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Employee Benefits

Thomas R. Brous, Esquire 

Court refuses to apply "abuse of discretion" standard of review to appeal of a benefit denial even though the self-funded, governmental medical benefits plan had "Firestone language" reserving to the employer the discretion to make final interpretations of the plan and determine questions of fact and eligibility. Thiemann v. Columbia Public School District, No. 72791 (Mo. App. W.D., March 22, 2011), Martin, P.J.
The case involved a dispute over whether a self-funded governmental medical benefits plan provided coverage for a dental surgical procedure performed in a hospital under anesthesia. Plaintiff-employee was denied the benefit, and sued alleging breach of contract and vexatious refusal to pay. The lower court granted summary for the defendant-employer, and the plaintiff-employee appealed that decision.
While the appellate court writes in great detail regarding why it reversed the trial court in its interpretation of the plan document ("We conclude that the plain meaning of the language employed in the Plan afforded [plaintiff] coverage for her surgical procedures as a matter of law."), the interesting legal point in the appellate court's decision is the standard of review that was applied to the plan's decision to deny plaintiff her sought-after benefit.
The plan contained what ERISA lawyers know as "Firestone language" (see: Firestone Tire & Rubber Co. v. Burch, 489 U.S. 101 (1989)). The relevant text of the plan reads as follows:

The Employer, or its designee, shall have the sole and absolute authority and discretion to interpret the terms of the Plan, to determine all questions of fact and determine the eligibility of individuals for coverage and benefits and their extent. All determinations and interpretations [sic] the Employer of its designee shall be final and binding on all parties unless such determination is arbitrary or capricious. (emphasis added)

Based on the quoted language, the employer argued that the court's standard of review should be "abuse of discretion" and not de novo. Although it was conceded that the plan was not subject to the Employee Retirement Income Security Act ("ERISA") (governmental plans are exempt from ERISA) and therefore not subject to federal law precedent which construed "Firestone language" as imposing an abuse of discretion standared of review of coverage determinations, defendant-employer argued the abuse of discretion standard should apply.
The appellate court rejected the defendant-employer's assertion for the following reasons:
(1) the plan is not subject to ERISA;
(2) the plan itself provided that Missouri law would govern interpretation of the document;
(3) the discretionary language quoted above expressly authorized the employer to make determinations of fact, not law; and
(4) no Missouri authority was cited suggesting that the standard of review in interpreting an insurance contract can be summarily modified by the insertion of a "discretionary authority" provision into the contract.
The opinion concluded:  "We will not deviate from our Supreme Court's directive that a trial court's decision to grant a summary judgment motion be reviewed de novo, and that the determination of coverage under an insurance policy be reviewed de novo as a question of law."  Two important points to note in the court's conclusion: (1) it applied a de novo standard to review of the summary judgment, whereas employer-defendant was arguing for an abuse of discretion standard of review to be applied to the plan's decision to deny benefits; and (2) the court without discussion treated a self-funded medical plan as an "insurance policy."
Editor's Note:  Discussion of those two points would have been helpful in fully understanding the court's rationale. The Missouri Bar Courts Bulletin, 11-Apr