Denmark v. Liberty Life, No. 05-2877 is a big ERISA case.
This case looks really big and complicated, but it comes
down to one issue, which splits the panels, and the panel admits (and
describes) the circuit split. The
majority says that that an en banc panel should hear this.
The issue is what degree of deference (if any) should be
paid when there is a “structural conflict” between the “administrator” of an
ERISA plan that hears appeals from denials of benefits and the insurer. In other words, should the court defer to the
decisions of an administrator when the benefits come out the pocket of the
entity making the decision, or should the court (without further evidence of
specific interference in the decision-making process) assume that there is a
conflict. The First has held the “arbitrary
and capricious” standard applies, because market forces will make the appeal
determinations fair. Other circuits
disagree. Selya says that the First Circuit's precedent is flexible enough to take into account conflicts of interest.
While litigating at the District Court, the plaintiff sought
various pieces of discovery to demonstrate the conflict. The defendant partially complied. The “sanction” that the District Court fashioned
was the application of a higher level of scrutiny to an opinion offered by one
of the defendants. Lipez says that this “piecemeal”
approach to standards of review is not supported by preference, but Selya
thinks that such a sanction was a good (though unusual) idea.
The First discusses whether “objective” confirmation of
hard-to-see conditions like fibromyalgia can be required: no. But “objective” confirmation of physical
limitations can be.
The First also resolved, as a threshold matter, that this
policy was covered by ERISA, and that a purchaser of a company (that adopted
the provisions of the policy) was a proper assignee of the “fiduciary
responsibility for reviewing benefit claims.”
Selya claims that en banc proceedings “waste” “scarce
judicial resources.” Whatever. So is using your clerks to look up big words. So are investiture ceremonies and chambers decoration budgets.
DotD comments here. Stephen Rosenberg comments here. WorkplaceProf comments here.
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