How will a court construe ambiguities in ERISA plan terms?

If the plan confers discretion to the administrator “to interpret plan terms,” ambiguities may NOT be construed against the plan administrator.

Here’s the case of Porter v. Lowe’s Companies, __ F.3d__ (5th Cir. September 24, 2013) (PDF).

FACTS: Elizabeth Porter, employed with Lowe’s and eligible for ERISA death benefits, died in an auto accident while driving to work to respond to a security alarm.  The plan conferred discretion to “interpret the terms of the Plan to determine eligibility for benefits.”  Newman, the plan administrator, denied the death benefit claim because the Plan excludes injuries or death sustained “during travel to and from work.”  The surviving spouse sued.

District Court Held: Administrator abused discretion in denying benefits because employee was injured in an accident while on her way to work.  Court concluded the employee was on a “Bonafide Trip” and therefore the beneficiary was entitled to death benefits under the plan.

5th Circuit REVERSES and finds no abuse of discretion:

  1. Ambiguities may not be construed against the plan administrator when the administrator is given discretion to interpret plan terms.  Op. at 7, fn. 13.
  2. The Court, in reviewing a Plan administrator’s decision, can by-pass without deciding whether the determination is legally correct, “and move directly to whether the determination was an abuse of discretion.” Op. at 9.