Laake v. Benefits Committee, Western & Southern Fin. Group Co. Flexible Benefits Plan, 2023 WL 3559602 (6th Cir. 2023)
A participant in an ERISA employee welfare benefit plan sued the plan and plan administrator after her claim for extended long-term disability benefits was denied, arguing that she was entitled to extended benefits and that she had not timely received copies of the plan and other requested documents. Among other things, she argued that her claim had been improperly decided by the employer’s benefits department instead of the plan’s benefits committee, which was given discretionary authority under the plan to determine eligibility for benefits. For this reason, she argued, the denial of her claim should be reviewed under the de novo standard of review (which allows the court to conduct an independent analysis of the plan’s denial of claims with scrutiny), rather than the arbitrary and capricious standard (which allows the plan’s decision to be overturned only if it was clearly in error). The trial court determined that the participant was eligible for extended long-term disability benefits, agreeing that the de novo standard should apply because the benefits department had decided the participant’s claim although there was no express delegation of authority allowing it to do so. It also concluded that the plan failed to provide the requested documents in a timely manner, imposing penalties on the plan administrator and awarding attorney’s fees and costs to the participant.
On appeal, the Sixth Circuit upheld the trial court’s decision, agreeing that the de novo standard of review applied. Although the benefits committee may have delegated the decision to the benefits department, it was not permitted to do so by the plan document, so the department’s adverse benefit determination was subject to the de novo standard. The court also upheld the trial court’s decision to impose penalties on the plan administrator for failure to timely provide requested documents to the participant, rejecting arguments that the participant had not suffered prejudice and that the delay was “inadvertent.”
EBIA Comment: This case highlights the importance of clearly drafting—and carefully following—delegation of authority procedures. To decrease the likelihood of de novo review by a court, delegation of discretionary authority should be done in accordance with the plan’s terms, and final decisions should be made only by parties who are permitted to do so under the plan. This case also serves as a reminder that plan administrators risk penalties in court if they fail to furnish certain requested documents in a timely manner. For more information, see EBIA’s ERISA Compliance manual at Sections XI.B (“Discretionary Authority to Interpret Plan and Determine Facts”), XXIX.F (“Delegation of Plan Administrator Duties to Others”), XXXI.C (“Plan Document Failures”), and XXXVI.C (“Standard of Judicial Review Applied to Benefit Decisions Under ERISA Plans”). See also EBIA’s Self-Insured Health Plans manual at Section XXVI.J (“Litigation Issues”).
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