Unlike most breach of contract cases or cases involving insurance, where the standard of judicial review is de novo – i.e. the court gets to determine whether or not a breach has occurred or if the beneficiary is entitled to the disputed benefit – under ERISA claims what standard of review is to be applied is one of the initial questions and disputes between the parties. While a de novo review can occur most of the time the District Court will utilize the abuse of discretion standard.
The question of what standard to apply becomes more nuanced when the ERISA plan administrator has either not performed its review of the LTD claim in accordance with the procedures outlined under Federal Regulation or if there is an inherent conflict of interest.
Firestone: The Starting Point
The Supreme Court’s landmark decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), established the default rule: courts apply a de novo standard of review unless the benefit plan grants the ERISA plan administrator discretionary authority to determine eligibility or interpret plan terms. If such authority exists, courts apply a more deferential abuse of discretion standard to a judicial review of a denial of a claim for LTD benefits
This ruling was meant to ensure fairness, but it left open questions about what happens when the administrator has a conflict of interest or engages in procedural irregularities.
Unsurprisingly, the various Circuits have developed numerous approaches to what standard of review applies when procedural irregularities exist in the long-term disability claim file and/or conflicts of interest are present.
This post focuses on the 8th Circuits rapidly evolving, and very imprecise, approach to deciding what standard of review applies in ERISA governed claims for LTD when procedural irregularities and conflicts of interest shade the judgment and outcome of the ERISA plan administrator’s decisions.
Woo: The Sliding Scale Approach
In Woo v. Deluxe Corp., 144 F.3d 1157 (8th Cir. 1998), the Eighth Circuit introduced a “sliding scale” standard of review. If a claimant could show both a serious procedural irregularity or palpable conflict of interest, and that it had some connection to the denial of benefits, then the court would apply a less deferential review—not fully de novo, but more scrutinizing than pure abuse of discretion.
This became a powerful tool for claimants to challenge biased or flawed denials. However, Woo’s framework was not universally accepted and began to erode over time. This erosion occurred because the 8th Circuit and the District Courts failed to consistently define what constituted a procedural irregularity. Also, the scale itself was arbitrary in how irregularities and conflicts of interest were weighed against the benefit decisions made by the LTD plan administrator.
Ultimately, many District Court’s began applying the de novo standard when procedural irregularities and/or conflicts of interest were present in the LTD claim file. This appeared to be in direct contradiction to the holding in Woo, but reasonable considering the lack of direction provided by the 8th Circuit as to how to proceed if irregularities and conflicts of interest were present in the LTD claim file.
McIntyre: Returning to Deference
In 2020 the 8th Circuit took a hard shift back to the less deferential standard, holding that procedural irregularities and/or conflicts of interest would never trigger a de novo review where the ERISA plan administrator had discretionary authority. This appeared to overturn the Woo holding, and if not, then many cases that relied upon Woo.
Rejecting the sliding scale outlined in Woo, the 8th Circuit adopted what it called the “modified abuse of discretion standard” for instances when procedural irregularities and conflicts of interest were present in the LTD claim process. However, the 8th Circuit once again failed to outline what the modified abuse of discretion standard was and how it was to be applied by the District Courts.
In 2023, once again reviewing the decision of the District Court in McIntyre v. Reliance Standard Life Insurance Co., the 8th Circuit seems to have thrown out its own “modified abuse of discretion standard” indicating that while there were procedural irregularities in the handling of the LTD claim and that the ERISA plan administrator had an inherent conflict of interest, neither should affect the discretion granted to the plan administrator. And the even though the “modified abuse of discretion standard” was applied the Court’s holding seems to only apply a normal arbitrary and capricious review, finding that the decision to deny the benefits was reasonable.
What This Means for Claimants
The 8th Circuit is one of the trickiest places to get a less deferential judicial review of a denial of an ERISA governed claim for long-term disability benefits. Because of this it is crucial that the claim file is perfected during the initial application and appeal process. This necessarily includes identifying any procedural irregularities and conflicts of interest in real time.
How We Can Help
At Davis Olszeski Law, we understand how to navigate the internal claim and appeal process as well as the evolving legal landscape. We focus on building strong ERISA claims from the ground up—because how your claim is handled before it reaches court often determines how it’s reviewed.
If your LTD benefits were denied, don’t wait. Contact us today to schedule a consultation and protect your right to a fair review.
