The Conflict Of Interest Inherit In Administrative — страница 6

  • Просмотров 602
  • Скачиваний 5
  • Размер файла 24
    Кб

Seventh Circuits all allow a very broad and/or generic grant of discretionary power, in order to trigger a differential review. See Batchelor v. Int’l Board of Elec. Workers, 877 F.2d 441 (5th Cir. 1989), Davis v. Kentucky Financial Co., 887 F.2d 689 (6th 1989), Lister v. Stark, 942 F.2d 1183 (7th 1991). However, the Eight Circuit seems to require a much more carefully drafted grant of discretion, in order for the administrator to be able to use his/her discretion to interpret and construe plan terms and provisions. Jacobs v. Picklands Mather & Co., 886 F.2d 182 (8th Cir 1989). In Jacobs, former employees sued to recover benefits under an ERISA governed plan. The court found that since the plan did not specifically grant the administrator discretion to construe plan terms

or to determine eligibility for benefits, the court had to review the actions as if the administrator was granted no discretion. As a result, the court granted a de novo review. The Eighth Circuit required an explicitly tailored grant of discretionary power to the administrator to construe ambiguous plan language before the court will apply a differential review. Id. at 656. As seen in Jacobs, a generic, non-explicit provision that gives a trustee final authority to determine “all matters of eligibility for the payment of claims,” is not specific enough to avoid a de novo review. Another case out of the Eighth Circuit demonstrates the “flexible” approach in comparison to the “strict” interpretation. In Woo v. Deluxe Corp., a former employee sued his employer and plan

administrator seeking review of a denial of both long and short-term disability benefits. On appeal, the Eighth Circuit held that less differential than de novo standard of review applied to the administrator’s denial of disability benefits, and when an ERISA plan administrator is operating under a conflict of interest, the sliding scale standard of review applies. Woo v. Deluxe Corp., 144 F.3d 1157 (8th Cir. 1998). Under this “sliding scale” or “flexible” approach, the court will continue to review for an abuse of discretion but will decrease the deference given to an administrator in proportion to the seriousness of the conflict. Id. The court stated that Woo was “required to present evidence which demonstrated that: (1) a palpable conflict of interest or serious

procedural irregularity existed, which (2) caused a serious breach of the plan administrator’s fiduciary duty to the claimant.” Id. at 1160. Further, the court related that Woo needed only to show that the conflict had “some connection to the substantive decision reached” in order to trigger the sliding scale. Id. Woo was able to demonstrate that the administrator was operating under a conflict of interest, so the court reviewed for an abuse of discretion and weighed the conflict of interest against the defendant. The final interpretation of Brunch is the “shift the burden to the employer” interpretation. The “shift” approach seems to be followed in the Ninth and Eleventh Circuits. See Kunin v. Benefit Trust Life Ins. Co., 898 F.2d 1556 (11th Cir. 1990), and

Newell v. Prudential Ins. Co. of America, 904 F.2d 644 (11th Cir. 1990). The “shift” interpretation generally holds that whenever a court determines that a conflict of interest is present by the administrator, the court will apply a de novo standard of review, unless the employer/administrator can show that the conflict of interest did not influence the decision to deny the claim. In Newell, the court had established a more stringent standard, which required the administrator to “prove that its interpretation of the plan provisions committed to its discretion was not tainted by self interest.” The administrator also had to show that he/she operated “exclusively in the interest of the plan participants and beneficiaries.” Id. at 651. The “shift the burden” standard

does not seem to follow the differential review that Brunch established because Brunch specifically held that a conflict of interest should only weigh against the deference given to the administrative decision, not completely erase the discretion the allocated to the plan administer. Even though I do believe that this standard does not follow the precedent Brunch set, I personally believe that this standard is the appropriate standard. This is the appropriate standard because the “shift the burden” approach is the only “interpretation” which recognizes that insurance companies or employer administrators are profit-generating entities. As profit-generating entities, these administrators make more money when claims are denied, therefore they have a significant incentive to