4th Circuit Issues ERISA Benefits Review Decision
Published by Eric A. Welter on June 20, 2008
The U.S. Court of Appeals for the Fourth Circuit has issued a published decision holding that a plan administrator does not have discretionary authority, but only mere authority, under an ERISA plan that only designates the plan administrator to make timely benefit determinations. Accordingly, it remanded the benefits claim for de novo review, as opposed […]
The U.S. Court of Appeals for the Fourth Circuit has issued a published decision holding that a plan administrator does not have discretionary authority, but only mere authority, under an ERISA plan that only designates the plan administrator to make timely benefit determinations. Accordingly, it remanded the benefits claim for de novo review, as opposed to the more deferential review for discretionary decisions.
In Woods v. Prudential Insurance Company of America, No. 07-1580 (June 11, 2008), Plaintiff-Appellant Patricia Woods was employed by Wendy’s International as a co-manager. After Woods was injured in a car accident, she filed for a claim under a long-term disability plan (the “Plan”) that she was insured under during her employment. Prudential Insurance Company, who administered the Plan, approved and paid Woods’ claim for benefits for a twelve-month period until January 2005. It then reevaluated Woods’ claim and denied any further benefits to Woods. Woods brought action under ERISA. On appeal, Woods challenged the trial court’s conclusion that the Plan vests discretionary authority in Prudential, and review of Prudential’s determination under an abuse-of-discretion standard.
The Court, citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), held that an ERISA plan can confer discretion on an administrator in two ways: (1) by language that “expressly creates discretionary authority,” and (2) by term which “create discretion by implication.” Firestone, which was based on common law trust principles, drew a distinction between trustees who had no discretion but who had authority to manage a trust and trustees who had been granted discretion in addition to their authority. Thus, regardless of whether discretion created expressly or by implication, the plan must manifest a clear intent to confer such discretion.
In reviewing the Plan in question, the court found that although the plan vested authority in Prudential it did not create any discretionary authority. Discretionary authority is not conferred by the mere fact that a plan requires a determination of eligibility by an administrator. Almost all ERISA plans designate an administrator who must determine if a participant is eligible for benefits. Yet the authority to make determinations does not create the requisite discretion unless the plan expressly provides. ERISA plans are to be construed in accordance with the reasonable expectations of the insured, and beneficiaries should be able to learn their rights and obligations at any time through the written plan documents. Nothing in the Plan’s phrases “when Prudential determines” or “determined by Prudential” even implies the conferral of discretions, as opposed to mere authority. Accordingly, the trial court’s judgment was vacated and remanded for further proceedings to review Prudential’s denial of Woods’ claims de novo.Topics: ERISA