May 21, 2019
A few days ago I received a brochure from the American Conference Institute advertising their annual ERISA Litigation seminar. In the past ACI has put on a good (albeit expensive) ERISA seminar each year. I’ve presented at it in the past. The difference in this year’s format is that ACI is presenting the seminar solely from a defense perspective. It promotes the program by boasting a faculty that includes 28 in-house counsel from various insurers and large corporations along with 21 U.S. District Court judges from across the country.
More troubling, however, are some of the topics the presenters will address. One of them is “using the claims review process to set up, control and strengthen the defense.” Another topic to be addressed is “anticipating claims when making the decision and preparing to defend it before the decision is made.” You can take a look at the brochure yourself. I’ve placed a copy of it in the website library here.
Now maybe I’m being just a little sensitive in how I title this post but I don’t think so. You see, the overriding concern of ERISA is that fiduciaries will be held to strict fiduciary standards. The statute defines ERISA in broad terms. Any person or entity that is charged with, or actually exercises, any authority, management or control over an ERISA plan or its assets is a fiduciary. 29 U.S.C. Sec. 1002(21). It doesn’t matter whether the person is designated as a fiduciary under the plan documents or they simply act in a fiduciary capacity. It doesn’t matter whether they are aware of their fiduciary status or intend to act as a fiduciary.
In addition, the statute expressly states that ERISA fiduciaries must act solely in the interest of the ERISA plan’s participants and beneficiaries and for the exclusive purpose of providing them benefits. 29 U.S.C. §1104(a)(1)(A). Various cases provide more information about the nature of these fiduciary duties. One court referred to ERISA’s fiduciary duty standards as “the highest known to the law." Donovan v. Bierwirth, 680 F.2d 263, 272, n. 8 (2nd Cir. 1982). The Supreme Court referred to ERISA's fiduciary duty standards just last year as requiring “higher-than-marketplace” standards of conduct. Metropolitan Life v. Glenn, 128 S.Ct. 2343, 2350 (2008). This echoes the language of Justice Benjamin Cardozo many years ago when he described fiduciary duties in this way:
Many forms of conduct permissible in a workaday world for those acting at arms length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the marketplace. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.
Meinhard v. Salmon, 164 N.E. 545 (N.Y. 1928). One of the most critical points at which these fiduciary duties apply is when insurers and plan administrators are evaluating whether to pay or deny a claim.
What does it say about how seriously ACI and its presenters take ERISA’s fiduciary duty standards when they teach plan fiduciaries how they can “use the claims review process to set up, control and strengthen” defense of that claim in litigation? When ACI advises lawyers and corporate officers about how they can “anticipate claims when making the decision and prepare to defend them before the decision is made,” it is doing nothing less than encouraging the breach of ERISA’s fiduciary duties.
The ACI marketing brochure is testimony to what a sham ERISA’s fiduciary protections of participants and beneficiaries have become.
Yesterday's Washington Post article about Wendell Potter's testimony before the Senate Commerce Committee should come as no surprise to anyone who's dealt with health insurers. The former Cigna executive's message? Don't trust insurers. I don't think this is the bombshell that a lot of others seem to think it is. The idea that we should blindly trust any business is pretty naive. They are created to make a profit and short of that cease to exist. The problem with all insurers, however, is that consumers are at their mercy to a much greater degree than for most business transactions. And insurers know it. Indeed, they play on our vulnerabilties in their ad campaigns. Just think of their marketing: "like a good neighbor, State Farm is there." "You're in good hands with Allstate." They want us to know that they are there to protect us and we can trust them . Within ERISA the potential for abuse in the insurer/insured relationship is recognized and dealt with through that statute's fiduciary duty standards. A good argument can be made that there is nothing wrong with ERISA's language, only with the federal judiciary's refusal to enforce in a meaningful way those fiduciary standards.
It's nice to see an industry insider reminding Congress that we should be very wary of removing meaningful checks on insurers or gutting remedies for their misconduct. We need to provide in our healthcare reforms effective ways to ensure that insurers are held accountable when they overreach.