Employees in Chicago that are participants in any employee benefit plans should pay attention to the growing divide among Courts of Appeals over whether “satisfactory to us” is language in a plan sufficient to vest the plan administrator with discretion to interpret plan terms and make benefit determinations. When the administrator has such discretion, a court reviewing the administrator’s decision will do so under an abuse of discretion standard–whether the decision was reasonable, not whether it was right.
The United States Court of Appeals for the Third Circuit joined the ranks of courts in holding such language requiring a participant to provide proof of a loss “satisfactory to us” does not confer discretion on the administrator of the plan. Viera v. Life Insurance Company of North America, No. 10-22810, Slip Op. at 19 (3d Cir. June 10, 2011). The Third Circuit joined the ranks of the Second, Seventh, and Ninth Circuits in holding that this sort of language does not clearly communicate to a participant that the plan administrator has discretion in administering the plan.
The Court of Appeals for the Seventh Circuit–located in Chicago–held this sort of language cannot vest the administrator with discretion back in 2005. Diaz v. Prudential Life Insurance Company of America, 424 F.3d 635, 637 (7th Cir. 2005). However, employees cannot take these holdings for granted. When there is a divide in courts of appeals such as the one present here, it is more likely the Supreme Court will allow an appeal in order to resolve the conflict.