Uniformity, Efficiency and Primacy of Plan Documents Rules
A plan participant sued the plan administrator under the Employee Retirement Income Security Act (ERISA), challenging the decision to terminate his long-term disability (LTD) benefits. The Tenth Circuit concluded as a matter of federal common law a choice-of-law provision in a LTD insurance policy must be enforced because a clear, uniform rule is required to ensure plan administrators enjoy the predictable obligations and reduced administrative costs central to ERISA. The plaintiff had brought the action in Colorado, but the policy had a choice-of-law provision requiring the application of Pennsylvania law. This raised a material issue because Colorado law bans discretionary clauses in insurance policies while Pennsylvania does not. The Tenth Circuit focused on the uniformity and efficiency objectives central to ERISA and concluded that if the plan has a legitimate connection to the state which law is chosen, ERISA’s interest in efficiency and uniformity, as well as its recognition of the primacy of plan documents, compelled the conclusion that the selected law should govern as a matter of federal common law.