Another Attack on Administrator Discretion Turned Back

There is a pattern in case law development under ERISA of lower courts giving pro-employee results, only to be overturned on appeal, particularly to the Supreme Court. This pattern certainly extends to case law on the appropriate standard of review of decisions by plan administrators. Yet another instance of this pattern is reflected in the recent Supreme Court case of Conkright v. Frommert, No. 08-810 (Apr. 21, 2010).

In Conkright, a participant’s claim was denied on one basis. The participant sued and eventually the basis for denying the claim was rejected by the Circuit Court, which returned the case to the plan administrator for consideration of other interpretations. The plan administrator again denied the claim, based on another interpretation, whereupon the participant went back to the courts. The participant argued that, since the plan administrator had been wrong the first time, there should be a de novo review, rather than a review for abuse of discretion, and the District Court and Circuit Court agreed. The Supreme Court disagreed, holding that the decision of the plan administrator on remand was still entitled to the deferential abuse of discretion review.

There are three lessons here. First, procedurally, plans should push for remand after adverse court decisions. Second, decisions by plan administrators should include language stating, broadly, that the initial denial is based on the issues considered as sufficient, and that other issues may warrant a denial. Third, nobody should get too worked up about lower court decisions on ERISA issues.