I don’t want to leave the impression that the Ninth Circuit’s decision in Abatie is a wacky or fringe decision, or that I think that myself. Far from it. The new rule it announces for that circuit on the effect of structural conflicts is certainly well within the margins of current mainstream jurisprudence on the issue, probably more so than the somewhat Rube Goldberg like burden shifting contraption that the Abatie court described the circuit as previously applying to such conflict situations. It is fair to say, though, that with regard to the core of its ruling, I simply don’t agree with the premise that the conflict of interest alone, without a showing that the conflict actually played a role in the decision making at issue, should affect the standard of review. It is not as though other circuits don’t take such conflicts into account, as they do and they should. But I think the more appropriate rule is to have that conflict only matter if the claimant can show that it actually mattered; i.e., that it affected the decision made by the plan or its administrator. This is, in essence, what the First Circuit required in Janeiro, as discussed here. And requiring this simply should not be a significant issue, since proving a conflict of interest, based on documents or testimony, is – or at least should be – a standard arrow in the quiver of any competent trial lawyer; there is no quicker way to discredit testimony on cross examination than to show the speaker had agendas other than the truth in mind when he or she spoke. So at the end of the day, I don’t think the broad, throw the baby out with the bath water condemnation of all insurers and of all administrators acting while burdened with a structural conflict that Abatie enacts is warranted; you can clearly protect against the undue influence of such conflicts in a more nuanced and fact specific manner than what the Ninth Circuit has chosen to do.
So to those I have heard from who are concerned that the reliance on the market argument that I presented here is too favorable to insurers/administrators and does not provide sufficient protection against having benefit determinations swayed by such conflicts, I can say only this in a short piece: I do think market discipline works against any tendency for such decisions to be swayed by conflicts of this nature, but when the market is not enough to prevent it, an aggrieved party is still protected against having a benefit determination affected by the conflict simply by proving that the conflict actually did affect the outcome of his or her particular claim. Market forces and an evidence based rule to protect claimants is a nice one – two punch, and certainly seems more preferable to me than simply assuming that all decisions made by an administrator who must pay any benefits that are awarded are always suspect.
And as to why I am not fond of that latter approach, I will hopefully return to that point in a subsequent post, for those of you who, like me (I hope I am not the only one), simply can’t get enough of Abatie.