The Eleventh Circuit has held that the “heightened” arbitrary and capricious standard of review previously used by the court in cases where a conflicted plan administrator decided a claim for benefits — and its accompanying burden-shifting analysis — does not survive the Supreme Court’s recent decision in Metropolitan Life Ins. Co. v. Glenn, 128 S. Ct. 2343 (2008). Instead, where a plan grants the fiduciary discretionary authority to determine eligibility for benefits, a decision denying plan benefits should be reviewed under an arbitrary and capricious standard, with the reviewing court considering any conflict as “a factor” in its decision. Doyle v. Liberty Life Assurance Co. of Boston, __ F.3d __, 2008 WL 4272748 (11th Cir. Sept. 18, 2008). Doyle should make it substantially easier for a conflicted administrator to prevail in a lawsuit that is brought in the Eleventh Circuit challenging a decision that denied plan benefits.

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989)

The Employee Retirement Income Security Act of 1974 (ERISA) does not delineate a standard under which district courts should review a plan administrator’s decision denying a claim for benefits. However, the Supreme Court held in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 (1989), that district courts should review de novo (or anew) benefit decisions made by an administrator who does not have discretion to determine eligibility for benefits or to construe the terms of an ERISA-governed plan. The Court further ruled that where the administrator exercises a grant of discretion, an “arbitrary and capricious” standard of review is appropriate. This is a very deferential standard of review that, when applicable, usually means the administrator’s decision will be affirmed. Finally, the Court held that when an administrator with discretion operates under a conflict of interest, “that conflict must be weighed as a ‘facto[r] in determining whether there is an abuse of discretion.’”

The Standard of Review Developed by the Eleventh Circuit

Following Firestone, the Eleventh Circuit held that when an administrator operated under a conflict of interest, a decision denying benefits was to be reviewed under a heightened arbitrary and capricious standard, “the hallmark of which is its burden-shifting requirement.” Under this heightened standard of review, the burden shifts to the fiduciary to prove that its interpretation of plan provisions was not impacted by self-interest. Thus, a “plan interpretation that advances the conflicting interest of the fiduciary at the expense of the affected beneficiary” was arbitrary and capricious, unless the administrator “justifies the interpretation on the ground of its benefit to the class of all participants and beneficiaries.”

The Supreme Court’s Decision in Glenn

In Glenn, the plan vested MetLife — which served as both the plan’s administrator and insurer — with discretion to determine eligibility for benefits, meaning that its decision was subject to an arbitrary and capricious standard of review. However, because MetLife both decided a claim for benefits and paid any subsequent benefits due, Glenn argued that MetLife’s decision was tainted by a conflict of interest. The district court affirmed MetLife’s decision to deny benefits, but the Sixth Circuit reversed. The Supreme Court granted certiorari on two issues: whether an entity’s dual role of administrator and insurer creates a conflict of interest and, if a conflict exists, how to account for that conflict in the judicial review of benefits decisions.

With respect to the first issue, the Court held that the dual role does create a conflict of interest. It explained that an entity that “determines whether an employee is eligible for benefits and pays benefits out of its own pocket,” whether an employer or insurance company, operates under a conflict of interest. With respect to the second issue, the Court reasoned that such a conflict “should be weighed as a factor in determining whether there is an abuse of discretion.” The Court emphasized that “the word ‘factor’ implies, namely, that when judges review the lawfulness of benefit denials, they will often take account of several different considerations of which a conflict of interest is one.”

The Eleventh Circuit’s Decision in Doyle

The plaintiff in Doyle was covered by a long-term disability plan sponsored by her employer and governed by ERISA. The defendant, Liberty Life Assurance Company of Boston, insured the plan pursuant to a group policy and also acted as plan administrator. Following a surgical procedure, Doyle received short-term disability through the maximum date available. After reviewing Doyle’s medical records, Liberty Life determined that Doyle was ineligible for long-term disability benefits because she was still able to perform the duties of her own occupation.

The district court found that Liberty Life operated under a conflict of interest, since it was responsible for both determining eligibility and paying benefits. However, instead of applying the heightened arbitrary and capricious standard — which would have required Liberty Life to prove that its decision was not influenced by the conflict — the court reviewed the record and concluded that “there does not appear to be any evidence that Liberty in any way manipulated or improperly influenced Doyle’s LTD benefits process in order to achieve a financially beneficial result.” Based on its analysis, the district court affirmed the decision denying benefits.

On appeal, the Eleventh Circuit held that Glenn implicitly overruled circuit precedent requiring district courts to apply a heightened standard of review to a conflicted administrator’s decision. The court noted that one of the principal flaws in the heightened standard was its burden-shifting feature, under which the administrator bore the burden of proving that its decision was not influenced by a conflict. This was contrary to the traditional burden of proof, which requires the plaintiff to prove that a decision was tainted by self-interest.

As to the existence of a conflict of interest, the court held that such a conflict “should merely be a factor for the district court to take into account when determining whether an administrator’s decision was arbitrary and capricious.” Moreover, “the burden remains on the plaintiff to show the decision was arbitrary; it is not the defendant’s burden to prove its decision was not tainted by self interest.” After reviewing the facts of Doyle’s claim, the Eleventh Circuit affirmed the decision to deny benefits, reasoning that the evidence did not show that Liberty Life was influenced by the conflict.

Conclusion

Prior to Doyle, the heightened standard of review and its accompanying burden-shifting requirement placed conflicted administrators in the unenviable position – a position almost unique to administrators sued in the Eleventh Circuit – of having to prove a decision denying benefits was not influenced by a conflict of interest. Following Doyle, any conflict will be weighed merely as “a factor” by the court reviewing the decision, and the burden will be on the participant to show that the conflict influenced the outcome of his or her claim for benefits.