What language is needed in the ERISA plan to confer discretion? 

The bar was just raised in the 4th Circuit.

Here’s the case of Cosey v. Prudential Insurance Company of America, [PDF] __F.3d__ (November 12, 2013).

FACTS:  Cosey was a marketing manager, eligible for short and long term disability (LTD) benefits under the company ERISA plan.  The LTD plan, administered by Prudential, stated that benefits will be paid only if the claimant “submit[s] proof of continuing disability satisfactory to Prudential” (emphasis added).

ISSUE:  Does the language confer discretion, or does the de novo standard of review apply?

4th CIRCUIT HELD:  De novo review applies—the language did not confer discretion.

  1. “[F]ive of our sister circuits recently have held that this language does not unambiguously confer discretionary authority…. We agree with the conclusions reached by the five sister circuits.”  Op. at 7.
  2. “[T]he phrase ‘proof satisfactory to us’ is inherently ambiguous. Op. at 7-8
  3. The phrase does not clearly confer discretion because “such a construction…would not be an insured employee’s ‘most likely’ interpretation of that language.”  Op. at 8.
  4. [A]mbiguities in an ERISA plan must be construed against the administrator responsible for drafting the plan.”  Op. at 9.
  5. The court sidesteps language in Gallagher v. Reliance Standard, 305 F.3d 264, 268, 269 (4th Cir. 2002).  There, the 4th Circuit stated that plan language requiring that a claimant submit “proof…that is satisfactory to [the plan administrator]” would “occasion abuse of discretion review.” But in this case the 4th Circuit stated the language in Gallagher was “dictum and does not bind our consideration of the plan language before us.” Op. at 7.