The Heightened Arbitrary and Capricious Standard

Long time no blog – got a bit behind with a 2-week flu bug and the game of catch up that followed.

As I previously suggested the “standard of review” can drive the ultimate outcome in an ERISA benefits case. Many close cases involve the so-called “heightened arbitrary and capricious” standard of review. This is where the plan decision maker, although protected by discretion-granting language in the plan document, operated under a conflict of interest. The 11th Circuit has taken the position that a “poisoning of the well” should be presumed in such instance and deference to the plan reduced or eliminated. All kinds of interesting issues crop up in these cases. A recent decision out of the Southern District, Fick vs. Met Life, is particularly interesting on the issue of the evidence that can be considered by the Court.

The Fick Court held that relevant evidence outside the claims file could include: 1) the technical competence of the claims decision maker, 2) the exact nature of the information considered by the decision maker and 3) the routine claims practices followed in reaching the decision. So far so good for claimants who seek discovery. But the Court held that the plan overcame the burden against it by showing that it enlisted the help of two independent case evaluators and objectively considered all of the claimant’s evidence.

Here’s what bothers me about this opinion: it pays homage to 11th Circuit case law which underscores the dangers of the taint caused by a conflict of interest but then too easily forgives it. Plans routinely use consultants to deny claims. Does that “routine practice” justify giving them a hall pass? 11th Circuit case law gives plans the opportunity to overcome the taint by showing that their decision was in the overall best interests of plan participants and beneficiaries. This, in my opinion, is a heavier burden.