Colvill v. Life Ins. Co. of N. Am., 2018 WL 4078398 (E.D. Wis. 2018)
In a dispute over the denial of benefits under an employer-provided long-term disability plan, the court was asked to make an initial ruling on the standard of review it would use to review the insurer’s denial. As background, a court must apply a de novo standard of review unless the plan documents clearly vest the claims administrator with discretionary authority to determine whether benefits are due; if that authority is appropriately granted, the standard is more deferential, and the court must consider only whether the administrator’s determination was arbitrary and capricious. The employer (in its role as plan administrator) had executed an Appointment of Claim Fiduciary Form (ACF) appointing the insurer as the designated fiduciary for claims review. In addition, the plan’s SPD stated that the plan administrator had appointed the insurer as the named fiduciary for adjudicating claims and for deciding appeals. The SPD further stated that the insurer had discretion to interpret the terms of the plan, to decide eligibility questions, and to make any related findings of fact.
The insurer argued for deferential review, asserting that the ACF was a legally binding plan document, that the SPD communicated the ACF’s grant of discretion to plan participants, and that taken together these documents were sufficient to confer discretion on the insurer. The plan participant argued that the ACF was not a plan document because it was neither incorporated into the underlying insurance policy nor explicitly referenced in the SPD. Relying on Seventh Circuit precedent, the court determined that the ACF was a plan document based on several factors: (1) it was specifically captioned as a plan document; (2) it named the applicable plan; (3) it was executed “for the plan” by a person authorized to amend the plan; (4) it cross-referenced the insurance policy; and (5) the effective date was the same as the policy effective date. Concluding that the ACF was a plan document, the court held that the ACF properly conferred discretion on the insurer, and the grant of discretion was properly communicated in the SPD. Thus, the insurer’s benefits denial will be subject to deferential review by the court.
EBIA Comment: The court distinguished the Amara decision, in which the Supreme Court ruled that a grant of discretion that appears in an SPD but not in the underlying plan is insufficient to warrant deferential review (see our Checkpoint article). In this case, the court explained, the SPD did not purport to confer discretion—it simply communicated to participants the grant of discretion that was properly conferred by the ACF. For more information, see EBIA’s ERISA Compliance manual at Sections XI.B (“Discretionary Authority to Interpret Plan and Determine Facts”) and XXXVI.C (“Standard of Judicial Review Applied to Benefit Decisions Under ERISA Plans”).
Contributing Editors: EBIA Staff.