According to one U.S. Circuit Court of Appeal, the answer is a resounding "no." In an important decision today from the Seventh Circuit, Judge Frank Easterbrook writes for a unanimous panel in Krolnik v. The Prudential Ins. Co. of America. The trial court ruled that Paul Krolnik was prohibited from introducing affidavits in litigation to support his disability claim. Krolnik also attempted to conduct discovery but the trial court likewise cut him off at the pass. The trial court ruled that ERISA benefit denial cases, even those conducted under a de novo standard of review, simply involve a review of the insurer's actions rather than consideration of all the facts and arguments presented by both sides in litigation. After the court granted Prudential summary judgment, Krolnik appealed.UPDATE: I've place Krolnik in the website library.
Judge Easterbrook is known for his concise, direct and unequivocal writing style and this opinion is no exception. The reference in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), to "de novo review" is misleading: "[t]he law Latin could be replace by an English word, such as 'independent.' And the word 'review' simply has to go. For what Firestone requires is not 'review' of any kind; it is an independent decision rather than 'review' that Firestone contemplates."
Comparing the dispute before the court to non-ERISA insurance litigation, the opinion goes on to state, "[a] judge would not dream of forbidding the parties to take discovery, let alone of rejecting affidavits that did not depend on discovery. Evidence is essential if the court is to fulfill its fact-finding function. Just so in ERISA litigation." Where the evidence is conflicting, the court, rather than an insurer or other ERISA plan administrator, is obligated to weigh the evidence and make a final decision about whether the claimant is entitled to benefits.
Summing up, Judge Easterbrook takes pains to be clear:
"All in all, it would be best for judges and lawyers to stop thinking about 'de novo review'--with the implication that the judge is 'reviewing' someone else's action--and start thinking about independent decision, which is what Firestone requires."
This is the first Circuit court I'm aware of to explicitly state that there are no restrictions or limitations on the scope of review a trial court carries out when it undertakes de novo review of an ERISA benefit denial case. There is support for the argument not just in Firestone v. Bruch, as the opinion references, but also in the Court's statements last year in MetLife v. Glenn, 128 S.Ct. 2343 (2008). In that case the Supreme Court held that there are no special evidentiary or procedural rules trial courts are bound to follow in evaluating how an insurer's inherent conflict of interest affects a court's review.
As de novo review becomes more common in ERISA benefit denial cases (states are increasingly banning discretionary authority clauses from insurance policies), Krolnik has the potential to significantly shift the basic framework lawyers and judges have taken for granted in litigating ERISA benefit denial cases. The effect of greater discovery and opportunity to develop and present information in litigation will do two things. It will result in better, more fully informed and accurate decision making by the federal judiciary. And it will make litigating ERISA benefit denial cases more costly in time and money for the parties.
- ?I have been awarded Social Security disability benefits. But the insurer of my disability policy has denied my claim. Can the insurer do that?
- ?I already have a lawyer working on my social security disability claim. Can't that lawyer handle my disability insurance claim too?
- ?What issues do you see in life insurance claims?
- Posted on 07/11/2019Timothy D. v. Aetna Health and Life Ins. Co.
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- Posted on 04/24/2006Eliminating Discretionary Clauses in Insurance Policies