Effect of Recent U.S. Supreme Court Decision
Re-Establishing ERISA Standard of Review in the Eleventh Circuit

Metropolitan Life Insurance Company v. Glenn, 128 S.Ct. 2343 (2008)

ERISA provides, at 29 U.S.C. §1132(a)(1)(B), that a participant or beneficiary may bring suit to recover benefits under a plan. Actions brought under this provision, challenging benefit denials, are to be reviewed under an "arbitrary and capricious" standard when the plan gives the claims administrator discretionary authority to determine eligibility for benefits or to construe terms of the plan. Firestone Tire & Rubber Co. v. Bruch, 109 S. Ct. 948, 956-57 (1989).

The inclusion of discretionary language in the Plan granting discretionary authority and limits the role of a reviewing federal district court to determination of whether the claims fiduciary made a correct and/or reasonable decision based on the record before it at the time the decision was made. Jett v. Blue Cross & Blue Shield of Alabama, 890 F.2d 1137 (11th Cir. 1989); Motley v. Metropolitan Life Ins. Co., 834 F.Supp. 1272, 1277 (D. Kan. 1993). "Deferential review does not involve a construction of the terms of the plan; it involves a more abstract inquiry -- the construction of someone else's construction." Morton v. Smith, 91 F.3d 867, 871, n. 1 (7th Cir. 1996).

Thus, it is not for this Court to construe the terms of the Plans, but rather, a Court must determine whether the claims administrator's construction was reasonable. Even if the Court disagrees with the claims administrator's construction and determination, that construction and determination must be upheld unless those determinations were "clear error," meaning that it is "not rational and based on consideration of relevant factors." See Shiffler v. Equitable Life Assur. Soc., 838 F.2d 78, 83 (3d Cir. 1988).

Where an apparent conflict of interest exists for the claims fiduciary, the arbitrary and capricious standard is still applicable, but the conflict of interest must be weighed as a "facto[r] in determining whether there is an abuse of discretion." Firestone, 489 U.S. at 115, 109 S.Ct. at 957 (quoting Restatement (Second) of Trusts, § 187, cmt. d (1959)); Godfrey v. BellSouth Telecommunications, Inc., 89 F.3d 755, 758 (11th Cir. 1996).

Within the Eleventh Circuit, a case involving an insurer who makes claims determinations and also pays benefits had been governed by the "heightened scrutiny arbitrary and capricious" test for nearly twenty years. See Brown v. Blue Cross and Blue Shield of Alabama, 898 F.2d 1556 (11th Cir. 1990). Under this test, the Court conducted a six step, formulated analysis for the purpose of determining whether the insurer's decisions were legally "correct," and if not, whether they were "reasonable" but untainted by bias. See Doyle v. Liberty Life Assur. Co. of Boston, 511 F.3d 1336, 1340 (11th Cir. 2008). This test also shifted the burden of proof to the insurer. Id. at 1343.

However, the United States Supreme Court recently frowned upon the heightened scrutiny test, or any other means of formulating the standard of review beyond an "arbitrary and capricious" analysis. Specifically, in Metropolitan Life Insurance Company v. Glenn, 128 S.Ct. 2343 (2008), the Supreme Court held that the conflict of interest scenario created by an insurer making decisions and paying claims does not warrant "a change in the standard of review, say, from deferential to de novo review ... Nor would we overturn Firestone by adopting a rule that in practice could bring about near universal review by judges de novo-i.e., without deference of the lion’s share of ERISA plan claims denials." Glenn, 128 S.Ct. at 2350.

The majority went on to comment that they did not "believe it necessary or desirable for courts to create special burden-of-proof rules, or other special procedural or evidentiary rules, focused narrowly upon the evaluator/payor conflict." Id. at 2351. Rather, the Supreme Court explained that its "elucidation of Firestone's standard does not consist of a detailed set of instructions" because of "the intractability of any formula to furnish definiteness of content for all the impalpable factors involved in judicial review." Id. at 2352.

Thus, following the ruling in Glenn, district courts within the Eleventh Circuit must now review ERISA claims determinations under an "arbitrary and capricious" standard, determining whether those determinations were reasonable under the totality of circumstances. See id at 2350-2352.

For further information about this case, contact Orlando ERISA attorney Lee W. Marcus at 407-447-2550.