A recent line of court decisions has been placing ERISA plan drafters under a heightened duty to speak very plainly if they want to have courts uphold plan administrator discretion in making disability decisions. The importance of discretion; it will determine whether a reviewing court applies a de novo standard of review to the evidence in a case, or if the court must find an abuse of discretion to overturn a plan administrator’s decision.
In Cosey v. Prudential, 2013 WL 5977151, 4th Circuit (2013), the Fourth Circuit found that ERISA plan language stating that benefits will be paid to a claimant who “…submit(s) proof of continuing disability satisfactory to Prudential…” was ambiguous and therefore failed to grant the necessary discretionary power to the administrator.
Ms. Cosey offered a mixed bag of medical opinions to support her claim of both short and long term disability. Most of her complaints involved her own reported symptoms, with very little objective proof.
The Federal District Court below had found the plan language offered the degree of certainty necessary to give the administrator’s discretion in ruling on a claim. In fact, the District Judge bootstrapped the language so that the administrator could even require objective evidence to uphold a claim for disability even though there was no such requirement in the policy.
The Fourth Circuit Court of Appeals strongly disagreed, finding the plan language lacked the clarity ERISA requires to confer discretionary power in the administrator.
The major fault in the language, the Court found, was that “proof satisfactory to us” is ambiguous. It can mean proof must be provided in a certain form and the wording does not clearly confer discretion to the administrator to make a decision on the merits.
The extraordinary part of the opinion to our mind was the Court’s concern that an employee may not understand the meaning of the language in the plan and that an employee may make a choice of employer based on whether a plan gives an administrator’s decision deference.
In reality, such a chain of events is so far from what actually happens in real life that it makes us wonder how courts can conceivably think that an employee carries any weight in the ERISA plan his employer enters into. Further, it suggests a degree of sophistication regarding the nuances of ERISA jurisprudence that most laymen, even most lawyers, simply do not possess.
The insurance contract portion of an ERISA plan is not a contract the employee bargains for. It is a contract of adhesion. It is in place at the time of employment and the employee either takes it or leaves it. There is no input from the employee which can change its terms.
That’s why we are upset when the Supreme Court justifies, as it did in U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013), taking away important equitable remedies from employees on the grounds that the insurance contract is something they had a hand in bargaining for.
The decision in Cosey is to be applauded. Employers and insurance companies have all the say in the wording of an ERISA plan and its supporting insurance policy. It should be done correctly.
The worrisome part of Cosey is that some judges still think employees have any influence or knowledge of the ERISA plan and insurance policy which covers them. This is absolutely not so.
To believe it is so, gives the wrong slant to deciding future ERISA cases.