In a recent decision, Ariana M v. Humana Health Plan of Texas, Inc., 2017 WL 1423765 (5th Cir. April 21, 2017), the Fifth Circuit Court of Appeals called into question the validity of its holding in Pierre v. Connecticut General Life Insurance Co./Life Insurance Co. of North America, 932 F.2d 1552 (5th Cir. 1991), in which the Fifth Circuit held that courts had to give deference to an ERISA benefit plan administrator’s factual determinations, even if the plan did not contain a discretionary clause. Accordingly, under Pierre, a reviewing court cannot overturn an ERISA plan administrator’s denial of benefits unless it found that the denial of benefits was arbitrary and capricious, an extremely high bar to reach for claimants.
While ERISA does not actually speak to the standard of judicial review to apply in benefit claims, the Supreme Court has explained that a de novo standard of review applies unless the plan administrator grants itself discretion in the plan. In such a case, the stricter arbitrary and capricious standard of review would apply. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). When applying a de novo standard of review, courts merely must find that the plan administrator made a wrong benefit determination to overturn a claim denial.
Due to the inequity claimants face when an arbitrary and capricious standard of review is applied in ERISA benefit cases, many states have passed legislation banning clauses in plans that grant plan administrator’s discretion. One such state is Texas, where the Ariana M. case was filed. The plaintiff in Ariana M. argued that Texas’ discretionary ban requires the court to apply a de novo standard of review and prohibits applying Pierre deference to the plan administrator’s factual conclusion that Ariana M.’s treatment was not medically necessary.
The Fifth Circuit panel explained that they were required to follow Pierre, and thus, had to defer to the factual conclusions made by the plan administrator despite the Texas law precluding discretionary clauses in policies, noting that the law “does not mandate a standard of review.” In so doing, the court concluded that the benefit denial was not arbitrary and capricious. However, all three judges on the panel signed on to a special concurrence, suggesting that the Fifth Circuit should reexamine Pierre. The panel noted that the Fifth Circuit is the only circuit that applies deference to the factual determinations of ERISA plan administrators, even if a plan does not grant deference to the administrator. The panel also acknowledged that Supreme Court cases decided after Pierre calls into question the basis of the Pierre Court’s findings, including its interpretation of the Supreme Court case, Firestone Tire & Rubber Co. v. Bruch Firestone Tire & Rubber Co. remarked that its reliance on Trust law may not withstand judicial scrutiny.
Ariana M. is currently seeking an en banc review by the Fifth Circuit. If en banc review is granted, the Fifth Circuit will have an opportunity to strike down its precedent in Pierre. Such an conclusion will benefit ERISA claimants, cure some of the inequities in the ERISA claims process, and bring the Fifth Circuit in line with the seven other Circuits to have weighed in on this issue.
If you have questions about your ERISA claim and your rights under your disability plan or policy, please feel free to contact Disability Insurance Law Group at (866) 363-3628 with any questions. We handle cases nationwide.