Bendixen v. Standard Insurance Co. (August 2, 1999)

* Court: Ninth Circuit

* Trial Court Decision: In favor of Standard

* Appellate Court Decision: In favor of Standard

* Issue Areas: ERISA standard of review

Bendixen Facts

* Bendixen was covered by a long-term disability policy with her employer.

* Bendixen worked up until her employer fired her.

* She filed for disability, and Standard decided that she was not disabled by her mental illness until after she stopped working for the employer. Some evidence given to the administrator indicated that it was her termination that caused her mental illness.

* The district court granted Standard summary judgment.

* The Ninth Circuit upheld the district court.

Bendixen Analysis

* The U.S. Supreme Court held in Firestone v. Bruch that, if a plan document gave the plan's Board of Trustees discretion to decide benefit appeals and if a participant sued the plan, then a court could overturn the Trustees' decision only if the administrator abused its discretion.

* The Standard LTD policy conferred discretion under Standard to decide benefit appeals.

* But the courts love to make things complicated. So they have added a new rule.

* Standard both issued the LTD policy and administered it. The courts consider this a conflict of interest. That all by itself does not matter. But if the conflict is deemed to be "serious", then a court will use a tougher standard of review, notwithstanding the presence of the Firestone language in the plan document.

* To show that a conflict of interest is "serious", a plaintiff must come up with some evidence of administrator bias. Bendixen failed to come up with anything. So she did not get the more favorable standard of judicial review.

* Under the abuse-of-discretion standard of judicial review which is less favorable to Bendixen, the Ninth Circuit determined that Standard had not abused its discretion. Conclusion LDF is not in the business of turning a profit, although, for example, AIG is. So, at least under the current case law, LDF does not have a conflict of interest vis-a-vis LDF participants, although, for example, AIG may have a conflict of interest vis-a-vis its participants. So LDF will be accorded an unadulterated standard of judicial review if it is sued, but AIG may be subject to a tougher standard of review.