You already know about the big trend in states to ban discretionary clauses in insurance policies that fund ERISA benefits.

Chalk up another circuit deciding to enforce the ban.

Here’s the case of Fontaine v. Met Life, __ F.3d __ (7th Circuit, September 4, 2015) (PDF).

FACTS: Fontaine, a lawyer at Mayer Brown, sought ERISA governed long-term disability benefits for a vision impairment. The “disability plan provides that MetLife’s benefit determination ‘shall be given full force and effect’ unless they are shown to be ‘arbitrary and capricious,’ thus calling for discretionary review.” Met Life denied the claim and Fontaine brought suit claiming the de novo standard of review should apply because an Illinois state regulation bans discretionary clauses.

ISSUE: Does ERISA preempt a state law banning discretionary clauses?

7th Circuit HELD: No.

  1. Met Life argued that the ban on discretionary clauses is preempted by ERISA because the discretionary clause here was contained in the ERISA plan, not an insurance policy. The court concluded, however: “Whether a provision for discretionary interpretation is placed in an insurance policy or in a different document…should make no legal difference.” Op. at 7.
  2. “We join the Ninth and Sixth Circuits in concluding that a state law prohibiting discretionary clauses squarely satisfies [the requirement of proof that the state law substantially affect risk pooling].” Op. at 9-10.
  3. The state law here “does not duplicate, supplement, or supplant the ERISA civil enforcement remedy. All it does is restore in Illinois ERISA’s own default rule of de novo review in court cases challenging denials of health and disability benefits.” Op. at 10.
Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Mike Reilly Mike Reilly

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment…

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment advice, and has represented clients in more than 75 jury trials, arbitrations, bench trials and claims before the EEOC and Washington State Human Rights Commission.

Small and large employers retain Mike for his strategic advice and decades of experience in employment issues and litigation, business decisions and litigation avoidance. Mike provides advice in claims involving discrimination, retaliation, wrongful discharge, disability accommodation, ERISA and non-ERISA employee benefit claims, and wage/hour claims. He served as lead counsel in an employee raiding/trade secret case as reported in the Wall Street Journal, and defends employers in class action claims.

Mike’s remarks on employment issues have been quoted in NewsweekCorporate Legal TimesSeattle TimesEmployee Relations Law JournalPuget Sound Business JournalCFO.com, and other professional journals and management publications. Chambers USA’s Guide to America’s Leading Lawyers for Businessrates Mike in the top ranking (band one) for his work in labor and employment law, and has described him as “one of Seattle’s top-rate attorneys” who is “truly phenomenal [with] superb legal instincts” and “an amazingly assertive litigator.” His clients include Nordstrom, Seattle Seahawks, Home Depot, KeyBank, Starbucks, Fred Hutchinson Cancer Research Center, Red Robin and Seattle Chamber of Commerce, among others.