By Rory Eric Jurman and Michael A. Monteverde
Ever since the United States Supreme Court addressed the question of whether a wholesale adoption of the "arbitrary and capricious" standard of review would be appropriate for judicial review of denial of benefit determinations in ERISA cases, the standing rule in ERISA cases has been that Courts will apply a de novo review of denial of benefit determinations made by ERISA plan administrators, unless the plan itself provides discretionary power to the plan administrator. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). In cases where discretion is granted to the plan administrator by way of the terms and provisions of the benefits plan, federal district courts will apply the "arbitrary and capricious" or "abuse of discretion" standard when reviewing a plan administrator's denial of benefits under an ERISA benefits plan. Whether the language of a plan confers such discretion is an element that Courts must determine when analyzing any such ERISA claims determination.
An issue that has resurfaced in the past year in two separate Circuit Court of Appeals cases is the question of whether phrases such as "proof satisfactory to us" confers discretion upon the plan administrator when read in the context of the proof that must be provided by a plan participant in order to recover benefits under an ERISA plan. The two cases that have recently addressed this issue are Gross v. Sun Life Assurance Company of Canada, 734 F.3d 1 (1st Cir. 2013) and Cosey v. Prudential Insurance Company of America, 735 F.3d 161 (4th Cir. 2013). The First Circuit and the Fourth Circuit both changed course regarding how they interpret such language, and moved the pendulum towards a more stringent language requirement necessary to confer discretionary authority to an ERISA plan administrator. These cases should raise the antenna of practitioners in the Eleventh Circuit, as they could be sign posts for how the Eleventh Circuit may ultimately interpret similar language in ERISA plans.
The issue addressed by Gross and Cosey was whether phrases such as "proof of claim satisfactory to us" in an ERISA benefits plan is language that confers discretion on a plan administrator such that the Courts will apply an "arbitrary and capricious" standard of review as opposed to a de novo review. More simply, does such language in a plan mean that the plan administrator gets to decide what kind or amount of proof is satisfactory, such that district courts can only overturn decisions made by plan administrators if their decision is deemed to be "arbitrary and capricious"? The answer to that question is not uniform across the circuits, and moving in favor of the policy holder.
In Gross, a participant under an ERISA governed long term disability benefits plan challenged the denial of her claim for benefits that was made by the plan administrator. The plan in Gross required, inter alia, that (1) "Proof [of claim] must be satisfactory to [insurer]". Gross, at *12. The insurer in Gross argued that such language resulted in any judicial review of the insurer's claim determination to be governed by the "arbitrary and capricious" standard of review. The Plaintiff-participant moved the district court for an order that the de novo standard of review applied. The district court denied the participant's motion and propounded that an arbitrary and capricious standard of review would be applied in light of the aforementioned plan language.
In addressing the Plaintiff's appeal in Gross, the First Circuit revisited its earlier decision concerning this same issue set forth in Brigham v. Sun Life of Canada, 317 F.3d 72 (1st Cir. 2003). In Brigham the First Circuit held that language comparable to that at issue in Gross "constituted 'an indicator of subjective, discretionary authority on the part of the administrator'". Gross, at *12, quoting Brigham, 317 F.3d 72. Thus, up until the time of Gross, the First Circuit interpreted language such as "proof of claim must be satisfactory to insurer" to grant discretion to the administrator of the plan.
The First Circuit in Gross wholly receded from that prior precedent, relying on a perceived change in precedential landscape across the country that had occurred in the ten years since the Brigham opinion was issued. Hence, the Gross Court determined that because other circuits were now finding that "proof satisfactory to us" language does not confer discretionary authority to a plan administrator, the First Circuit no longer would either. In supporting its decision, the First Circuit in Gross articulated its position that such language in an ERISA benefits plan is ambiguous, because it is unclear what needs to be "satisfactory to us".
Borrowing from other Circuit Courts, the Gross Court held that "proof satisfactory to us" could mean that the actual substance of the proof needs to be satisfactory to the administrator making the determination of benefits, or it could simply mean that the form of proof—i.e., how the proof is presented—needs to be satisfactory to the administrator. Because ERISA plans are construed broadly for coverage and ambiguities are construed against the administrator/insurer, the First Circuit held that this potential for two different interpretations required it to find that such language does not provide discretion to the plan administrator.
Shortly after the First Circuit issued its decision in Gross, the Fourth Circuit followed suit in Cosey v. Prudential Ins. Co. of America, 735 F.3d 161 (4th Cir. 2013). In Cosey, the Fourth Circuit rejected an argument made by the claims administrator, i.e., that the phrase "proof satisfactory to the plan administrator" conferred discretion to the administrator. Thus, the Court rejected the application of an arbitrary and capricious level of judicial review based on such language. The claims administrator in Cosey was relying on the Fourth Circuit's reasoning applied in its prior decision, Gallagher v. Reliance Standard Life Insurance Co., in which the Fourth Circuit hypothetically noted that the phrase "proof. . .that is satisfactory to the plan administrator" would result in an abuse of discretion level of review. 305 F.3d 264. 268 (4th Cir. 2002).
The Fourth Circuit dismissed that argument, claiming that the statement in Gallagher was mere dicta and therefore was not binding on the Fourth Circuit's decision in Cosey. The Fourth Circuit, like the First Circuit in Gross, referenced the changing precedent in other circuits. The Fourth Circuit also cited the fact that the First Circuit in Gross was willing to abandon its prior precedent, discussed supra, in order to follow the changing decisional landscape concerning this issue. Relying on the foregoing factors, the Fourth Circuit held that such language is ambiguous, does not provide sufficient notice to plan participants, and should be construed against the administrator under the rules of interpretation of ERISA plans. Cosey, 735 F.3d at 167-168. Accordingly, this was the second circuit court of appeals to reverse course on the issue of whether the type of plan language referenced above confers discretionary authority on plan administrators. As a result, in both the First and Fourth Circuits such plan language will result in de novo judicial review.
The practical effect of the foregoing decisions is that in those circuits a plan administrator's denial decisions under ERISA plans with the "proof satisfactory to us" language will now be analyzed by district courts under a de novo review standard. This is significant because in those circuits plan administrators' decisions will now not be upheld because it can be shown they were not arbitrary and capricious, but rather the Court will step into the shoes of the administrator to see if it agrees with the administrator's underlying determination. This trend serves as a harbinger for insurers and practitioners in other circuits.
In the Eleventh Circuit it appears that language such as "proof of claim satisfactory to the claims administrator" and its variations is still considered as conferring discretionary authority on plan administrators. See Tippit v. Reliance Standard of Life Ins., 457 F.3d 1227, 1233-34 (11th Cir. 2006). The Eleventh Circuit in Tippit determined that similar language to that analyzed in Gross and Cosey did result in the district court having to apply an arbitrary and capricious review of the plan administrator's decision in that case. Unlike in Gross and Cosey, the Eleventh Circuit declined to ignore its prior holdings and statements on the issue, and simply stated that it was bound by its prior decision in Levinson v. Reliance Standard Life Ins., 245 F.3d 1321, 1324-25 (11th Cir. 2001). Accordingly, the Eleventh Circuit decided the issue solely on the requirement that it follow its own precedent; something that the First and Fourth Circuits expressly decided against.
Notwithstanding the foregoing, Eleventh Circuit practitioners and insurers should still be wary moving forward. Tippit was decided in 2006. Both Gross and Cosey were decided in 2013. While this issue has not again been raised to the Eleventh Circuit since Tippit, it is unclear whether the Eleventh Circuit would follow the Fourth and First Circuits. While the language "proof satisfactory to the administrator" will still confer arbitrary and capricious review in the Eleventh Circuit, those days may be numbered in the offing if the Eleventh Circuit agrees that the weight of authority from other circuit courts of appeal, coupled with its willingness to ignore their own prior decisions, should be adopted and relied upon. This is an issue to watch in the Eleventh Circuit, and one that we will be watching closely in the coming months, and may eventually reach the Supreme Court for ultimate Satisfaction.
 Which would support a discretionary review standard for a plan administrator's denial of benefits determination.