The US Court of Appeals for the Eighth Circuit recently reversed and remanded a decision of a district court that upheld an insurer's decision to deny long-term health benefits. The circuit court held that the district court gave too much deference to the insurer's decision to deny the benefits. In this case there was a conflict between the language in the plan document and the summary plan description (SPD) regarding the grant of discretionary authority. The insurer, also the plan administrator, was not granted discretionary authority under the terms of the plan document, even though the plan's summary plan description included such a delegation of authority. In previous cases, courts have generally followed a rule that an SPD prevails over a plan when there is a conflict between the two. The reasoning behind these prior holdings is that the Employee Retirement Income Security Act places a priority on full disclosure and, because an SPD is designed to be understood by the average plan participant, its terms should not be undermined by the provisions of a technical legal document. This case is an exception to this general rule favoring the language in the SPD. The court points out that the rationale behind the "SPD prevails" rule, meant to protect plan participants, is not furthered when the SPD enlarges the rights of the plan administrator at the expense of plan participants when the plan itself does not confer those rights. Although this case is an exception to the general rule that the SPD prevails, it is consistent with the idea that the language favoring the participant will prevail regardless of which document it is in. This case highlights the importance of confirming that the language in the plan and SPD is consistent, as inconsistencies often lead to unanticipated plan liabilities. (Ringwald v. Prudential Insurance Co. of America, 8th Cir. 2010)
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Conflict between plan and SPD ruled in favor of participant
- Hodgson Russ LLP
- Peter K. Bradley, Anita Costello Greer, Michael J. Flanagan, Richard W. Kaiser, Arthur A. Marrapese III and Daniel R. Sharpe
- August 31 2010
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