Safeguards to Defend Against Conflict of Interest Allegations in the Administration of ERISA Welfare Benefit Claims
In cross-motions for summary judgment in Geiger v. Aetna Life Insurance Company, the U.S. Court of Appeals for the Seventh Circuit considered whether Aetna, the designated claims fiduciary and insurer of disability benefits provided under an employer-sponsored ERISA welfare benefit plan, abused its discretion when it terminated the plaintiff’s disability benefits. The plaintiff was a former employee of the employer-plan sponsor. The terms of the plan specifically granted discretionary authority to Aetna with respect to determining benefits and construing the terms of the plan. However, the plaintiff alleged that Aetna had operated under a conflict of interest, as the party that both determined eligibility for and paid plan benefits, and thus abused its discretion in denying her claim. In deciding that Aetna did not abuse its discretion, the Court considered the following four safeguards that Aetna had undertaken to minimize any conflict of interest: (i) Aetna obtained numerous independent physician reports regarding the plaintiff’s condition; (ii) Aetna and the independent reviewing physicians reached out to the plaintiff’s own physicians and placed reliance on their reports; (iii) information gained independently by Aetna (in the form of video surveillance of the plaintiff’s physical activities) was provided to the plaintiff’s physicians to ensure an objective interpretation; and (iv) Aetna reviewed every document submitted by the plaintiff or on her behalf during the internal appeal process in order to make a fair review (and, in fact, Aetna reversed one of its prior decisions during one step of the appeal process). Although this case pertains to a claim for disability benefits, the principles behind the four safeguards could have similar application in the context of benefit claims under an employer-sponsored self-funded group health plan, when such a plan is subject to ERISA and the employer both funds the benefits and functions as the claims fiduciary in making final decisions on benefits claims.