I recently blogged about the importance the standard of review can make when a court decides whether a claims decision made under an employer plan will be upheld. My recent blog post dealt with the standard of review under a top-hat plan, a plan for executives. Another recent case makes the same point in a long-term disability claim.
The case involves a Federal Express employee who made a claim for disability benefits under the FedEx plan. FedEx used Aetna as its claims administrator and Aetna denied the claim. The employee sued and won at the district court level. FedEx appealed and the appeals court upheld the decision.
One of the first issues the court had to decide was the appropriate standard of review. FedEx claimed that the plan document granted to its appeals committee authority to decide claims and that FedEx had delegated that authority to Aetna. If Aetna had the authority to decide claims, then the court should review Aetna’s decision under an abuse of discretion standard.
Unfortunately for FedEx, there was no proper delegation of authority to Aetna. Although the service agreement gave Aetna discretion to decide claims, the court found no provision in the plan documents that gave FedEx the authority to delegate that discretion. In the absence of proper delegation of decision-making authority to Aetna, the court reviewed the claim without deference to Aetna’s decision. The appellate court concluded that the district court properly found that the employee was disabled.
Note to Employers: Make sure your plan documents give you authority to delegate discretion to decide claims to the entity that is actually deciding the claims. Then make sure that any such delegation has been made properly in a manner consistent with the plan documents.