Harsh condemnation of a Supreme Court “misstep” has come down from the federal bench. In Criss v. Union Security Ins. Co., 2014 WL 2707774, 2014 U.S.Dist.LEXIS 79300 (N.D.Ala. June 11, 2014), Judge William Acker, Jr. denounced a 1989 decision that gave “clearly conflicted ERISA plan administrators and insurers” the authority, in their sole discretion, to interpret the terms of their plans and determine benefit eligibility through under plans’ discretionary provisions. He described how the Supreme Court “blindly stumbled off on the wrong foot and in the wrong direction when it … invented a strange quasi-administrative regime for court review of denials of ERISA benefits claims.” Review of those denials by the courts is often limited to determining whether or not there was an abuse of discretion – in other words, was the decision so wrong that it could be called “arbitrary and capricious?”
A discretionary provision “puts plan administrators and insurers firmly in the driver’s seat, and invites them to sit in judgment on their own denial decisions, and to ignore, as if meaningless, their fiduciary obligations of strict loyalty to their plan beneficiaries.” On the other hand, if there is no discretionary clause, courts may review benefit decisions de novo – as if looking at the issues for the first time. This is why the National Association of Insurance Commissioners’ model rules propose that discretionary clauses be prohibited and more than a dozen states have enacted laws against such clauses. Unfortunately, Karen Criss did not live in one of those states.
Criss was insured under a Union Security Insurance Company [USIC] disability insurance policy provided by her employer. She had a long history of fibromyalgia, neuropathy, depression, and other medical conditions which, after five years of employment, were compounded by a mental breakdown. USIC began paying her benefits based on “anxiety, panic disorder, depression, severe pain, fibromyalgia, neuropathy, [and] carpal tunnel.” These were discontinued after expiration of the plan’s 24-month limitation on benefits for disabilities due to mental illness. The plan also provided:
Your period of disability will be considered due to … mental illness if: … you are limited by … [mental illness] and … do not have other conditions which, in the absence of [mental illness], would continue to exist, limit your activities, and lead us to conclude that you were disabled.
USIC denied Criss’s initial appeal. She then went to federal court seeking a re-examination of the question of whether her serious physical problems, by themselves, would have rendered her “disabled” under her plan and whether such disability would have made gainful employment impossible. However, the court was “stymied” even in its preliminary step of determining whether the USIC decision was actually wrong. The court found a striking absence of credible medical and occupational evidence in the record which showed that the USIC decision had ignored the “fundamental requirement that [a] decision to deny benefits [be] based on a complete administrative record that is the product of a fair claim-evaluation process.”
Judge Acker noted that even Supreme Court justices will often recuse themselves when they have an interest in a case in honor of the long-standing legal principle: Nemo judex in causa sua (“No man should be a judge in his own case”). Nevertheless, he was unsurprised when he did “not [find] a single case in which an insurance company has recused itself in an ERISA case.” In spite of a clear distaste for the limits on review imposed by ERISA jurisprudence, sending the case for mediation or back to USIC for full and fair administrative consideration was the most the court could do.