In Gross v. Sun Life Assurance Company of Canada, No. 12-1175 (1st Cir. 2013), the First Circuit Court of Appeals (the “Court”) was faced with the question as to whether the “safe harbor” exception to the ERISA preemption applies to the long term disability insurance policy that covers plaintiff Diahann Gross (“Gross”). The district court found that it did not, and consequently held that Gross’s state law claims were preempted. Furthermore, the district court concluded that her insurer was entitled to the highly deferential “arbitrary and capricious” review prescribed for certain ERISA benefits decisions. Using that standard, the district court upheld the insurer’s denial of long term disability benefits to Gross.
In analyzing the case, the Court said that it agreed with the district court that the safe harbor exception is inapplicable, since Gross was covered by her employer’s “ERISA plan”, so that Gross’s state law claims are preempted by ERISA. However, the Court held that the benefits denial by the insurer was subject to de novo review. Joining several other circuits, the Court concluded that language requiring proof of disability “satisfactory to us” is inadequate to confer the discretionary authority that would trigger deferential review. The Court further concluded that the administrative record was inadequate to allow a full and fair-assessment of Gross’s entitlement to long term disability benefits. As such, the Court vacated the district court’s judgment and remanded the case back to the district court, so that it could return the matter to the insurer for further development of the record.