A Plan Administrators’ Primer on ERISA Litigation in Federal Court

Defending a case under the Employee Retirement Income Security Act of 1974 (“ERISA”) in Virginia can be both straightforward and incredibly complex.  This paradox arises because ERISA provides a relatively simple litigation procedure but the substantive law is nuanced.  This primer will briefly cover both.

ERISA litigation is, at least procedurally, one of the most streamlined litigation processes in the federal system.  This can be attributed to one of the over-arching goals of ERISA: to provide a quick resolution to claims related to employer-provided benefits.  As such, courts treat ERISA litigation almost exclusively as an administrative review.  Prior to filing a claim in federal court, an ERISA plaintiff must exhaust all administrative remedies provided by the respective ERISA plan.  All ERISA employee welfare benefit plans include a mandatory administrative appeal where a beneficiary’s claim is reviewed de novo by the plan.  The plan must complete this review within 45 days of the appeal, subject to various exceptions.  If the clock runs out on the plan, administrative remedies are deemed exhausted, and a claimant can proceed directly to court.  Because courts generally demand a well-developed administrative record before making its decision, court action arising out of procedural default by the plan administrator frequently results in remand for development of an administrative record.

Once a claim reaches court, things move quickly.  Because courts treat ERISA litigation as an administrative review, the process typically concludes with summary judgment based on the administrative record.  To that end, costly and time-consuming procedures such as initial disclosures, written discovery, and depositions are rare if not entirely forbidden.  Thus, the standard practice in an ERISA case is for the plan to provide the plaintiff and the court a copy of the administrative record, followed shortly thereafter by motions for summary judgment.

It is at the summary judgment phase that ERISA litigation can get complex.  So much of ERISA litigation is determined by the standard of review.  This dates back to the Supreme Court decision of Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), where the Supreme Court likened ERISA plans to trusts.  Citing common law trust principles, the Court held that, absent a grant of discretion, review of an ERISA plan administrator’s action would be reviewed de novo.

Following this decision, ERISA plans were commonly drafted to include a broad grant of discretion to its administrators, meaning that any court review of the action would be under a more lenient abuse of discretion standard.  These discretionary plan terms quickly became the norm.  Under the more deferential abuse of discretion standard, a court will only overturn an ERISA plan administrator’s decision if there is no reasonable evidence to support the decision.  This is an incredibly high bar for plaintiffs to meet.  For that reason, many states, like Maryland, have banned grants of discretion in insurance policies.  Virginia is not one of those states.

Because the standard of review is so important in ERISA cases, summary judgment often turns on which standard applies.  For example, there is a body of case law finding that a grant of discretion in a standalone document covering an entire ERISA plan is not a valid grant of discretion.  These courts base their decision on Cigna Corp. v. Amara, 561 U.S. 1024 (2011), which held that contradictory language in a summary plan description was trumped by the language of the actual plan.  There are, however, competing decisions finding such standalone grants of discretion are valid.  These courts, including one here in Virginia, recognized that ERISA plans have multiple documents, and these grants of discretion are merely an ERISA plan document.

Beyond the standard of review, ERISA claims can involve a variety of substantive issues.  One common issue is whether the limitations period has run for the ERISA claim.  This is often grounds for litigation because ERISA does not provide a statute of limitations.  Thus, the limitations are either provided by the plan or common law.

Most commonly, ERISA defendants will focus their energies challenging whether the plan decision was reasonable, correct, and the result of a deliberate and principled review.  To prevail on an abuse of discretion standard, the ERISA plan only needs to show that the plan reached a reasonable decision at the end of a deliberate and principled review.  What constitutes a deliberate and principled review is well established in Virginia: constant communication with the claimant; review of the records by independent professionals; and the opportunity to supplement the record on appeal.

ERISA litigation remains an area of complex substantive law that moves at a lightning quick pace given its streamlined procedure.  At ThompsonMcMullan, our lawyers have litigated dozens of ERISA cases for some of the nation’s largest life, health, and disability insurance providers.  We would be happy to assist with your claims.