In Chronister v. Unum Life Insurance Company of America, No. 07-3552 (8th Cir. 2009), the court ended over a dozen years of benefit claims and litigation in holding that Unum must pay an employee’s disability benefits. The employee had been a nurse at Baptist Health in Arkansas. In 1995, she was injured in a car accident, and thereafter began receiving disability benefit payments under Baptist Health’s long-term disability plan. This plan was insured and administered by Unum. After 24 months, Unum stopped benefit payments, due to the “self-reported symptoms” limitation of the plan. The employee exhausted her administrative remedies in contesting the payment stoppage, and then brought suit against Unum. The case wound up in the Eighth Circuit Court of Appeals. There, the court discussed the impact of the Supreme Court’s decision in Metropolitan Life Ins.Co. v. Glenn, 128 S. Ct. at 2343 (2008) on how the decision by Unum-a fiduciary for ERISA purposes-to stop the disability benefit payments should be reviewed by the courts.
The Eighth Circuit court said that, in Glenn, the Supreme Court found that the abuse-of-discretion standard is the appropriate test for determining whether a court should overturn a fiduciary’s decision to deny (or stop) a benefit under an employee benefit plan. The decision is overturned if abuse is found. In applying this standard, the court must take into account, and appropriately weigh together, several different, case-specific factors. If the fiduciary both determines whether an employee is eligible for the benefit and pays the benefit out of its own pocket, a conflict of interest exists. However, the conflict of interest is just one of those factors to be taken into account in applying the abuse-of-discretion standard, and the conflict is given increased weight in the analysis to the extent that the circumstances suggest a higher likelihood that the conflict affected the fiduciary’s decision to deny (or stop) the benefit.
The Eighth Circuit court noted that the above was contrary to the manner in which, prior to Glenn, it had applied the abuse-of-discretion standard. The court said that, in the instant case, there are several factors that point to an abuse of discretion by Unum-primarily Unum’s financial conflict of interest (being both the administrator of the plan in question and the benefit payor), Unum’s overall history of biased claims administration (which the Supreme Court itself commented on in Glenn) and erroneous and arbitrary claims denials, and Unum’s failure to follow its own claims-handling procedures when it did not take into account a determination by the Social Security Administration that the employee was disabled. Weighing these factors, the Court concluded that Unum’s decision to deny the employee’s claim for continued disability benefit payments was an abuse of discretion and must be overturned. Moreover, given that the employee’s benefit claim had been pending for more than a decade, the court entered judgement in the employee’s favor, rather than remand the case for further proceedings.
The question is whether Chronister could be a part of a trend under which a fiduciary’s decision to deny a benefit claim will be subject to increased scrutiny. The abuse-of-discretion standard, as the test for determining whether a fiduciary’s decision to deny a benefit claim should be overturned by a court, has been around for a long time. Clearly, Glenn weakens-if not ends-the argument advanced in certain cases that (e.g., due to a conflict of interest) a less deferential standard should apply. Nevertheless, Glenn and Chronister, and their requirement that all facts and circumstances be taken into account when applying the abuse-of-discretion standard, may encourage a court to dig for facts, e.g., the fiduciary’s history on approving/denying benefit claims, that point to an abuse, allowing the court to overturn the fiduciary’s.