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Prichard v. Metropolitan Life Insurance Company

In Prichard v. Metropolitan Life Insurance Company, 783 F.3d 1166 (April 21, 2015), the Ninth Circuit Court of Appeals vacated and remanded the district court’s judgment affirming Metropolitan Life Insurance Company's (“MetLife”) decision to deny Prichard long-term disability benefits under the long term disability plan of his employer, IBM. On appeal, Prichard argued (1) the district court erred in applying an abuse of discretion standard, and (2) even if the abuse of discretion standard was correctly applied, MetLife’s denial of benefits constituted an abuse of discretion.

In January 2007, Prichard applied to MetLife, who insured and administered IBM’s Long Term Disability Plan (“Plan”), for long term disability under the Plan. MetLife approved the claim based on psychiatric disability, but determined Prichard’s benefits period would be limited to twenty-four months, a limitation the Plan applied to, inter alia, mental and nervous disorders. Prior to the exhaustion of the twenty-four month period, MetLife informed Prichard his benefits would be expiring, unless he submitted medical information demonstrating a “non-limited medical condition[].” MetLife obtained and reviewed Prichard’s medical files then determined there was insufficient medical evidence as to the existence of a continuing “disability” as defined by the Plan. Prichard unsuccessfully appealed the decision to MetLife before filing this action in the district court.

Both parties submitted motions for summary judgment. MetLife argued that the “language in its Summary Plan Description (SPD) that stated, ‘Plan fiduciaries shall have discretionary authority to interpret the terms of the Plan benefits’” required application of an abuse of discretion standard. Prichard argued that Supreme Court’s decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), holding that the terms of a statutorily required plan summary may not be enforced as the terms of the plan itself, required the district court to review the decision de novo “because Amara precluded MetLife from asserting the SPD's terms as those of the Plan, and no other Plan document in the administrative record conferred discretionary authority upon MetLife.”

In ruling on these motions, the district court applied an abuse of discretion standard upon finding the SPD, which unambiguously granted MetLife discretion, was the governing plan document. The district court then determined MetLife did not abuse its discretion in denying Prichard additional benefits.

The Ninth Circuit stated the applicable standards of review to apply in reviewing the decision of the district court:

"We review de novo a district court's choice and application of the standard of review to decisions by fiduciaries in ERISA cases."Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 962 (9th Cir. 2006). However, we review for clear error any findings of fact underlying the court's choice of the applicable standard of review. Id. A district court must review a plan administrator's denial of benefits de novo "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits." Firestone, 489 U.S. at 115. MetLife bears the burden of proving the Plan's grant of such discretionary authority. Thomas v. Or. Fruit Prods. Co., 228 F.3d 991, 994 (9th Cir. 2000).

The Ninth Circuit noted that “it is undisputed that the only document in the record that confers discretionary authority upon MetLife is the SPD.” While Prichard argued that, under Amara, a SPD is insufficient to grant discretion, MetLife countered that “the SPD is the Plan,” and discretionary review is warranted. The Court turned to the definitions provided under ERISA to assess these arguments:

ERISA defines the word "plan" as "an employee welfare benefit plan or an employee pension benefit plan or a plan which is both," 29 U.S.C. § 1002(3), and it requires that a "plan""be established and maintained pursuant to a written instrument," id. § 1102(a)(1). An SPD, in contrast, is a disclosure meant "to reasonably apprise participants and beneficiaries of their rights and obligations under the plan." Id. § 1022(a).

Although the Court noted that a SPD may be the Plan (a “consolidated” approach which “several federal courts” have followed where “the SPD neither adds nor contradicts the terms of existing Plan documents”), it found the present case to be an “unconsolidated” case, like Amara, where the plan has both a governing plan document and a SPD.

The Court rejected MetLife’s claim that the SPD was the only plan document, determining an insurance certificate was “[t]he only document in the record that contains a clear indication that it is a Plan document.” The Court then limited its analysis to those documents listed in the certificate’s integration clause:

to promises made in extraneous documents like the Benefit Summary," also precluded the administrator from binding insureds to the Summary's discretion-granting clause because "what is sauce for the gander must be sauce for the goose."Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1161 (9th Cir. 2001) (internal quotation marks omitted). There is no reason to depart from that principle here. We therefore limit our analysis to the documents listed in the insurance certificate's integration clause.

The Court determined the insurance certificate did not include a grant of discretion to MetLife, and noted the “possibthat other official Plan documents outside the record contain discretionary language.” However, MetLife bore the burden to place such evidence before the court, and “failed to do so.”

Despite MetLife’s protestations, the Court found “the certificate contains the Plan's relevant ‘terms and provisions’ and is clearly issued to and written for IBM's employees who are beneficiaries under IBM's long-term disability plan,” while the SPD clearly states “that ‘official plan documents . . . remain the final authority’ and ‘shall govern’ in the event the SPD's terms conflict with those of official Plan documents.” The Court concluded the “the district court clearly erred in finding that ‘the SPD, and not the insurance certificate, constitutes the Plan document.’” The Ninth Circuit declined to consider the SPD an additional term of the Plan, finding the district court’s application of the abuse of discretion standard to be error. The Court reversed and remanded to the district court for review under a de novo standard.

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