When Does Plan Language Mandate De Novo Review?

I wanted to take a moment over the next couple of posts to return to a couple of cases from earlier this month that are worth a look and a comment, but that I haven’t had a chance to talk about yet. One of them is a decision by Judge Lindsay of the United States District Court for the District of Massachusetts from the beginning of the month, Dickerson v. Prudential Insurance Company, in which the court considered the question of whether plan documents actually conferred discretionary authority on the administrator of an ERISA governed long term disability plan; as most of you already know, if it did not, then the court had to decide a dispute over benefits under that plan de novo, while if it did, the court was to decide the dispute by applying a deferential standard of review.

Now, we see many cases finding that discretionary authority is conferred and that deferential review applies, but cases finding the opposite are actually not quite as common. This is usually because the plan in question in a case either clearly grants discretion, or doesn’t do so at all. As a result, it is comparatively infrequent that a court has to address in any depth whether or not particular plan language grants discretion. Into this relative void steps the Dickerson decision, which is an interesting example of a case finding that the particular language used in a plan did not clearly confer discretionary authority. I liked Judge Lindsay’s description of the applicable standard, which was that: 

Courts have recognized that "there are no magic words determining the scope of judicial review of decisions to deny benefits." Brigham, 371 F.3d at 81 (quoting Herzberger v. Standard Ins. Co., 205 F.3d 327, 331 (7th Cir. 2000)). Until insurance plans include language that "could leave no doubt about the administrator's discretion . . . we must in fairness carefully consider existing language that falls short of that ideal." Id.

"[T]he critical question is notice: participants must be able to tell from the plan's language whether the plan is one that reserves discretion for the administrator." Diaz v. Prudential Ins. Co. of Am., 424 F.3d 635, 637 (7th Cir. 2005). Language that merely requires a determination of eligibility by the administrator and proof of the applicant's claim "does not give the employee adequate notice that the plan administrator is to make a judgment largely insulated from judicial review by reason of being discretionary." Herzberger, 205 F.3d at 332. Cf. Diaz, 424 F.3d at 639 (for Plan language to confer discretion on the administrator, it must "communicate the idea that the administrator not only had broad-ranging authority to assess compliance with pre-existing criteria, but also has the power to interpret the rules, to implement the rules, and even to change them entirely.").

The Court concluded that the particular language in the plan at issue in Dickerson gave the administrator the “ the power to make the determination” but imposed a list of specific conditions on the exercise of that power. As a result, the judge held that “[b]ecause the Plan language” suggests that "the plan administrator is to make a judgment within the confines of pre-set standards [and does not have] the latitude to shape the application, interpretation, and content of the rules in each case . . . the language [was] insufficient to trigger deferential review by the court.”