Fifth Circuit Reverses Course on Deference Afforded to Plan Administrators in ERISA Benefit Disputes

On March 1, 2018, the Fifth Circuit reversed its long-standing but much criticized holding on the appropriate standard of review in ERISA disputes. See Ariana M. v. Humana Health Plan of Tex, Inc., No. 16-20174, (5^th Cir. Mar. 1, 2018) (en banc). The genesis of the decision was the enactment of a Texas statute in 2011 which prohibits the use of discretionary clauses, i.e., clauses delegating discretionary authority to a plan administrator, in accident, health, and life insurance policies (among others). See Tex. Ins. Code § 1701.062. That law in turn was a response to the ubiquitous inclusion of such clauses in ERISA policies following the United States Supreme Court’s decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). In Firestone, the Supreme Court held that the default standard of review in ERISA benefits dispute is de novo unless the plan gives the administrator discretionary authority. Id. at 115. The Fifth Circuit’s interpretation of Firestone was to limit it to legal interpretations; thus, regardless of whether an ERISA Plan included a delegation clause, factual determinations were reviewed for abuse of discretion. See Pierre v. Connecticut Gen. Life Ins. Co., 932 F.2d 1552, 1562 (5th Cir. 1991). Twenty-six years later, the court has revisited the resulting “bifurcated standard of review for challenges in our circuit to the denial of ERISA benefits.” Ariana M., slip opinion at p.2.