This is a great story today from Lauren Clason at Bloomberg on litigation over claim denials in which AI was used to process the claims. There is a lot to be said about this issue, and I wish I had more time to write on it today. However, I have a brief due on Friday and no time today for a thousand word post on the issues raised by the use of AI in this context (hmm – perhaps I shouldn’t have spent five hours yesterday writing an article on LinkedIn and then I would have had time to write further on this one right now). I suspect, however, that this will not be anywhere near my last opportunity to write about this subject.

For now, though, I wanted to flag one point that the inevitable use of AI to process claims raises. I can see no legitimate argument against the use of AI claims processing – subject to appropriate testing for accuracy, errors, gender or other biases, etc. – when it comes to purely rules based decisions, in other words when there is nothing more to it than does the submitted claim match or instead violate the written and clear rules of the plan. For instance, where the entire inquiry is to the effect that the plan only covers X medicine after the following three alternative treatments or generics have been tried and certified by the treating physician as ineffective, and the question is whether the claim submission satisfies those plain and unambiguous terms.

But many, many types of claims, in all sorts of contexts, require interpretation of plan terms or even insurance policy terms, and even more require some sort of judgment call as to the relationship between a particular fact pattern and the plan or policy terms at issue. Discretion is not only the better part of valor, but in many instances it is the better part of claims handling as well. An AI rule based system that denies claims where judgment and discretion are needed to make the call raises a host of problems, including whether denials are accurate, whether a state’s claims handling statues and regulations are being complied with in that circumstance (in Massachusetts, for instance, a judgment call made on a claim is defensible in court so long as it is reasonable, which is a characterization of human decision making and possibly not – without sufficient human oversight – of any AI based claim system), and whether a claim denial under an ERISA plan is arbitrary and capricious (it is hard to see how a denial that requires a judgment call on the reading of plan language or the application of unclear facts cannot be arbitrary and capricious if made without human involvement or at least intervention after the decision by an AI process).

I am not a Luddite in any manner and there is certainly a role for AI in aspects of claims processing. But as a be all, end all solution? That is going to need more vetting than I suspect has yet occurred.

I have written extensively on the relationship between insurance and climate change, going back to early comments and work on the subject by Lloyds‘, and continued to address it in the context of insurers withdrawing from markets in the face of climate related losses. I am known for saying that the insurance industry is, in fact and in many ways, environmentalists’ best friend, in that the industry’s economic interest in limiting the damaging impact of climate change aligns with the idealistic goals of many environmentalists. In many ways, the role of the insurance industry in this issue mirrors the extent to which various economic actors have a financial stake in transitioning the economy to a greener future, including wind, solar and other energy producers and investors. I am fond of the saying, which I read elsewhere, that someone once said that Marx was wrong about a lot of things, but he was right that everything is economics. The insurance industry has a huge economic motivation and role to play in the discussion and handling of climate change, and the industry both is and should be doing so.

In my discussions and writing on this topic, I have generally focused on discrete issues, such as the relationship between climate change and homeowner insurers departing from certain markets. It all ties, though, to my general view that at a macro scale, the insurance structure is the bedrock of large scale trade, investment and economic activity throughout the developed world, and that the economic impacts of climate change on the insurance industry threaten that bedrock foundation.

But I am just a lone blogger and a practicing lawyer. In the past week or so, though, a senior official with a major insurer came right out and said the quiet part out loud (as the cliché goes), explaining that climate change was moving to the point where it threatened massive disruption – from a purely economic perspective – to the insurance industry and to insurance coverage, with potentially devastating corollary effects on capitalism as practiced today (if anything, I am understating his warning). As he puts it, climate change’s impact on the insurance industry alone – without accounting for any other effect it may have – is “a systemic risk that threatens the very foundation of the financial sector.” Personally, I don’t much disagree with him, particularly as someone who has followed this issue for years but read his original LinkedIn article and the Guardian’s news coverage of it and decide for yourself.

Ouch, is all I could think to say after reading the First Circuit’s latest decision on ERISA preemption, Cannon v. Blue Cross & Blue Shield of Mass., in which a wrongful death action based on a benefit denial was deemed preempted. This is one of those tough outcomes that ERISA’s broad preemption provision sometimes leads to – a lack of any recovery simply because ERISA has subsumed the field, and despite the fact that ERISA itself presents no avenue for recovery. In the olden days, before equitable relief claims under ERISA were recognized by the Supreme Court, giving some possible avenue for relief in at least some such cases, judges used to refer to these types of cases as presenting “harms without a remedy” (or at least one federal judge did on a couple of cases where I was the defense lawyer and won just by invoking ERISA preemption).

Anyway, it’s a good decision on the reasoning, analysis and scope of preemption under the law of the First Circuit. Preemption remains vigorous here on my home turf and, while I thought the plaintiffs’ lawyers constructed some reasonable arguments around it in this case, it is obvious that still more is needed for a plaintiff in such a case to catapult over the defensive wall constructed by ERISA’s preemption provision.

A recent discussion with a colleague in the insurance industry (who shall remain nameless so as to protect the innocent) caused me to crystalize some of my inchoate thinking on how current problems in ERISA class action litigation, including too many suits, too much defense spending, too much self-protective caution on the part of plan sponsors and many more, parallel my experience decades ago as an IP litigator and coverage lawyer during the heyday of patent troll litigation. Back then, I used to joke that half my practice was IP litigation, half was ERISA litigation and half was insurance coverage counseling and litigation. I eventually stopped making that joke, because nobody ever laughed although sometimes people groaned. It was like the lawyer version of a Dad joke.

But it does illustrate the extent to which, back in the day, I was heavily involved in the patent troll litigation explosion, both as a defense lawyer handling patent and copyright cases (it’s actually amazing to me that in recent years I have still been dealing with what are essentially ransom notes to clients from copyright trolls alleging infringement and seeking payments to go away simply because it would be more expensive to litigate with them), and as an insurance coverage lawyer advising insurers on the scope of their coverage and settlement obligations in response to IP claims (in one notable matter, I arbitrated the applicability of a version of a violation of statute exclusion to a claim for large – as in seven figure – defense bills incurred in a particularly outrageous patent infringement strike suit).

A recent blog post raised the question of whether ERISA requires a specialized court, in much the same way aspects of patent law are subject to a particular specialized court. Discussions around that idea focus in particular on the extent to which different outcomes in ERISA class action cases occur dependent on where suit is filed. There is absolutely no doubt that variation in outcomes on the same facts in all types of ERISA cases, from excessive fee class actions to benefit denials to 502(a)(3) equitable relief claims, occurs across courts and different circuits. In fact, I used to make that point by explaining that ERISA preemption was intended to create a uniform body of federal law governing ERISA issues, but instead it just created a dozen different rules, one for each circuit. That is obviously an overstatement and a joke, but like most good jokes, there is some truth lurking in it.

Yet I am not completely convinced that a specialized court, rather than multiple circuit courts, is the best remedy for this problem, in that the sheer complexity of ERISA and of its application in specific circumstances often requires multiple decisions by multiple courts before a consensus is reached on what the correct rule on a given issue actually should be. So, just spit balling here, but perhaps the best solution is a structure that feeds any conflicting circuit court opinions automatically to a designated and specialized appellate bench above the circuit courts but below the Supreme Court, to maximize the opportunities for such diverse decisions to be synthesized. This alone would increase the uniformity of the body of law governing ERISA, including class action litigation, and reduce the venue shopping and other tactical maneuvers that underpin much of the boom in ERISA class action litigation. Now note that I haven’t looked into whether this is actually possible, and I will leave that to any constitutional law scholars or Federal Courts faculty out there reading this post.

In the patent world, the America Invents Act addressed structural problems in patent prosecution and litigation, including some changes intended to reduce the patent troll problem. Nothing’s ever perfect and it is important, in this area as in many others, not to let the perfect get in the way of the good, but overall the statutory response had a positive impact on excessive patent infringement litigation, at least anecdotally. And again, at least anecdotally, the statute seems to have done a reasonable job of balancing the interests of all concerned – from industries that rely on patents, to patent holders, to those whose patents were actually infringed.

There is probably, likewise, a similar statutory response to excessive class action litigation over ERISA plans that is available, that likewise properly balances the benefits to participants of court access with the risk to plan sponsors of excessive class action litigation. It is important to remember that the central conundrum in addressing the problems caused by excessive class action litigation involving ERISA plans is finding the right balance, the sweet spot if you will, between protecting participants’ ability to seek court redress, including in circumstances that can only be resolved through class action litigation, and avoiding the harms of excessive class action litigation, such as – to borrow from my past life in IP litigation – strike suits intended solely to trigger a settlement payment and lawyers’ fees.

I have an appeal pending at the First Circuit right now concerning the interpretation of top hat plans and, thus, with discretion being the better part of valor and all that, I am not going to write too much about this new top hat decision out of the Eighth Circuit. However, for anyone out there studying the subject or litigating a top hat case, I did want to bring it to your attention. It reinforces the extent to which top hat plans are a unique combination of contract law and ERISA, and illustrates the extent to which doctrines of contractual interpretation control the application of top hat plans, to a more significant extent than is typically the case with ERISA plans.

The decision is Hankins v. Crane Auto Holdings, and you can find it here.

As I have mentioned in the past, it seems to be taking an inordinate amount of time for me to get through my countdown of the top ten posts on my blog in 2024. Nonetheless, I have finally reached the end of this countdown, even if I am a little late across the finish line on it, given that it is modeled on the old end of the year countdowns of hit songs radio stations used to do at the end of the year (and would typically finish on January 1 of a given year and not, as with this countdown, on March 2).

There is a certain irony to how long it has taken to finish this countdown – even though there are good reasons for that – because, of all things, the most popular post on this blog in 2024 was actually a post I wrote in June of 2023, in which I discussed why generative AI was more likely to increase, not decrease, the amount of legal work and corresponding legal bills that complex transactions and litigation produce. Why is that likely to be the case? Because history tells us that increased technological capabilities in the law just lead to more complicated deals and lawsuits, and with them bigger bills. And the news that some partners at Quinn Emanuel now bill $3,000 an hour and that consulting behemoth KPMG just launched its tech driven law practice, just seems to confirm my prediction.

And with that, here is the most read post of 2024 on this blog, “Why Do Law Firms (And Their Bills) Get Bigger the More Efficient They Become? And What Does That Foretell About the Use in Law Firms of Generative AI?“

Because I really like lawyering, I am pleased that I have had a very busy and productive February, full of client meetings, filings in courts in various jurisdictions, and interesting work. The drawback, though, is that it is now almost the end of the second month of 2025 and I still haven’t finished my countdown of my top ten blog posts from 2024. It’s starting to get a little embarrassing, frankly, to the extent that I think many law bloggers would have just dropped the whole countdown thing by now and just hoped that nobody would ever notice that they only made it to the fifth or the fourth or whatever number it was of their most popular posts from the prior year. Not me, though, because I am apparantly a glutton for punishment and determined, like Charlie Brown, to finally kick that football!

More seriously though, it is worth finishing this countdown because I believe that my second most popular post from 2024 is one of the more important posts I have ever written and is becoming more and more timely by the day. The post discusses the political and economic pressure to add private equity investment options to 401(k) plan investment menus, and why this is a terrible idea. Forget the question of whether it is paternalistic for naysayers like me to argue against it – the simple fact is that such a change will open up plan sponsors to so much future class action litigation that I don’t think anyone who argues against the proliferation of class actions against plan sponsors has any business promoting this idea. And that’s before we get to the question of whether the average plan participant is an appropriate and knowledgeable enough investor for this to make sense. Tell me, dear reader – do you have the time to research the details of the investments in your 401(k) plan, or do you just look at the returns? It’s not a criticism, it is just a fact – the investment of time to properly consider private equity investments, and the risks versus the returns, and the expertise needed to do so, makes this a bad idea for plan participants.

And so what if protecting plan participants by continuing to preclude such investments in 401(k) plans might strike some as paternalistic. That’s the whole point of the fiduciary requirements for such plans: that there is a prudent and loyal expert acting on behalf and in the interest of plan participants. If that isn’t pretty close to the definition of paternalistic, I don’t know what is. And yet, to the extent the 401(k) system does in fact work, this dynamic is a large part of the reason why.

So, with that, I will climb down from my soap box and introduce the second most popular post on my blog in 2024, “Adding Private Equity Investment Options to 401(k) Plans May Be a Good Idea – for Everyone Who Is Not a Plan Participant or a Plan Fiduciary.”

When I started this series of posts that count down the most popular posts on my blog in 2024, I called back, nostalgically, to the old days when radio disc jockeys would count down the most popular songs of the past year and play them, one after the other, over the course of a day or two. Back then, everything took place in real time and not internet time, and thus those countdowns always finished as scheduled and advertised.

Here, though, in the world of the blog, time is more malleable. While I meant to finish the countdown of the most popular posts from 2024 at least during the first month of 2025, time has shown that plan to have been little more than the idyll daydream of an eternal optimist. Not only did actual client work and court hearings alter the schedule, but so too did new legal developments over the past few weeks, which I also wanted to blog about, thereby taking up time that would otherwise have been spent on my countdown of the top blog posts from 2024.

Oh, well. I at least know, since we have now counted down to the third most popular post from 2024 on this blog, that one way or the other, this countdown will conclude in the second month of the new year. And with that, here is the third most popular post on this blog in 2024, “Loper, Chevron and the (Underrated) Value of Predictability,” which, unsurprisingly and perhaps predictably (get the joke?), addressed the impact that the demise of Chevron deference, and with it the decrease in predictability for regulated entities, will likely have on ERISA governed entities.

There is a great article today in the Wall Street Journal on the adoption of 401(k) plans by smaller companies, noting that this phenomenon is driven by both legislative and labor market developments, and crediting these changes with pushing employee participation in 401(k) plans to half of the labor force. All good news, but there is one point about this development that is worth mentioning and probably should have been mentioned in the article, given its focus on the adoption of such plans by small businesses.

In my practice, I have often seen poor administration of 401(k) plans run by smaller employers, not because of anything nefarious on anyone’s part or even anything at all on the part of the employer. Instead, it arises because of the nature of many of the administrators available to small plans and employers. Some are good, some aren’t, but generally speaking, they don’t bring the same level of resources to bear on administering plans that the large companies that administer the plans of large employers bring to the table. For smaller employers either thinking of offering or already offering a 401(k) plan, this is a point to remember.

If you are a small employer, while the marketplace will dictate which vendors are available to you, there are steps you can take to ameliorate the risks and concerns this raises. I will give you one of those right now: pay close attention to the contract you enter into with the administrator and, if at all possible, have an ERISA lawyer review it before you execute it. There are many key points and issues in offering a 401(k) plan that, if problems arise, will be affected by the terms of that contract, and it is a lot better if the employer offering such a plan knows those terms at the outset than only after a problem arises. It is even better if the employer and counsel have a chance to negotiate with the administrator over those terms before the agreement is signed. I cannot count how many times employers have brought such contracts to me only after a dispute has arisen – and at that point, the cure is a lot worse than prevention, by means of careful contracting, would have been.

Some things are just evergreen when it comes to ERISA, a point that is driven home whenever, as now, I publish my top ten most read blog posts of the prior year. The Supreme Court just returned, for about the umpteenth time, to the subject of excessive fee class action litigation and the question of how to balance the value of such cases to participants against the costs to plan sponsors. Coincidentally, the fourth most popular post in 2024 on this blog was about the exact same issue, which I wrote about in the post “An Easy Read on the Past and Future of 401(k) Plan Litigation.” The more things change, I guess . . .