First, when an ERISA case involving a denial of benefits is reviewed by a federal judge, by definition, the court is never faced with a "single honest mistake" made by a plan administrator. Why? Because the federal judiciary uniformly holds that no ERISA benefits denial case may be brought to court unless and until the claimant has exhausted his pre-litigation appeal rights and obligations. That involves at least one level of appeal after the initial denial and usually two levels of appeal. Consequently, before a court hears a case, the plan administrator or its agents have already considered the claimant's arguments at least two, and usually three or more, times. The basis for the claim denial has been carefully considered and reviewed. Consequently, the fault Chief Justice Roberts lays at the feet of the Second Circuit for improperly adopting a "one-strike-and-you're-out" rule is fundamentally misplaced.
This error in the Court's analysis will undoubtedly cause unscrupulous insurers to claim that even if a judge determines that the insurer has wrongly denied benefits, it was a "single honest mistake" by the insurer and the court should give that insurer a second chance to make it right. These "remands" to plan administrators are easy ways for courts to unload off their dockets ERISA cases that they view as undesirable. But, of course, if there is no negative consequence for an insurer who can convince a court that their claims denial was simply a "single honest mistake," why should an insurer work hard to get it right the first time? The delay and cost associated with remands are disproportionately borne by the claimant, not the insurer. However, the slack the federal judiciary has cut insurers of ERISA plans over the last three decades has caused those insurers to grow increasingly sloppy. It's generally not hard for experienced claimant lawyers to find a variety of substantive and procedural errors made by insurers. In those cases, it's difficult for the insurer to argue, in good faith and with a straight face, that any error it might have made in denying a claim is a "single honest mistake." But that doesn't mean they won't use Conkright to try and make that argument.
The Court's analysis is frustrating because, as is so often the case in ERISA cases, the Court is exquisitely sensitive to any potentially negative economic consequences to plans and their administrators and sponsors but fails to consider the losses and hardships its ruling causes for plan participants and beneficiaries.
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