A silver lining in Muniz

Late last year, the Ninth Circuit issued a decision that is not generally particularly favorable to ERISA disability insurance benefits plaintiffs. Muniz v. Amec Constr. Mgmt., Inc., 623 F.3d 1290, 1295 (9th Cir. 2010). The case involved a plaintiff's appeal from a district court decision in a case where the courts reviewed the insurer's adverse benefit determination de novo. The Ninth Circuit held generally that the failure of the insurer to provide a full and fair review (which would be evidence of a conflict of interest in a case reviewed for abuse of discretion), was not necessarily a relevent consideration for a court conducting a de novo review of the insurer's decision.

The case contained one little gem, however. In dicta, Muniz stated that, in cases reviewed for abuse of discretion, if the administrator has a structural conflict of interest (see my post about the Supreme Court's decision in Glenn v. MetLife, below), the administrator has the burden of proving that the conflict of interest did not improperly influence its decision. Muniz, 623 F.3d at 1295.

Last week in an unpublished decision in Dine v. MetLife (click the case name to read the decision at the Ninth Circuit's web site) -- an abuse of discretion case -- the Ninth Circuit cited Muniz for exactly that proposition, reversed the district court, and ordered benefits be paid to Ms. Dine forthwith. Prominent in Dine, a very short decision, is the following quote:

"The administrator has the burden of proving that the conflict of interest did not improperly influence its decision. See Muniz v. Amec Constr. Mgmt., Inc., 623 F.3d 1290, 1295 (9th Cir. 2010)."

Ever since the Supreme Court issued its landmark decision in Glenn v. MetLife, courts, claimants, and insurers have struggled to apply its mandate that the insurer's conflict of interest be weighed as a factor. In the Ninth Circuit, at least, weighing that factor just became simpler. If Muniz and Dine mean what they say, then conflicted fidicuiaries (i.e., those that both adjudicate and pay claims) must now overcome a presumption that their conflict tainted their claims administration.

At the end of the day this is a fair and just implimentation of the law, since the claimaint rarely can prove with certitude what went on behind the administrator's closed doors. Rather, it is the fiduciary that controls the adjudication, controls the evidence, and must honor its fiduciary duty with "an eye single" to the interests of the participants and beneficiaries. It is consistent with hundreds of years with of common law trusts and fiduciary jurispridence that the burden of proving fiduciary compliance should rest with the fiduciary.

If you find yourself struggling with your ERISA plan's administrator or insurer over your benefits (pension, disability, health, or otherwise), let us see if we can help.