ERISA Long Term Disability Case Citations and references

DISCLAIMER: Please note that every case is different and these verdicts and settlements, while accurate, do not represent what we may obtain for you in your case.

What Does "Abuse of Discretion" Mean?

Read the following case excerpts carefully. Any employer that allows the insurance company to sneak in one of these "we have discretion" clauses (only crappy policies have them) is letting their employees down.

Evans v. Eaton Corp. Long Term Disability Plan, 514 F.3d 315 (4th Cir. 2008)

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

BRENDA EVANS,
Plaintiff-Appellee,
v.
EATON CORPORATION LONG TERM DISABILITY PLAN,
Defendant-Appellant.

The purpose of standards of review is to focus reviewing courts upon their proper role when passing on the conduct of other decisionmakers. Standards of review are thus an elemental expression of judicial restraint, which, in their deferential varieties, safeguard the superior vantage points of those entrusted with primary decisional responsibility.

Although ERISA itself is silent on the standard for denials of benefits challenged under § 1132(a)(1)(B), Firestone establishes that a de novo standard applies "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan," in which case the exercise of assigned discretion is reviewed for abuse of discretion.

It is notoriously difficult to venture a general definition of the term "abuse  of discretion," and none is canonical; indeed the term has different meanings in different legal contexts.

We will not disturb an ERISA administrator's discretionary decision if it is reasonable, and will reverse or remand if it is not.

Second, the abuse of discretion standard is less deferential to administrators than an arbitrary and capricious standard would be; to be unreasonable is not so extreme as to be irrational. See Firestone.

Third, an administrator's decision is reasonable "if it is the result of a deliberate, principled reasoning process and if it is supported by substantial evidence.

Fourth, the decision must reflect careful attention to "the language of the plan," as well as the requirements of ERISA itself.  One adds new assemblages of words to this legal landscape with caution, but it seems on the whole that we require ERISA administrators' decisions to adhere both to the text of ERISA and the plan to which they have contracted; to rest on  good evidence and sound reasoning; and to result from a fair and searching process.

Under no formulation, however, may a court, faced with discretionary language like that in the plan instrument in this case, forget its duty of deference and its secondary rather than primary role in determining a claimant's right to benefits. The abuse of discretion standard in ERISA cases protects important values: the plan administrator's greater experience and familiarity with plan terms and provisions; the enhanced prospects of achieving consistent application of those terms and provisions that results; the desire of those who establish ERISA plans to preserve at least some role in their administration; and the importance of ensuring that funds which are not unlimited go to those who, according to the terms of the plan, are truly deserving.  Thus, the language of discretion in an ERISA plan is a message to courts, counseling not judicial abdication, to be sure, but a healthy measure of judicial restraint.

 But deference has a particular significance in the context of ERISA. ERISA's preamble refers to the "interests of employees and their beneficiaries" no fewer than four times in three paragraphs, 29 U.S.C. § 1001 (2000); no one doubts that the statute exists to protect employees' access to benefits. And yet a cavalier approach to the deference owed ERISA fiduciaries who contract for it would likely disserve that purpose, whatever the call on our compassion in a particular case, for the fact is that the "price [of greater coverage] would almost certainly [be] lower benefits levels and lower levels of plan formation." John H. Langbein, The Supreme Court Flunks Trusts, 1990 Sup. Ct. Rev. 207, 213. For more than thirty years, then, courts have balanced the need to ensure that individual claimants get the benefits to which they are entitled with the need to protect employees and their beneficiaries as a group from a contraction in the total pool of benefits available. At any point, Congress could have intervened. But the delicate balance persists. The district court lost sight of this balance. We therefore reverse the district court's award of benefits to Evans and remand with directions that judgment be granted to Eaton.

Awarded: Another claimant loses because of ERISA