For more than twenty-five years, the law of the Fifth Circuit has been that health and disability benefit denials based on factual determinations (e.g., whether a beneficiary is disabled or whether a treatment is medically necessary within the meaning of a plan) are reviewed by courts under an abuse of discretion standard, regardless of whether a subject plan includes discretionary “Firestone” language. Pierre v. Connecticut General Life Ins. Co., 932 F.2d 1552, 1553 (5th Cir.) cert. denied, 112 S. Ct. 453 (1991).
The Fifth Circuit’s so-called “Pierre deference” was recently challenged in the case of Ariana M. v. Humana Health Plan of Texas Inc., No. 16-20174 (5th Cir. Apr. 21, 2017). In Ariana M., the plaintiff argued that a Texas statute prohibiting the use of discretionary clauses in insurance policies overrode the Fifth Circuit’s default Pierre deference, under which district courts are directed to “reject[ ] an administrator’s factual determinations in the course of a benefits review only upon the showing of an abuse of discretion.” Dutka ex rel. Estate of T.M. v. AIG Life Ins. Co., 573 F.3d 210, 212 (5th Cir. 2009). The plaintiff argued that Texas’s specific ban on the use of discretionary language in insurance policies precluded the district court from conducting a deferential review of Humana’s factual findings, and thus compelled application of the more favorable de novo standard.
The Fifth Circuit rejected the plaintiff’s argument, unanimously finding that “Texas’s anti-discretionary clause law concerns what language can and cannot be put into an insurance contract in Texas. It does not mandate a specific standard of review for insurance claims.B” Consequently, “Texas’s anti-discretionary clause law does not change [the Fifth Circuit’s] normal Pierre deference”, and courts in the Circuit will continue to apply Pierre deference to all factual determinations even in cases arising out of insurance policies issued in Texas. In this regard, Ariana M. preserves the status quo.
Interestingly, however, the Ariana M. decision included a unanimous concurrence, in which the panel directed its attention to the “striking” fact that “we are the only circuit that would apply [Pierre] deference to factual determinations made by an ERISA administrator when the plan does not vest them with that discretion.” The Fifth Circuit proceeded to detail the basis for Pierre at the time it was decided, and the divergent evolution of the law in other circuits:
Pierre did not have the benefit of this robust case law. It was writing largely on a blank slate as only one other circuit (the Fourth) had at that time ruled on the standard to apply to factual determinations in ERISA cases when the plan did not delegate discretion to the administrator. 932 F.2d at 1556– 57. The unanimous view of the six other circuits that have weighed in on the other side of the split Pierre created, as well as other developments during the quarter century since we decided the question, calls our view into doubt.
Pierre turned largely on an interpretation of a then-recent Supreme Court case, Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). Pierre had to decide whether the de novo standard of review discussed in Firestone applies only to interpretations of plan terms or also includes factual determinations of benefit eligibility. Pierre, 932 F.2d at 1556 (noting conflicting language in Firestone on this question). In addition to every other circuit reading Firestone differently, a more recent Supreme Court decision [Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008)] — even if it does not “unequivocally direct[ ]” us to overrule our precedent—counsels against Pierre’s reading.
Commenting that “[t]he pillars supporting Pierre may have thus eroded”, the Fifth Circuit’s concurrence suggests that the tides may be changing, and that Firestone‘s requirement for discretionary language may soon apply equally to questions of plan interpretation and fact in the Fifth Circuit.