As a general rule, there is no right to a jury trial in an ERISA benefit dispute. Usually these cases are decided in Federal District Court by a judge, who reviews the plan administrator's final decision, denying a claim. The Court may adopt one of two possible standards of review: either a de novo standard or a deferential standard. (There is a third "less deferential" standard that may be applied in certain cases involving a "conflict of interest" of the plan fiduciary). The outcome of a case often depends upon which standard of review is applied.
Under de novo review, the Court basically looks at the claim as it would any other contract dispute. The judge may simply review the evidence in support of the claim, examine the plain language of the Plan, and render an immediate decision on the merits. Under de novo r eview, there is no presumption of correctness of the plan administrator's decision.
Deferential review is more restricted. The Court's focus is upon whether the plan administrator's final decision was "arbitrary, capricious or an abuse of discretion" . Under this standard, the administrator's decision can be upheld by the Court, even if it is technically wrong, as long as there is "substantial evidence" in the administrative record to support the decision. "Substantial evidence" is a rather nebulous term, which has been defined by the appellate courts as: "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion" . It does not mean a large or considerable amount of evidence. It requires "more than a scintilla, but less than a preponderance."
The U.S. Supreme Court, in Firestone Tire & Rubber v. Bruch , 489 US 101 (1989), basically held that de novo review is to be presumed. Unfortunately, the Supreme Court carved out a gigantic exception to this rule. Explaining either the rule or the exception here would take more space than is available (and would cause the reader's eyes to glaze over). Suffice it to say, Plan attorneys universally argue that the "Firestone exception" applies, so as to try to take advantage of a deferential standard of review. Participants' attorneys usually argue the opposite. Much of ERISA litigation involves this rather technical debate over the applicable standard of review. Because of this, (and other reasons) even the simplest benefit dispute takes on a ridiculous degree of complexity.
Although the deferential standard certainly gives the plan administrator a decided advantage over the Participant, it is not the panacea that many sloppy or unscrupulous plan administrators think it is, nor is it akin to a Papal Dispensation. The deferential standard does not give the administrator carte blanche to do whatever it wants with regard to a particular claim. There are still rules that must be followed, and quite often, ERISA plan administrators (as well as their claims administrators and managed care companies) either do not know the rules or they forget to follow them.
Ó 1997 Michael A. McKuin - ERISA Lawyer
