SDNY Refuses to Find Exceptions to the Firestone Deference Rule

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In Wedge v. Shawmut Design & Construction Group Long Term Disability Ins. Plan, No. 12 Civ. 5645 (KPF) (S.D.N.Y. Sept. 10, 2013), the court declined to recognize an exception to the rule established in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), where the Supreme Court held that, for ERISA welfare benefit plans, judicial review of an administrator’s claim determination is to be reviewed under a deferential arbitrary and capricious standard when the plan vests the administrator with discretionary authority to determine a claimant’s eligibility for benefits.

In Wedge, the plaintiff (“Wedge”) received long-term disability benefits as a participant in an ERISA plan established and maintained by his employer (the “Plan”).  The Plan’s administrator, Reliance Standard Life Insurance Company (“RSLI”), had discretionary authority to determine Wedge’s eligibility to receive benefits, and terminated Wedge’s long-term disability benefits based on its determination that he no longer was disabled.  Wedge appealed RSLI’s decision and then sought judicial review.  Both parties agreed that the court ordinarily would apply a deferential arbitrary and capricious standard of review pursuant to Firestone, but Wedge argued that the court should apply a de novo standard of review in his case because RSLI issued its final determination on Wedge’s claim 79 days late and 13 days after Wedge commenced his lawsuit to recover long-term disability benefits.  In making this argument, Wedge relied heavily on the Second Circuit’s decision in Nichols v. Prudential Ins. Co. of America, 406 F.3d 98 (2d Cir. 2005), arguing that an exception to the Firestone discretionary review standard applies in cases where the administrator fails to exercise its discretionary authority.  RSLI countered that the arbitrary and capricious review standard should apply because the Supreme Court has not recognized any exceptions to Firestone.

The court rejected Wedge’s arguments, including his reliance on Nichols.  The court noted that Nichols presented distinguishable facts, including the administrator’s general failure to engage in communications with the claimant, as opposed to RSLI’s consistent communications with Wedge during the administrative process.  Notably, RSLI’s delay in issuing its final benefit determination was attributable, in part, to Wedge’s effort to negotiate conditions precedent to appearing for an Independent Medical Examination (“IME”) requested by RSLI, and RSLI’s attempts to accommodate Wedge’s request for an opportunity to review and respond to the report prepared by the IME physician.  Moreover, the Nichols court determined that the plan language did not vest discretionary authority in the administrator. Finally, and “most importantly,” RSLI did, in fact, exercise its discretion when it issued a final appeal decision a few days after the litigation commenced.

The Wedge court further reasoned that Nichols should not determine or influence the applicable standard of review because “[t]he continuing vitality of the Second Circuit’s decision in Nichols is far from clear.”  In particular, pre-2002 ERISA regulations applicable in Nichols provided that an administrator’s failure to issue a determination on a claim for benefits within the time specified would render the claim “deemed denied,” but did not address the claimant’s right to seek judicial review.  Thus, the Nichols court was concerned that an administrator could obstruct the claimant’s access to judicial review by delaying rendering its claim determination.  However, under the revised regulations, which applied to the Plan, claimants are deemed to have exhausted the administrative remedies and may bring civil actions seeking plan benefits if administrators fail to follow claim procedures.

The Wedge court also recognized that precedential, post-Firestone Supreme Court decisions have not recognized any exceptions to the Firestone rule.  For example, in Conkright v. Frommert, 559 U.S. 506 (2010), the Supreme Court reversed a Second Circuit decision that, like Nichols, crafted an exception to the Firestone deference rule.  Accordingly, the Wedge court declined to interpret Nichols as requiring de novo review where an administrator did not exercise its discretion in the time or matter required by ERISA, as doing so would “turn Firestone on its head.”

 

Topics:  Disability, Disability Benefits, Employee Benefits, ERISA, Health and Welfare Plans, SCOTUS

Published In: Administrative Agency Updates, Civil Procedure Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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