You already know that ERISA plans frequently delegate discretionary authority to an administrator or fiduciary to make benefit decisions.
When reviewing the claim decision, courts may examine whether the ERISA Plan administrator properly designated authority to a claims administrator to make benefit decisions for the Plan.
If the delegation of authority is not done according to a process set forth in the ERISA Plan for designating administrators, the Court will apply the de novo standard of review, even if the Plan called for an abuse of discretion standard of review.
So, how can you be sure the Plan correctly designated fiduciary authority in claims decisions? This new case shows how to confirm when the Plan has properly delegated fiduciary duties.
Key Takeaways: (1) Follow the fiduciary designation process set out in the Plan; (2) know that a general delegation of fiduciary duties is not enough; (3) be able to establish that the delegation applies to the specific claim at issue.
Here’s the case of Hampton v. National Union, 2020 WL 5946967 (N.D. Ill. October 7, 2020)(The court applied de novo review, rather than the abuse of discretion standard of review, because “[t]he Plan Administrator did not properly delegate fiduciary duty to National Union… “[I]t is not enough to find that the insurer acted as a plan fiduciary generally; the Court must determine if it acted as a fiduciary regarding the claim at issue.”.”)
FACTS: Hampton, a Boeing employee, died following a car accident and his wife sought ERISA-governed accidental death benefits. After the Claims Administrator, AIG Claims, concluded Hampton’s death resulted from natural causes, National Union denied the claim. A lawsuit seeking benefits followed. At issue in this case was what standard of review applied. Hampton argued that the abuse of discretion standard should not apply because Boeing’s Plan Administrator did not properly delegate authority to National Union.
ISSUE: Whether the Boeing ERISA Plan Administrator Properly Delegated Authority to National Union?
DISTRICT COURT HELD: NO. “The Plan Administrator did not properly delegate fiduciary duty to National Union.”
1. “ERISA benefit determinations are generally fiduciary acts.” Op. at 4.
2. “‘Classifying any entity with discretionary authority over benefits determinations as anything but a plan fiduciary would thus conflict with ERISA’s statutory and regulatory scheme.’” Op. at 4.
3. The Plan and the Summary Plan Description conflicted on whether National Union had authority to make claim determinations. Op. at 6.
- National Union contended it had been delegated authority because Boeing’s Summary Plan Description (SPD) identified National Union as “the service representative” for both the basic and supplemental accidental death and dismemberment policies….” Op. at 5-6.
- “The SPD does not explicitly refer to [National Union’s duties of day-to-day administration and insurance coverage decisions] as fiduciary duties in nature. Yet… [the Boeing Plan] plainly purported to delegate fiduciary authority to National Union. Op. at 5.
4. But “it is not enough to find that the insurer acted as a plan fiduciary generally; the Court must determine if it acted as a fiduciary regarding the claim at issue.” Op. at 5.
5. “The problem…is that the Plan provides a specific method for delegating authority to a service representative, whereas the SPD does not.” Op. at 6.
6. The Boeing Plan provides that “When the [Boeing] Plan and the SPD conflict, the SPD stipulates that the [Boeing] Plan trumps the SPD.” This is consistent with Seventh Circuit precedent. Op. at 6.
7. The Plan set for a process for delegation of fiduciary duties. It required that delegation of duties be “in writing, approved by majority vote.” Op. at 7.
8. National Union never “alleged nor offered any evidence indicating that the Plan Administrator conformed with these procedures.” Op. at 6. As a result, National Union lacked requisite authority to deny Hampton’s claim. Op. at 7. The court then applied de novo review, rather than the abuse of discretion standard of review.