ERISA-Ninth Circuit Rules That California Insurance Law Requires De Novo Review Of A Denial Of Benefits

In Orzechowski v. The  Boeing Company Non-Union  Long-Term Disability Plan, No. 14-55919 (9th Cir. 2017), a panel of the Ninth Circuit Court of Appeals (the “Panel”) reversed the district court’s judgment, after a bench trial, in favor of the defendants in an ERISA action, which challenged a decision to terminate the plaintiff’s long-term disability benefits. The district court reviewed the benefits decision for an abuse of discretion, because the ERISA plan gave defendants discretionary authority.

The Panel held that de novo review was required in this case, under California Insurance Code § 10110.6, which voided the discretionary clause contained in the plan. The panel held that § 10110.6 is not preempted by ERISA because it falls within the savings clause set forth in 29 U.S.C. § 1144(b)(2)(A). Agreeing with the Seventh Circuit, the Panel concluded that § 10110.6 is directed toward entities engaged in insurance, and it substantially affects the risk-pooling arrangement between the insurer and the insured. The Panel held that § 10110.6 applied to the plaintiff’s claim because the relevant insurance policy renewed after the statute’s effective date. The Panel remanded the case to the district court.

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