The standard of review utilized by a district court in a denial of benefits case can be outcome determinative. Either the court will examine the administrative record and make its own determination as to a participant’s eligibility for benefits (the de novo standard) or simply assure itself that the plan administrator’s decision to deny benefits “falls somewhere on a continuum of reasonableness” (the abuse of discretion standard). Corry v. Liberty Life Assurance Co. of Boston, 499 F.3d 389, 398 (5th Cir. 2007). Needless to say, a plan administrator’s decision to deny benefits is given great deference, and routinely upheld, under the abuse of discretion standard.
Recently, the Fifth Circuit Court of Appeals overruled its longstanding precedent to reject the notion that plan administrators are inherently entitled to discretion. Ariana M. v. Human Health Plan of Tex., 884 F.3d 246, 255 (5th Cir. 2018). As a result, courts must now apply the de novo standard of review unless the benefit plan itself expressly delegates discretion to the plan administrator.
It is important to note, however, that Texas state law prohibits the use of “discretionary clauses” that would purport to delegate discretionary authority to plan administrators. See Section 1701.062 of the Texas Insurance Code (2019). The Fifth Circuit expressly declined to decide whether or not federal law preempts this state action but noted that all courts to have considered the issue held that ERISA does not preempt state anti-delegation statutes. Ariana M., 884 F.3d at 249, n. 2. At least one court has followed this reasoning to apply a de novo standard of review after concluding that the benefit plan’s discretionary clause was unenforceable under state law. Woods v. Riverbend Country Club, No. H-17-416, 2018 U.S. Dist. LEXIS 149173 (S.D. Tex., August 10, 2018).
At a minimum, plan participants who are denied benefits (under a benefit plan that qualifies as an insurance plan under Texas law) should request the application of the de novo standard of review to their ERISA claims.