Firestone does make a difference!



Although straying into the area of employee benefits and ERISA is something that seems to happen more frequently to employment lawyers these days, one of the most critical issues has to occur at the drafting of the plan, long before we generally are allowed to meddle. Any first year law student knows that there is considerable difference whether or not a decision is reviewed for an abuse of discretion vs. a de novo review. The difference -- between winning and losing. If you are the decision maker, you clearly favor the the former which will cut you some slack; if you are the one whose claim has been denied, you want a fresh, independent look.



The Supreme Court clearly set out the rules for ERISA plans in Firestone Tire Rubber v. Bruch, 489 US 101 (1989), with the basic rule being de novo, but allowing any drafter to avoid the rule by using appropriate language. A concept ERISA lawyer Michael McKuin discusses in his cleverly titled, When the Exception Becomes the Rule and the Rule Becomes the Exception, of What Value Is the Rule?



In any event, the 9th Circuit, the favorite of every employee in employment related matters, recently showed the difference those few words can make. Discussing a practice which has drawn more judicial attention than one might think, the court in a 2-1 decision awarded life insurance benefits because it found that death by autoerotic asphyxiation was barred neither by the suicide or intentionally inflicted self-injury clauses. Padfield v. AIG, decided May 17, 2002.



The benefits had been denied by the plan administrator and the district court. Unfortunately, the plan lacked the magic Firestone words. Thus rather than being required to give the administrator's decision deference, the 9th Circuit was free to supply its own rationale. Finding the cases applying these two clauses to deaths of autoerotic asphyxiation split, the court noted that reasonable men could disagree, which would meet the standard for upholding the administrator's decision under Firestone. But alas, for the lack of a few words ....