ERISA failure to define

A common battle ground in ERISA claims involves the argument that ambiguous terms should be construed against the party that drafted the document.  This is known as the doctrine of contra proferentem.  See generally E. Erlich, [How to] Conquer Your Enemies and Impress Your Friends with Everyday Latin (2010).

But when the ERISA Plan has vested discretionary authority to the plan administrator to determine eligibility and construe plan terms, should the court construe ambiguous terms against the plan administrator?  NO.

To highlight this point, here is the case of Holzman v. Hartford Life and Accident Ins. Co., ___F. Supp. 3d __, 2019 WL 181527 (D. Mass. January 14, 2019). (Kudos to some nice work by my friend Byrne Decker at Ogletree…)

FACTS: Holzman sought ERISA-governed disability benefits for facial paralysis. Hartford, the claim administrator, denied the claim under the Pre-Existing Condition provision. Holzman claimed Hartford “failed to define pre-existing condition adequately or to specify what constitutes “nonspecific symptomology.”  Holzman argued that this ambiguity should be resolved in his favor under the doctrine of contra proferentem (which construes vague terms against the insurer).

ISSUE: Whether ambiguous terms should be construed against the disability insurer under the contra proferentem doctrine?

DISTRICT COURT HELD:

  1.  “[C]ontra proferentem does not apply because…the Group Policy grants full discretionary authority to the Hartford to determine eligibility for benefits and to construe and interpret all terms and provisions in the Policy.”  Op. at 6.
  2.  Where the policy does not contain discretionary language, you should expect the court to apply contra proferentem and to construe vague terms against the drafter or insurer.  Op. at 7.