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.
