FIDUCIARY/PENSIONS ALERT: Court Flushes Out Standards Applicable to Plan Administrator
Ninth Circuit -- California - March 7, 2011. U.S. courts have been grappling with the standards to apply to a decision by an ERISA plan administrator to deny benefits. Review is complicated by the conflict of interest that commonly arises when the plan administrator not only administers the plan, but also pays benefits out of its coffers. The Ninth Circuit has settled on the following legal standards: whether the decision was illogical, implausible, or without support in inferences that may be drawn from the facts in the record. The court concluded here that the plan administrator violated its procedural obligations and violated its substantive obligation by abusing its discretion and judging the employee’s disability claim arbitrarily and capriciously. The court’s skepticism was heightened by the administrator’s conflict of interest.