ERISA-Eighth Circuit Rules That Language In SPD Does Not Entitle Insurer To Deferential Review Of Its Claim Denial

In Ringwald v. Prudential Insurance Company, No. 09-1933 (8th Cir. 2010), the plaintiff, Eric Ringwald, had brought suit under ERISA against the defendant, Prudential Insurance Company (“Prudential”), for long-term disability benefits. The suit challenged Prudential’s decision to deny plaintiff’s claim for those benefits. The District Court had granted summary judgment against the plaintiff, and the plaintiff appealed.

The issue for the Eighth Circuit Court was whether Prudential’s decision to deny the benefits should be reviewed under the abuse of discretion standard, as opposed to the de novo standard. The abuse of discretion standard applies when the plan gives the reviewing insurer the discretion to determine eligibility for benefits under the plan. In this case, the plan’s summary plan description, or “SPD”, granted this discretion to Prudential, while the plan itself said nothing on this matter. Following its recent decision in Jobe v. Medical Life Insurance Co., the Court said that a grant of discretion to the plan administrator (here Pruential), appearing only in an SPD, does not vest the administrator with discretion, where the plan provides a mechanism for amending the plan, and this mechanism does not allow the SPD to alter the plan. In this case, the insurance policy with Prudential served as the plan, and the policy had no mechanism for amendment at all. Therefore, the SPD could not be deemed to amend the plan to provide discretion to Prudential.

Based on the above, the Court ruled that Prudential’s decision to deny the Plaintiff’s long-term disability benefits should be reviewed under the novo standard. The Court remanded the case back to the District Court, overturning its grant of summary judgment.

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