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United States Supreme Court Decision Favors Plan Administrators

On April 21, 2010, the United States Supreme Court ruled in Conkright v. Frommert, No. 08-810, 2010 WL 1558979, that the determination of an administrator with discretionary authority to interpret a plan is entitled to deference from a reviewing court even if the administrator’s prior determination with respect to the same claim had been held invalid. Writing for the majority, Chief Justice Roberts stated:

People make mistakes. Even administrators of ERISA plans. That should come as no surprise, given that [ERISA] . . . is “an enormously complex and detailed statute,” Mertens v. Hewitt Associates,508 U.S. 248, 262, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993), and the plans that administrators must construe can be lengthy and complicated. . . . We held in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), . . . that an administrator with discretionary authority to interpret a plan is entitled to deference in exercising that discretion. The question here is whether a single honest mistake in plan interpretation justifies stripping the administrator of that deference for subsequent related interpretations of the plan. We hold that it does not.

Needless to say, this decision presents just one more hurdle that Plaintiffs must overcome in attempting to receive benefits under an ERISA plan. We believe that Justice Breyer when he argued that there was no basis in trust law for requiring a court to defer to an administrator’s second attempt at exercising discretion; rather, trust law provided that after an abuse of discretion has occurred, the court itself has the authority to decide whether to defer anew, or to craft a remedy itself. Justice Breyer asserted that the majority’s “absolute ‘one free honest mistake’ rule” was impractical because it would require courts to evaluate whether the mistake was “honest,” and would encourage appeals and delays. Additionally, he opined that the majority’s decision would create incentives for administrators to draft ambiguous plans, with the expectation that they would have repeated opportunities for interpretation.