Discretionary Authority not Granted Despite SPD Language

Jobe v. Medical Life Insurance Company (8th Cir., March 19, 2010)

The issue before the circuit court was whether discretionary language included in the summary plan description ("SPD"), but not in the actual policy, prevailed. Plaintiff argued because the plan itself did not vest the plan administrator with discretionary authority, the district court erred is reviewing the benefit determination under an abuse of discretion standard. The insurer argued that language in the SPD prevails as previously stated by the Eight Circuit. In that prior case, the court held that the SPD language was enforceable where the beneficiary was granted certain rights or privileges not included in the policy. The insurer argued that this holding should be applied to discretionary language in the SPD.

The court distinguished its prior holding from the instant case on two grounds: (1) there was no underlying policy as there is in this case and (2) the employee was attempting to rely on the SPD for benefits, but disregard it with respect to the plan administrator’s rights. Here, application of the subject language in the SPD would be for the sole benefit of the administrator. Stating this was a case of first impression before the Eight Circuit, the court notes that other circuits which have addressed the same issue have not done so uniformly. It joins the prior holdings from the Seventh, Ninth and Eleventh Circuits, stating "the implication of §1022 is that the [SPD] will be an accurate summary, not an unnegotiated enlargement of the administrator’s authority." The court further stated that a contrary ruling would allow the practice of keeping policies silent on key provisions and insert favorable terms to the employer via the SPD. Moreover, the court found that the average plan participant would read the provision in the SPD that states it does not accrue any rights and conclude that the policy would prevail where a conflict exists. Because the actual policy did not grant discretion authority to the plan administrator, the court held that the determination regarding the participant's eligibility for benefits should have been reviewed de novo, not under an abuse of discretion standard. The district court's judgment was reversed and remanded.

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Kim Whistler and Dan Gerber