ERISA Trumps Common Sense

When an ERISA plan gives the administrator broad discretion to interpret the plan, the administrator has the ability to interpret claims to the point where common sense doesn’t count for beans.

The unlucky husband of an unlucky woman working for Lowe’s Companies found that out when he sued Lowe’s and its insurance company to collect ERISA life insurance benefits after his wife was killed in a car crash.

The story in a nutshell:

* Elizabeth Porter was a manager at a Lowe’s store.
* She was on her way home from work when she received a call that the store alarm had been actuated.
* Mrs. Porter turned around to head back to the store to take care of the alarm when she was blasted by another car, killing her and her unborn child.

The ERISA life insurance policy specifically did not cover an injury sustained during travel to and from work. The question here: Was Mrs. Porter’s turnaround to head back to the store travel to and from work? This fact makes the meaning of the words travel to and from work ambiguous.

In his ruling, the administrator found that Mrs. Porter was traveling to work to perform her regular job duties (ignoring the fact that she had to turn around from her trip home to go back to the store). Her Workman’s Comp claim was approved even though Comp, too, doesn’t pay for claims arising from travel to and from work. Mr. Porter sued.

In ruling in his favor, the District Court applied a common sense interpretation to the administrator’s decision, and held that the phrase applied only to her ordinary daily commute and that her turnaround to return to the store was outside of her ordinary commute.

The District Court rejected as an abuse of discretion the administrator’s finding that Mrs. Porter’s turnaround and return was “traveling to work to perform her regular job duties”. The Court therefore ordered the insurance company to pay the life insurance benefits to Mr. Porter. The insurance company appealed.

The Circuit Court of Appeals for the 5th Circuit reversed and entered judgment for the defendants, holding that when a plan gives the administrator broad power to interpret its terms, the administrator has that power even if there are ambiguities in the wording of the insurance policy. So long as there is any reasonable basis upon which the administrator’s ruling may be upheld, it is not arbitrary and capricious and must be upheld, the Appeals Court said.

This ruling means that ERISA gives a properly authorized administrator the right to resolve policy ambiguities in favor of the insurer even in the face of a very long line of insurance cases which holds just the opposite: Ambiguities in an insurance policy are interpreted in favor of an insured.

An interesting sidelight here is the Appeals Court found no conflict of interest as the administrator was not the insurance company insuring the plan. An online search, however, showed that the administrator was closely affiliated with the insurance company and probably received the financial benefits of administering many of the insurer’s ERISA plans. Wouldn’t such facts lead to a possible conflict of interest which the Court should have considered?

ERISA was billed as the “workingman’s friend” when it became law in 1974.

Sometimes it turns out to be her worst enemy.





Send Nord South!


Where did courts ever come up with the wild idea that medical opinions about a patient from a treating doctor and those from a reviewing doctor, who just looks at reports and test results without seeing the patient, should be given the same weight?  

The responsibility of the physician in each case is worlds apart. Physicians know that seeing the patient (skin pallor, demeanor, eye condition, general appearance) is a major part of diagnosing disease or illness. How can such a personal examination by an experienced doctor be replaced by looking at words on paper?

The Social Security Administration has long ago concluded that it cannot, and has adopted the “Treating Physician” rule. This rule gives more credit to the opinion of a physician who actually treats a patient than it does to a doctor who is paid just to render a medical opinion on the patient. To most people, this would seem a sensible rule.

However, the U.S. Supreme Court in Nord v. Black & Decker, 538 U.S. 822 (2003),has refused to allow the “Treating Physician” rule to used by courts in ERISA cases. Why?

 Sometimes, when the doctor has known the patient for some time, a change in appearance will offer a major clue to whether or not the patient is really ill. And, most importantly, a treating doctor can be held accountable for malpractice while a doctor examining for an insurance company cannot, because the person being examined is not that doctor’s patient.

But the Supreme Court in Nord suggests that a treating doctor may have a friendship or feel sorry for a patient and therefore shade his or her medical opinion toward the patient. However, this ignores the fact that for years insurance companies have been nurturing stables of doctors who never seem to find any claimant disabled, no matter how compelling that claimant’s injury or illness.

Until lately, courts have seemed to be blind to the practice of insurance companies using the same physicians over and over again based on the doctor’s inability to find disability. Many of these “experts” make all or most of their handsome livelihoods from these insurance company exams. Who would you think would be more liable to fudge examination results, the doctor who might feel sorry for a patient or the doctor who derives a major portion or all of his or her income from insurance exams?

To those who think there are doctors who would honestly follow their findings no matter what, we agree. However, such physicians are unlikely to have a stall in the disability insurance barn for long. We live in a world where to understand how things actually work you have to follow the money. When you follow insurance company money and a lot of it is going out because of one doctor’s opinions, you know there are going to be some changes made.

Which brings us back to the original question: Where did courts ever come up with the idea that medical opinions about a patient from a treating doctor and a reviewing doctor, should be given the same weight? And, why is it taking the courts so long to recognize this idea is so out of balance when everyone else involved in the disability insurance industry knows it is flat out wrong?

The obvious answer is that the insurance companies pay millions each year to PR and advertising people to blow smoke in the eyes of legislators and courts to perpetuate what is good for insurance companies, while claimants have no organized campaign to present inequities to the powers that be.

What’s to be done? Not much. Claimants will just have to chip away at the stodgy body of law which has grown since Congress enacted ERISA in 1974.   Appellate courts seem to be starting to get the message of the unfairness of closing their eyes to reality. See MetLife v. Glenn, 128 S. Ct. 2343 (2008)  at Page 2352, where the U.S. Supreme Court finally recognized that there is a conflict of interest when an insurance company, which will have to pay a claim, is given deference by courts to decide whether the claim is going to be paid. It doesn’t take a genius to figure that one out, especially in these times when “More, More, More” is the theme song in business.

Glenn should be a beginning. Notwithstanding Nord, more courts should come to the realization that treating doctors have their medical license to lose if they lie about their findings. On the other hand,  many insurance company doctors lose their meal ticket if they don’t lie about theirs.

If courts do recognize the difference in responsibility, maybe, just maybe, they will generally afford the evidence of treating doctors an edge over insurance doctors, who never even see the claimant.