ERISA-Eighth Circuit Holds That Insurer Did Not Abuse Its Discretion In Denying Claim For Disability Benefits

In Hampton v. Reliance Standard Life Insurance Company, No. 13-2782 (8th Cir. 2014), after being diagnosed with insulin-dependent diabetes mellitus, Christopher Hampton ceased work as an over-the-road truck driver for Ozark Motor Lines, Inc. Pursuant to the company’s employee benefit plan–Ozark Motor Lines Inc. Benefit Plan (the “Plan”)–which is governed by ERISA, Hampton submitted a claim for long-term disability benefits to Reliance Standard Life Insurance Company, the Plan’s insurer and claims-review fiduciary. Reliance Standard concluded that Hampton was not disabled under the terms of the Plan and denied the claim on that basis. Hampton sued Reliance Standard and the Plan, arguing that Reliance Standard abused its discretion. The district court granted judgment on the record for Hampton. Reliance Standard and the Plan appeal.

In analyzing the case, the Eighth Circuit Court of Appeals (the “Court”) said that where, as here, an ERISA-governed employee benefit plan grants discretion to the plan administrator or another fiduciary, such as the claims-review fiduciary, to interpret the plan and to determine eligibility for benefits, we review the fiduciary’s decision for abuse of discretion. Under this standard of review, we must uphold Reliance Standard’s decision so long as it is based on a reasonable interpretation of the Plan and is supported by substantial evidence. Where a fiduciary both evaluates claims for benefits and pays benefits claims, the court still applies the deferential abuse-of-discretion standard, but the fiduciary’s conflict of interest is one factor to be considered in the review.

The Court concluded that Reliance Standard’s interpretation and application of the Plan is reasonable. Reliance Standard interpreted the Plan to require, when claiming long-term disability benefits, “evidence that one is physically or mentally incapable of performing the material duties of his occupation,” independent of his loss of a license. Mere loss of license due to a medical condition-as happened to Hampton -does not mean that Hampton is disabled for purposes of the Plan. The Court further concluded that Reliance Standard’s determination that Hampton was not totally disabled, within the meaning of the Plan, was supported by substantial evidence. As such, the Court held that Reliance Standard did not abuse its discretion in denying the long-term disability benefits, and the Court reversed the district court’s judgment.

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