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Eighth Circuit: Procedural Irregularity Not a “Gateway” to De Novo Review of Administrator’s Decision to Deny Benefits

In McIntyre v. Reliance Standard Life Insurance Company, 972 F.3d 955 (8th Cir. 2020), the United States Court of Appeals for the Eighth Circuit clarified the standard of review to apply where there has been a denial of benefits challenged under ERISA Section 502(a)(1)(B).

Generally, a court reviews a denial of benefits under a de novo standard, unless the benefit plan gives the administrator or fiduciary the discretionary authority to determine eligibility for benefits or to construe the terms of the plan. Where the benefit plan gives the administrator such discretionary authority, then a court should review the administrator’s decision for an abuse of discretion.

In this case, an employee who suffered from a degenerative neurological condition was denied disability benefits. She filed an appeal, challenging her administrator’s eligibility determination. After delays from both parties, she underwent an independent medical examination. The doctor performing the independent medical examination concluded she was capable of working full time with an accommodation. The plan administrator upheld its original determination that she was not eligible for disability benefits. She sued for wrongfully denied benefits.

It was undisputed that the benefit plan granted the administrator discretionary authority—thereby triggering an abuse of discretion review. But the district court nevertheless decided that a de novo standard applied, based on purported procedural irregularities in the administrative review process.

In Woo, the Eighth Circuit recognized a court could apply a “less deferential review” if: (1) either the administrator faces a “palpable conflict of interest” or a “serious procedural irregularity” arose in the review process, and (2) either the conflict or the procedural irregularity “caused a serious breach of the plan administrator’s fiduciary duty” to the claimant. Woo v. Deluxe Corp., 144 F.3d 1157 (8th Cir. 1998), abrogated in part by Metro. Life Ins. V. Glenn, 554 U.S. 105, 115-16 (2008).

Based on the district court’s understanding of Woo, it found both a palpable conflict of interest—insofar as the administrator “both determines and pays claims” and ostensibly has a “history of biased claims administration”—and a serious procedural irregularity—namely, the “long delay in deciding [the] appeal.” The district court then applied a de novo standard to its review, determining that the plaintiff was entitled to benefits.

The Eighth Circuit vacated and remanded to the district court for review under the abuse of discretion standard, clarifying that the United States Supreme Court in Glenn abrogated the conflict-of-interest component of Woo. The Eighth Circuit also clarified that it did not intend its holding in Woo to be read as providing a “gateway” to de novo review.  Rather, in Woo, the Eighth  Circuit adopted a “sliding scale approach” to abuse of discretion review. Applying this standard, in some cases an administrator might have to support its decision with “substantial evidence bordering on a preponderance,” while in other cases, an administrator might have to support its decision with mere “substantial evidence.”

Therefore, it was error for the district to treat the ostensibly serious procedural irregularity as a trigger for de novo review. Rather, the irregularity was just another factor for the district court to consider when reviewing the administrator’s decision for an abuse of discretion.

On remand, in McIntyre v. Reliance Standard Life Insurance Company, 2021 U.S. Dist. LEXIS 157848 (D. Minn. Aug. 20, 2021), the district court found that the denial of benefits was an abuse of discretion.  That decision has been appealed to the Eighth Circuit.

Jackson Lewis P.C. © 2022National Law Review, Volume XI, Number 319
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About this Author

Stephanie O. Zorn, Jackson Lewis Law Firm, Employee Benefits Attorney
Of Counsel

Ms. Zorn  has over twenty years of experience exclusively representing management in employee benefits and employment matters, both as in-house counsel and in private practice.

Ms. Zorn’s  employee benefits practice includes counseling clients with regard to plan compliance, administration, participant disclosures, reporting and drafting requirements under ERISA, the Internal Revenue Code, ACA, HIPAA and COBRA. Ms. Zorn assists clients with a broad range of plans, including retirement plans, welfare benefit plans,...

314-827-3939
Daniel Crowner Employment Lawyer Jackson Lewis Seattle Law Firm
Associate

Biography

Daniel P. Crowner is an associate in the Seattle, Washington, office of Jackson Lewis P.C. His practice focuses on representing employers in workplace law matters, including preventive advice and counseling.

Honors and Recognitions

  • The Best Lawyers in America©, "Ones to Watch: Labor and Employment Law - Management" (2021-present)
206-626-6412
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