’t matter. 

ERISA cases are different. First of all, there is no right to a jury trial in an ERISA benefit dispute. These cases are decided in federal court by a judge, who reviews the insurer’s final decision denying a claim.   The court may adopt one of two possible standards of review, either a de novo standard or a deferential standard, also known as the “abuse of discretion” standard.  (I prefer to use “deferential” because it’s one word.)  Under de novo review, the Court simply looks at the claim as it would any other contract dispute. The judge may simply review the evidence in support of the claim, examine the plain language of the plan, and render a decision on the merits.  There is no presumption of correctness of an insurer’s decision denying a claim.  The very words “de novo” mean “anew” in Latin.   Several courts have held that the de novo standard is basically the same as a preponderance of the evidence standard. [1]   Deferential review is more restricted and far more complicated. Under that standard the issue before a court is not be whether the insurer was “right” or “wrong” in denying a benefit claim, but rather was it an abuse of discretion, based upon the evidence in the administrative record.  Figuring out whether or not it was, sometimes requires mental gymnastics that would take a gold medal, if it were an Olympic event.

The starting point is a relatively simple matter of reading, understanding and applying language, because an   insurer’s decision must be based on a “reasonable interpretation” of the plan’s terms. [2]   We then move into a more complicated area of determining whether an insurer’s decision is supported by “substantial evidence”. If it isn’t, the insurer loses. [3]  But the meaning of the term “substantial evidence” is as nebulous as it gets.  It has been described by the U.S. Supreme Court as “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”  [4]  It “does not mean a large or considerable amount of evidence.” [5]   And if that isn’t vague enough to make you want to scream, it requires “more than a scintilla but less than a preponderance”.  [6]  The Ninth Circuit once explained that as a general rule, “a plan administrator's decision will not be disturbed if reasonable. This reasonableness standard requires deference to the administrator's benefits decision unless it is (1) illogical, (2) implausible, or (3) without support in inferences that may be drawn from the facts in the record.”  [7]  

For a while, the Ninth Circuit went so far as to hold that benefit denials need not even be based on substantial evidence.  All that was required was that they be grounded in “any reasonable basis”, [8]   although the court later reversed that and held that the “any reasonable basis” test was “no longer good law when .  .  .  an administrator operates under a structural conflict of interest.” [9]   For the uninitiated, “A conflict is structural when it is inherent in the nature of the undertaking, where, for instance, an insurance company that determines the validity of claims, economically benefits by not paying that claim.”  [10]   Putting aside all the legal mumbo jumbo, deferential review sometimes comes down to whatever a judge thinks it is in any given case. But given the definitional challenges, the standard has afforded insurance companies an advantage over claimants in benefits disputes.  Although arguably, because of its complexity, in some circuits, such as the Ninth Circuit, claimants may have sometimes had an advantage on appeal.  Regardless, as we will see, the deferential standard has undergone some significant changes over the years.  

OK, so how do we determine which standard applies?  That’s where it gets more complicated because we run head on into an anomaly that has its genesis in trust law. The reason trust law weighs into the analysis is found in ERISA’s initial purpose, which was to regulate and safeguard pension benefit plans.  In that context it makes perfect sense as we think of actual funds, held for the benefit of retirees.  The principle never made any sense when applied to “employee welfare benefits”, such as insured health or disability benefits.

The Looking Glass Logic of ERISA (When the Exception Becomes the Rule and the Rule Becomes the Exception, What Good is the Rule?)

But where we descend into a pit of absurdity is when we try to follow the bouncing ball of the case law.  The U.S. Supreme Court, in the landmark case of Firestone Tire Rubber v. Bruch [11]  held that in an ERISA benefit case, de novo review is to be presumed, stating clearly that a “denial of benefits .  .  . is to be reviewed under a de novo standard .  .  .”  This is the so-called “Firestone default de novo” rule. The reason for the rule is simple, as explained by the Court itself.  The deferential standard of review “would afford less protection to employees and their beneficiaries than they enjoyed before ERISA was enacted.” Thus, to apply that standard in ERISA benefit cases would impose a result that Congress could not have intended in light of ERISA's very stated purpose of “promot[ing] the interest of employees and their beneficiaries.” [12]  

 

If the Firestone Court had just stopped right there, all would have been well and good in the ERISA world.  But unfortunately it didn’t.  Bound and determined to apply a century-old trust law principle to what had historically been a contract law relationship between insurer and insured, the Court went further, carving out one of the most infamous loopholes in the history of American jurisprudence. It created a gigantic exception to the very rule it had just announced. And in so doing, the Court did exactly what it said Congress did not intend to do.  It left plan participants with far less protection than they had before ERISA’s enactment. 

The Supreme Court held that a district court is to review ERISA claims de novo, “unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” [13]  Those 24 little words may not seem like much on the surface, but they have inflicted untold hardship on millions of Americans.  They comprise what’s known as the “Firestone exception” to the default de novo rule.  The trust law concept, relied upon by the Supreme Court is one that says courts will defer to certain well-defined discretionary powers that can be given to an independent trustee or fiduciary under terms of a trust instrument.  If a trustee indeed has such discretion, courts would not interfere with it, unless it could be shown that such discretion had been abused. 

Under ERISA, insurance companies, which by their very nature protect their own interests, are charged by law with the fiduciary responsibility for protecting your interests (at their expense).  Of course, that’s silly and if they don’t there are often no consequences. As you might expect, as soon as the Firestone case was decided, insurance companies had benefit plans scurry to insert language into their plan documents, giving plan fiduciaries “discretion” (which they could and would delegate to the “claims administrators”, i.e. insurance companies)  to determine issues of eligibility and to interpret the plans. In what can only be described as the most perfect example of the “looking glass” logic of ERISA, the result of the Firestone decision was to impose the deferential standard of review on the widest scale imaginable.  In essence, the Court created an exception that swallowed the rule.  Now bear in mind, this is the very result that the Supreme Court itself said was contrary to the intent of Congress in passing the law in the first place and yet, it was the most profound result of the Court’s decision.

Insurance defense attorneys have generally argued, whenever possible, that the “Firestone exception” applies, so as to try to gain the advantage in litigation of imposing a higher burden of proof on plaintiffs.  Plaintiff’s attorneys have argued the opposite.  But even though the deferential standard certainly gave insurers a decided advantage over claimants, it was never the panacea that many sloppy or unscrupulous insurers thought it was, nor was it akin to a papal dispensation.  Even in its heyday, there were often creative ways to get around it.   Since the Firestone decision, the case law has undergone a phenomenal metamorphosis, especially in the Ninth Circuit.

One factor that emerged involved the quality of the plan language purporting to reserve discretionary power, which became the focal point of several federal appellate decisions.   One of my personal favorites is the Seventh Circuit's opinion in Herzberger v. Standard Insurance Company, which proposed (perhaps tongue in cheek) that plans include the following language in order to fall within the Firestone exception:   “Benefits under this plan will be paid only if the plan administrator decides in his discretion that the applicant is entitled to them.”   [14]  In other words, “We’ll pay your claim if we feel like it.  If we don't, we won't.”  To my knowledge, no ERISA benefit plan has ever adopted the language suggested in Herzberger.  

Sometimes, the plan language granting discretion would be obscure or ambiguous, which was clearly by design. But whenever that was the case, the Ninth Circuit held it would not suffice.  In both Bogue v. Ampex Corp. and in Kearney v. Standard Insurance Co., it held that such discretion had to be “unambiguously retained” in the plan documents. If it wasn’t, the standard of review is to be de novo. [15]    In Sandy v. Reliance, the court citing Harry Potter, stated:  “Neither the parties nor the courts should have to divine whether discretion is conferred. It either is, in so many words, or it isn't. For sure, there is no magic to the words ‘discretion’ or ‘authority’-- but we’re not at Hogwarts. Therefore, it should be clear: unless plan documents unambiguously say in sum or substance that the plan administrator or fiduciary has authority, power, or discretion to determine eligibility or to construe the terms of the Plan, the standard of review will be de novo.” [16]     

Passing the Buck While Keeping the Cash

 

Another factor involved the manner in which discretion was said to be “delegated” to an insurance company.  Because oftentimes it wasn’t.  The “administrator” referenced by the Firestone court is the plan administrator (as distinguished from a mere claims administrator or insurer.  Nothing in Firestone even remotely suggests that the Firestone exception would apply to decisions of a third-party claims administrator.   When one considers the trust law principles upon which the Firestone decision was based, no other interpretation is possible. ERISA itself provides for a “full and fair review by the appropriate named fiduciary,”  [17]   which may be the plan administrator “or any other party designated by the plan administrator, provided that such plan administrator or other party is named in the plan instrument or is identified pursuant to a procedure set forth in the Plan as the person who reviews and makes decisions on claim denials.”   [18]    The ERISA statute itself clearly provides that: “The instrument under which a plan is maintained may expressly provide for procedures . . .   (B) for named fiduciaries to designate persons other than named fiduciaries to carry out fiduciary responsibilities (other than trustee responsibilities) under the plan.”  [19]   

Therefore, a “named fiduciary” may delegate its fiduciary responsibilities to a third party, (even to a claims administrator), but it may do so only if the written plan instrument expressly provides procedures for doing so; and there must be an actual designation of that third party by the named fiduciary, as being a person empowered to carry  out fiduciary responsibilities under the Plan.  An alleged de facto fiduciary status is not enough to preserve the deferential standard under the Firestone exception and there must be an actual exercise of discretionary authority by the named or designated fiduciary.  If that fiduciary fails to act, then there is no decision of any fiduciary to defer to.  “In the case of third-party administrative services, the deferential standard of review may not apply to claim review procedures after the initial review if the administrative services contract (does) not confer discretionary powers on the (claims) administrator.” [20] Very frequently, a close examination of the plan documents may reveal that no discretionary authority has been conferred upon the entity claiming it.  Furthermore, the plan documents may not even set forth any procedure for delegating such discretion in the first place.  Therefore, consistent with the law, no discretion is held by that entity.

Even in those cases where such a procedure allowing for delegation of discretion exists and such delegation in fact has been made, yet another factor may arise, involving where the plan language is found.  All of the paperwork described above, needed to maintain the separation of entities was extremely tedious, but there were profound reasons for sticking to the routine.  It maintained the illusion of a rudimentary adherence to basic trust law principles. In the early days of ERISA preemption, insurance companies were conscientious in “assisting” employers in the proper structuring of their employee benefit plans to make certain that these requirements were met, so as to enable them to take advantage of the Firestone exception. This was done by separating claims administrative functions from funding and insurance obligations.  This was typically accomplished by setting up a separate company to perform claims administrative services. Of course, the claims administrator was usually a subsidiary or affiliate of the insurance company and was about as independent as a hand puppet. But on paper it looked good.  When a benefit plan was sold, a “Master Plan “Document” was executed by the employer, who was also (on paper) the “plan administrator”.  That document would contain the necessary provision by which discretion to interpret the plan and to decide benefit eligibility issues was “reserved” by the plan administrator.  There would be a “procedure” set forth in that document for delegating this discretion; and of course that delegation would be made to the claims administrator / insurance company.  The insurance company would issue a separate group insurance policy to the employer and the Master Plan Document would basically incorporate the terms, conditions, limitations, etc. of the insurance policy.  Summary Plan Descriptions (SPDs) were then provided to the employer, summarizing the benefits provided under the group policy for distribution to the employees, as required by the law. 

However, over the years insurance companies got lazier and greedier than usual.  They brought the claims administration operations back in house, creating an obvious conflict of interest.  Then, to top it off, not wishing to bother with all this complicated subterfuge to acquire the requisite “discretion”, they started throwing language into their own insurance policies, granting themselves discretion to interpret the plan and make benefit decisions, despite fact that they would have no authority under trust law to do so. Since insurance companies were the primary beneficiaries of the Firestone loophole, one would think it served their interests to be more careful.  

But courts seemed to turn a blind eye to the practice and they were allowed to get away with it in most instances.  In fact, keeping with this paradigm, case law emerged holding that insurers were so removed from this process, they were not even parties to any benefit dispute.  The Ninth Circuit cases on point were Everhart v. Allmerica Financial Life Ins. Co. [21] and Ford v. MCI Communications Corporation Health and Welfare Plan, [22] Those cases held that any action for plan benefits had to be brought against the “plan” or the “plan administrator”, not the insurer. Absurd?  Slightly.  In an insured plan, who else but the insurer is responsible for paying benefits? In fact, in each instance where the plan was sued, the attorneys who appeared in court for the defendant plans, always worked for the insurance companies and all of the litigation decisions were made by the insurance companies. Except in a few instances, the plan was involved in name only. 

Like so many other ridiculous aspects of ERISA, this immunity from suit was a judicial creation. It was the byproduct of an interpretation of 29 U.S.C. Section 1132(d) (2), which provides that “any money judgment . .  .  against an employee benefit plan shall be enforceable only against the plan as an entity and shall not be enforceable against any other person unless liability against such person is established in his individual capacity under this title.” It is an absurdity that was eventually corrected by the Ninth Circuit’s decision in Cyr v. Reliance Standard, [23] overturning Everhart and Ford, and specifically holding that the insurance company could in fact be sued for benefits under ERISA.

The Ultimate Recognition of the Undeniable Inevitable Conflict of Interest

In time, more and more courts came to recognize that that if an insurance company was both a funding source of a plan and the decision-maker regarding payment of claims, a clear conflict of interest emerged.  In the Ninth Circuit an approach to dealing with this conflict evolved that endured for more than a decade. The test applied to decisions of such “conflicted” fiduciaries was the one announced in Atwood v. Newmont Gold Co. [24] Under the Atwood test, ERISA plaintiffs had a shot at de novo review, even in those cases where discretion was conferred upon an insurance company by the plan.  All a plaintiff had to do was come forward with “material, probative evidence, beyond the mere fact of the apparent conflict, tending to show that the (insurer’s) self-interest caused a breach of (its) fiduciary obligations to the beneficiary.”  [25] If the plaintiff did that, then the burden shifted to the plan to prove that the conflict of interest did not affect its decision to deny benefits.   If the plan could not carry that burden, the standard of review would be elevated to de novo. [26]

The “Non-Sliding” Sliding Scale for Reviewing Decisions of Conflicted ERISA Fiduciaries

Because of the draconian nature of the deferential standard in general, over time the Ninth Circuit reined it in to a point where the standard underwent drastic changes over time, culminating in the Ninth Circuit’s 2006, en banc opinion in Abatie v. Alta Health & Life Ins. Co., [27] a case that completely changed the rules for determining the standard of review applicable to decisions of conflicted fiduciaries.  The rule change was a substantial one.  The court found that the burden-shifting analysis of Atwood failed to follow the Supreme Court precedent of Firestone in that Atwood was said to have placed “an unreasonable burden on ERISA plaintiffs”, which “requires that we overrule it”. [28]  Thus, the stated purpose of the Abatie decision was to “(alleviate) the unreasonable burden Atwood placed on ERISA plaintiffs” to “(bring) forth evidence of a ‘serious conflict of interest,’ triggering de novo review”.   [29]   In theory, no longer would administrators’ decisions be upheld, merely because they are “grounded on any reasonable basis.” [30] To the contrary, “Going forward, plaintiffs (would) have the benefit of an abuse of discretion review that always considers the inherent conflict when a plan administrator is also the fiduciary, even in the absence of ‘smoking gun’ evidence of conflict.” [31]

Therefore, Abatie overruled Atwood, replacing its burden-shifting approach with an abuse of discretion standard, but very different from the traditional standard.  The Ninth Circuit established what it described as “a more comprehensive approach to ERISA cases in which a conflict of interest exists. As we will explain below, abuse of discretion review, tempered by skepticism commensurate with the plan administrator’s conflict of interest, applies here.” [32]  Under Abatie, judicial review would be colored by consideration of all the relevant facts and circumstances.  [33]    The result of the Abatie decision and those cases that followed it was that deferential review would no longer be a singular, definable standard.  Instead it would be multi-faceted, with perhaps more than 50 shades of gray.   The extent of deference to be given to a “conflicted” fiduciary’s decision, was to be determined by weighing a number of both procedural and substantive “factors”, which could vary depending on the facts of each individual case.  A trial court’s review was to be “informed by the nature, extent, and effect on the decision-making process of any conflict of interest that may appear in the record.” [34]  As the Court in Abatie put it: “We recognize that abuse of discretion review, with any conflict . . . weighed as a factor,  .  .  .  is indefinite. We believe, however, that trial courts are familiar with the process of weighing a conflict of interest. For example, in a bench trial the court must decide how much weight to give to a witness’ testimony in the face of some evidence of bias. What the district court is  doing in an ERISA benefits denial case is making something akin to a credibility determination about the insurance company’s or plan administrator’s reason for denying coverage under a particular plan and a particular set of medical and other records.  We believe that district courts are well equipped to consider the particulars of a conflict of interest, along with all the other facts and circumstances, to determine whether an abuse of discretion has occurred.” [35]

Abatie also recognized that there is a rare class of cases where procedural violations might actually give rise to de novo review, where the “administrator utterly fails to follow applicable procedures”.  [36] Those are cases involving “violations so flagrant as to alter the substantive relationship between the employer and employee, thereby causing the beneficiary substantive harm,”  such as where an administrator engaged in “wholesale and flagrant violations of the procedural requirements of ERISA, and thus acts in utter disregard of the underlying purpose of the plan as  well”  [37]   However, Abatie held that in ordinary cases, procedural violations were simply a factor to be weighed in abuse of discretion review.  [38]    So in essence, the Abatie decision vested the district courts with carte blanche authority to “decide in each case how much or how little credit” to give an insurer’s reasons for denying a claim.  

As Judge Kleinfeld’s concurring opinion noted, Abatie added even more “unpredictability” to the mix.  I was initially skeptical about the decision because, contrary to what the court stated, I never felt that the Atwood test necessarily required “smoking gun evidence”.  Cases such as Lang v. Long-Term Disability Plan and Friedrich v. Intel Corp.  [39] made it clear that there were many types of evidence, sufficient to shift the burden under Atwood, such as: unfairness of the claims process; inadequate communication; insufficiency in the notice of a claim decision; inconsistency of claims administration; and (my personal favorite) administering the claim in an adversarial manner, inconsistent with fiduciary obligations.  In my experience, 90% of the time, one or more of those factors was present in every claim decision I’ve reviewed.  Moreover, under the possible pretense of protecting plaintiffs from the perceived burden of Atwood, the Abatie case stripped plaintiffs of an ability to obtain de novo review in those cases where plaintiffs met the burden under Atwood. They would be left with a new and different kind of “abuse of discretion” review.  I also feared that Abatie might actually impose a new and expensive obligation on plaintiffs to conduct formal discovery, regarding an insurer’s conflict of interest.  But any evidence obtained by such discovery would do nothing more than give rise to “factors” that a district court judge might consider or “weigh” under an abuse of discretion standard. 

However, in all fairness I have to admit that Abatie did put more teeth into the deferential standard of review.  And subsequent Ninth Circuit cases applying Abatie refined its analytical framework to a point where it is perhaps more “claimant-friendly” than ever before. Two cases in particular, Montour v. Hartford Life & Accident Ins. Co. and Salomaa v. Honda Long Term Disability Plan [40]  clarified that such factors to be weighed by the district courts include whether an insurance company did such things as: (1) relying on mere paper reviews (in the face of better evidence); (2) “cherry-picking” the evidence (selective review); (3) conditioning an award of benefits on requiring evidence from a claimant that cannot exist  (e.g. “objective evidence”); (4)  ignoring an award of Social Security Disability benefits; (5) shifting rationales in its review of a claim; (6) failing to engage in a meaningful dialogue with the claimant?  Many of these factors were not new. [41] But the emphasis given to them by the Ninth Circuit, in Salomaa, for example, more firmly established their importance and today many of those things are addressed by the newest federal regulations.

Two years after the Abatie decision, the Supreme Court decided Metropolitan Life Ins. Co. v. Glenn [42] and essentially adopted the same approach, regarding the weighing of factors, extending that analysis to all federal courts, nationwide.  Interestingly, the Glenn decision did not once mention Abatie, (which may indicate what the Supreme Court thinks of the Ninth Circuit).   In the wake of the Glenn decision, the Ninth Circuit has cited Abatie and Glenn in tandem in published opinions on numerous occasions. [43] In one case it even referred to the approach for determining abuse of discretion as “the newly-established MetLife/Abatie standard”. [44]

Discretionary Bans and ERISA’s Savings Clause - The Slowly Dying Deferential Standard of Review in Disability Cases

Adding more complexity (or simplicity depending on your point of view), although ERISA’s preemption clause provides that it “shall supersede any and all State laws ... [that] relate to any employee benefit plan,” ERISA also has what’s known as a “Savings Clause” that exempts from preemption, any state law “which regulates insurance, banking, or securities.” So certain conduct by insurance companies can still be regulated by state law, despite ERISA. [45] Consistent with that, as regards insured plans, today at least 25 states, including California, have enacted statutes, banning discretionary clauses in insurance policies. Such state law bans are permitted because, unlike common law torts such as “bad faith”, which apply to all contracts generally, the discretionary bans merely “regulate insurance”.  [40] So at least as far as insured plans are concerned, the deferential standard has been rendered a relic in those states. The bans do not affect self-funded plans. 

The California statute does not apply to health insurance policies, but does broadly ban discretionary clauses in life and disability policies (as well as contracts, certificates, or other agreements), which grant insurance companies discretion to determine eligibility for benefits or to interpret plans.  [46] The ban applies to all such policies issued or renewed    on or after January 1, 2012 and which insure California residents, regardless of where the policies were issued.   Insurance  companies  have tested  creative ways  to try to get around the ban, but so far it has held up in California.  [47] So unless the Supreme Court takes up the issue, it appears that for those insured plans that are affected by the statute, discretionary review for ERISA benefit plans is dead in California.  

Most plaintiffs’ lawyers believe this is a good development, but not all.  While de novo review is generally more favorable to claimants, it is not without its risks.  There are two inherent problems with it.  First, if it is put in the hands of an ignorant or inexperienced district court judge, he can massacre a case with it. The second problem, which melds with the first, is that it is more difficult to get a de novo decision overturned on appeal.  In order to upset a lower court’s ruling, the appellate court must find “clear error”.  In other words, it’s sort of like deferential review all over again, only this time done by an appellate, rather than a trial court, without all of the safeguards achieved under Abatie and its progeny.  

________________________________________

 

        [1]     Jahn-Derian v. Metro. Life Ins. Co., No. CV 13-7221 FMO (SHx), 2016 WL 1355625, at *5–6 (C.D.  Cal. Mar. 31, 2016). (“A plaintiff challenging a plan administrator's decision bears the burden of proving entitlement to benefits by a preponderance of the evidence.  See [Muniz v. Amec Const. Mgmt. Inc.], 623 F.3d 1290 (9th Cir. 2010)], at 1294 (‘As concluded by other circuit courts which have addressed the question, when the court reviews a plan administrator’s decision under the de novo standard of review, the burden of proof is placed on the claimant.’); Jordan v. Northrop Grumman Corp. Welfare Benefit Plan, 63 F.Supp.2d 1145, 1155 (C.D. Cal. 1999) (‘[T]he burden in making such a claim [for entitlement to benefits] is on Plaintiff’). In a trial on the record, the court ‘can evaluate the persuasiveness of conflicting testimony and decide which is more likely true.’ [Kearney v. Standard Ins. Co., 175 F.3d 1084, 1095 (9th Cir., 1999)], at 1095; see Schramm v. CNA Fin. Corp. Insured Grp. Benefits Program, 718 F.Supp.2d 1151, 1162 (N.D. Cal. 2010) (in reviewing the administrative record, ‘the Court evaluates the persuasiveness of each party’s case, which necessarily entails making reasonable inferences where appropriate’).

 

        [2]     See: MacDonald v. Pan American World Airways, Inc., 859 F.2d 742, 744 (9th Cir. 1988); and see: McDaniel v. National Shopmen Pension Fund, 817 F.2d 1370, 1373 (9th Cir. 1987).

 

        [3]     Sandoval v. Aetna Life and Cas. Ins. Co., 967 F.2d 377, 378, 382 (10th Cir. 1992); and see: Madden v. ITT Long Term Disability Plan, 914 F.2d 1279, 1285 (9th Cir. 1990), cert. denied 498 U.S. 1087 (1991).

 

        [4]     Richardson v. Perales, 402 U.S. 389, 401, 28 L. Ed. 2d 842, 91 S. Ct. 1420 (1971).

 

        [5]     Pierce v. Underwood, 487 U.S. 552, 565, 108 S. Ct. 2541, 2550, 101 L. Ed. 2d 490 (1988). See: Podolan v. Aetna Life Ins. Co. 909 F. Supp. 1378, 1386 (1995).

 

        [6]     Sorenson v. Weinberger, 514 F.2d 1112, 1119 n.10 (9th Cir. 1975).

 

        [7]     Stephan v. Unum Life Ins. Co. of Am., 697 F.3d 917, 929 (9th Cir. 2012). 

 

        [8]     See, e.g. Jordan v. Northrop Grumman Corp. Welfare Benefit Plan, 370 F.3d 869, 875 (9th Cir. 2004).  (“a decision ‘grounded on any reasonable basis’ is not arbitrary and capricious, and that in order to be subject to reversal, an administrator’s factual findings that a claimant is not totally disabled must be ‘clearly erroneous.’”).

 

        [9]     Abatie v. Alta Health & Life Ins. Co. , 458 F.3d 955, 969 (9th Cir. 2006); See also: Salomaa v. Honda Long Term Disability Plan 642 F.3d 666, 674 (9th Cir. 2011).

 

        [10]     Frank J. Cavaliere, Toni Mulvaney. Marleen Swerdlow. "Structural Conflict of Interest After Glenn: What Is The Appropriate Standard of Review in Disability Denial Cases Under ERISA?"  116/Vol. XX/Southern Law Journal, pn 56.  Available at:  http://www.southernlawjournal.com/2010/3215_Chapter%206.pdf.

 

        [11]     Firestone Tire Rubber v. Bruch, 489 US 101, 115 (1989).

 

        [12]     Id. at 113-14.

 

        [13]     Id. at 115.  

 

        [14]     Herzberger v. Standard Insurance Company 205 F.3d 327, 330 (7th Cir., 2000).

 

        [15]     Bogue v. Ampex Corp., 976 F.2d 1319, 1325 (9th Cir. 1992); Kearney v. Standard Insurance Co., 175 F.3d 1084 (9th Cir. 1999).

 

        [16]     Sandy v. Reliance 222 F.3d 1202, 1207 (9th Cir. 2000).

 

        [17]     29 USC § 1133(2).

 

        [18]     Wilczynski v. Lumbermens Mut. Cas. Co., 93 F. 3d 397, 406 (7th Cir. 1996), (quoting former  29 CFR 2560.503(g)(2)).  See also: Hlinka v. Bethlehem Steel Corp., 863 F. 2d 279 (3rd Cir. 1988) at 289, fn 13; Weaver v. Phoenix Home Life Mut. Ins. Co., 990 F. 2d 154, 157 (4th Cir. 1993); and Malhiot v. Southern California Retail Clerks Union, 735 F. 2d 1133, 1139, fn 3 (9th Cir. 1984).

 

        [19]     29 USC § 1105(c)(1).  (Emphasis supplied) See also: 29 CFR 2509.75-8 (FR-12).   “In accordance with the logic and reasoning of Firestone, we hold that where:  (1)  the ERISA plan expressly gives the administrator or  fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan and (2) pursuant to ERISA, 29 U.S.C. @ 1105(c)(1) (1988), a named fiduciary properly designates  another fiduciary, delegating  its discretionary authority, the 'arbitrary and capricious' standard of review for ERISA claims brought under @ 1132(a)(1)(B) applies to the designated ERISA-fiduciary as well as to the named fiduciary.” Madden, supra at 1283-1284.       

 

        [20]     Polk, "ERISA Practice & Litigation", West Group, 1993, 1999 Sect. 11:53 P. 157, citing Baker v. Big Star Division of Grand Union Co., 893 F.2d 288, 291 (11th Cir. 1989) (“Any entity or person found not to be an ERISA ‘fiduciary’ cannot be an ‘administrator’ with discretionary authority’ subject to the arbitrary and capricious standard.”).  cf.  Madden v. ITT Long Term Disability Plan, 914 F.2d 1279, 1283-85 (9th Cir. 1990), cert. denied 498 U.S. 1087 (1991) (where administrator’s discretionary authority is delegated to an ERISA fiduciary, abuse of discretion standard is applied to the fiduciary’s decision); See also: Nelson  v.  EG & G  Energy Measurements Group, Inc. 37 F.3d 1384, 1389 (9th Cir. 1994).  (“Thus, because we do not have an interpretation of the Plan by the Administrative Committee, to whom such authority was granted by the Plan, there is no appropriate exercise of discretion to which to defer. The Plan does not permit the exercise of discretion by an employee who happens to be involved in the administration of the Plan . . .  Therefore, under the provisions of Firestone, we interpret the terms of the Plan de novo .  .  .”).

 

        [21]     Everhart v. Allmerica Financial Life Ins. Co., 275 F.3d 751 (9th Cir. 2001).

 

        [22]     Ford v. MCI Communications Corporation Health and Welfare Plan, 399 F.3d 1076 (9th Cir. 2005).

 

        [23]     Cyr v. Reliance Standard, 642 F.3d 1202 (9th Cir. 2011).

 

        [24]     Atwood v. Newmont Gold Co., 45 F.3d 1317 (9th Cir. 1995).

 

        [25]     Id. at 1323.

 

        [26]     Id.

 

        [27]     Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir. 2006).

 

        [28]     Id. at 966.

 

        [29]     Id. at 969.

 

        [30]     Id., citing Jordan v. Northrop Grumman Corp. Welfare Benefit Plan, 370 F.3d 869, 875 (9th Cir. 2004).  

 

        [31]     Id. at 969.   

 

        [32]     Id. at 959.

 

        [33]     Id. at 968-69.

 

        [34]     Id. at 967.

 

        [35]     Id. at 969.

 

        [36]     Id. at 959.  

 

        [37]     Id. at 971, citing Firestone 489 U.S. at 111.

 

        [38]     Id. at 972.  

       

        [39]     Lang v. Long-Term Disability Plan, 125 F.3d 794, 797 (9th Cir. 1997); Friedrich v. Intel Corp., 181 F.3d 1105, 1109 (9th Cir. 1999).

 

        [40]     Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623 (9th Cir. 2009); Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, (9th Cir. 2011).

 

        [41]     See, e.g. Ace v. Aetna Life Ins. Co., 139 F.3d 1241 (9th Cir. 1998), cert denied (“nor will a decision be found to be based on ‘substantial evidence’ on the record as a whole when there has been excessive weighting of selected evidence”); Govindarajan v. FMC Corp., 932 F.2d 634, 637 (7th Cir. 1991) (plan administrator's selective review of the administrative record was arbitrary and capricious); Ebert v. Reliance Standard, 171 F. Supp. 2d 726 (S.D. Ohio 2001) (held that insurers cannot rely on a selective review of the evidence); Castle v. Reliance Standard Life Ins. Co., 162 F. Supp. 2d 842, 2001 U.S. Dist. LEXIS 14625, 2001 WL 1090772 at *11 (concluding a plan administrator's selective review of the administrative record was arbitrary and capricious); Norris v. Citibank N.A. Disability Plan, 2002 U.S. App. LEXIS 21996 (8th Cir. 10/21/02), (court criticized insurer’s selective review of the evidence); Spangler v. Lockheed Martin Energy Systems, Inc., .2002 U.S. App. LEXIS 25733 (6th Cir. 12/16/02), (criticized insurer for using “cherry picked” evidence.);  Hess v. Hartford, 274 F.3d 456; 27 EB Cases 1205 (7th Cir. 2001) (plan abused its discretion in ignoring relevant evidence and is not entitled to discretion in determining which evidence is relevant and which is not); Clausen v. Standard Ins. Co., 961 F. Supp. 1446, 1451-1457 (D. Co. 1997) (abuse of discretion to undervalue and/or ignore medical evidence, opinions and records supplied by treating physicians that support a diagnosis); and see Friedrich  v. Intel Corporation, 181 F.3d 1105 (9th Cir., 1999).

 

        [42]     Metropolitan Life Ins. Co. v. Glenn, 128 S. Ct. 2343, 554 US 105, 171 L. Ed. 2d 299 (2008). 

 

        [43]     See, e.g. Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, (9th Cir., 2011);  Muniz v. AMEC Constr. Mgmt., 623 F.3d 1290,  (9th Cir., 2010);  Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623, 628 (9th Cir. 2009);  Nolan v. Heald College, 551 F.3d 1148; (9th Cir. 2009);  Vaught v. Scottsdale Healthcare Corporation Health Plan, 546 F.3d 620 (9th Cir., 2008); and Burke v. Pitney Bowes Inc. Long-Term Disability Plan,  544 F.3d 1016 (9th Cir. 2008).  

 

        [44]     Burke, supra at 1029.

 

        [45]     29 U.S.C. §§ 1144(a) and (b). 

 

        [46]     Standard Insurance Company v. Morrison, 584 F.3d 837, 842 (2009).   See also: Polnicky v. Liberty Life Assurance Co. of Boston, 999 F.Supp.2d 1144, 1148 (N.D. CA, 2013), (applying de novo standard of review to ERISA claim for denial of benefits because “[t]he Policy was continued in force after its January 1, 2012 anniversary date, [so] any provision in the Policy attempting to confer discretionary authority to Liberty Life was rendered void and unenforceable”).  

 

        [47]     California Insurance Code §10110.6.

 

        [48]     See, e.g. Orzechowski, v. The Boeing Company Non-Union Long-Term Disability Plan. 856 F.3d 686 (9th Cir. 2017).



 

 

 

 

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