In the world of employee benefits law, the applicable standard of review is a frequently-disputed threshold issue, and for good reason. An employee claimant’s bid to overturn an adverse benefit determination stands a far better chance of succeeding under “de novo” review, wherein the District Court reviews the record anew, divorced from any presumption of correctness, and stripped of any notion of deference. Conversely, where the standard of review is “arbitrary and capricious,” and the District Court is thus tasked to determine if the benefit determination was “without reason, unsupported by substantial evidence or erroneous as a matter of law,” the employee claimant faces a more difficult challenge.
And upon what consideration or set of considerations does this preliminary (yet hugely important) issue hinge? On the presence or absence of certain “magic” language in the subject plan (i.e., language conferring upon the decision-maker discretion to determine benefit eligibility). And although most of the decisions that have come down in this area have focused on whether a particular sentence or phrase suffices to confer discretion, a recent District Court decision wrestled with a different issue.
In the case, the insurer asserted that the “magic” language is contained in both the plan and the summary plan description (SPD). As respects the language in the plan, however, the insurer faced a problem: nearly identical language had been deemed by the Second Circuit, some eight (8) years earlier, insufficient to confer discretionary authority. That meant that if the insurer were going to succeed in forcing “arbitrary and capricious” review, it would need to rely on the language in the SPD.
Citing to the Supreme Court’s 2011 decision in CIGNA Corp. v. Amara, the District Court first held that statements contained within an SPD do not automatically constitute plan terms. In order for an SPD to be made part of the plan, the District Court held, there must be an explicit provision to that effect. And while finding that the SPD in question did in fact contain the “magic” language, the District Court concluded that because SPD had not been explicitly incorporated into the plan, de novo review was appropriate.
Wenger v. Prudential Ins. Co. of Am., 2013 WL 5441760 (S.D.N.Y. Sept. 26, 2013)