July 13, 2017

Court Denies De Novo Review in Favor of Request for Abuse of Discretion Standard

In a case brought in federal court under the Employee Retirement Income Security Act (ERISA) against our client, a national retailer, and its group health insurance plan for denial of an expensive surgery as not medically necessary, the court ordered briefing on the appropriate standard of court review. In ERISA cases, the standard of review is very important to determine whether the court will defer to the plan’s determination. Plaintiff filed a motion arguing for de novo review based on a California Insurance Code section he claimed negated the plan’s language requiring abuse of discretion review, citing two Central District court decisions in support. In opposition, Payne & Fears argued that the Insurance Code section was preempted with respect to the self-funded plan, distinguishing the two district court decisions and citing a conflicting decision from another Central District court.

On this issue which is undecided in the Ninth Circuit, the district court rejected plaintiff’s request for de novo review of the plan’s decision to deny coverage for his surgery. Instead, the court adopted the abuse of discretion standard requested by the plan, holding that the Insurance Code section was preempted with respect to the self-funded plan. The court also sided with the one case in the Central District so holding, and distinguished the two other Central District cases that decided otherwise.

Eric C. Sohlgren is defending the case on behalf of the plan and prepared the opposition briefing.