MARY C. FONTAINE, Plaintiff-Appellee,
METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellant
Argued December 1, 2014.
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:12-cv-08738 -- Joan B. Gottschall, Judge.
For MARY C. FONTAINE, Plaintiff - Appellee: Mark D. DeBofsky, Attorney, Martina Brendel Sherman, Attorney, DEBOFSKY & ASSOCIATES, P.C., Chicago, IL.
For METROPOLITAN LIFE INSURANCE COMPANY, Defendant - Appellant: Warren Sebastian von Schleicher, Attorney, Jacqueline J. Herring, Attorney, SMITH, VON SCHLEICHER & ASSOCIATES, Chicago, IL; Ian Seth Linker, Attorney, METROPOLITAN LIFE INSURANCE COMPANY, New York, NY.
For AMERICAN ASSOCIATION OF RETIRED PERSONS, Amicus Curiae: Mary E. Signorille, Senior Attorney, AARP FOUNDATION LITIGATION, Washington, DC.
For NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS, Amicus Curiae: Jennifer Maureen McAdam, Attorney, NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS, Kansas City, MO.
For SECRETARY OF LABOR, Amicus Curiae: Robin Springberg Parry, Attorney, UNITED STATES DEPARTMENT OF LABOR, Office of the Solicitor, Washington, DC.
Before BAUER, KANNE, and HAMILTON, Circuit Judges.
Hamilton, Circuit Judge.
In 1989, the Supreme Court held that courts should apply de novo review in suits challenging denials of employee benefits governed by the Employee Retirement Income Security Act of 1974, better known as ERISA. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989); see 29 U.S.C. § 1132(a)(1). But there was a catch. If the benefit plan provided expressly for a different, more deferential standard of review, Firestone said, that specific provision would control over the default rule of de novo review. 489 U.S. at 115. Insurance companies and plan sponsors began including such provisions in most employee benefit plans, typically saying the insurer or plan administrator would exercise discretionary judgment in interpreting a plan or deciding whether to pay benefits. Courts would then apply a deferential standard of review under which a denial would stand unless it was " arbitrary and capricious." See, e.g., Black v. Long Term Disability Ins., 582 F.3d 738, 743-44 (7th Cir. 2009).
A further round in the tug-of-war over employee benefits has been adoption of state laws intended to protect employees and plan beneficiaries from abuse of such discretion. In this case, we address a federal preemption challenge to such an Illinois insurance law, one that prohibits provisions " purporting to reserve discretion" to insurers to interpret health and disability insurance policies. Like our colleagues in the Ninth and Sixth Circuits, as well as the district court in this case, we reject the preemption challenge and apply the state law. See Standard Ins. Co. v. Morrison, 584 F.3d 837 (9th Cir. 2009); American Council of Life Insurers v. Ross, 558 F.3d 600 (6th Cir. 2009); Fontaine v. Metropolitan Life Ins. Co., 2014 WL 1258353, *11-12 (N.D.Ill. March 27, 2014). We therefore affirm the district court's judgment in favor of plaintiff Mary C. Fontaine.
I. Factual & Procedural Background
Plaintiff Fontaine was an equity partner in the structured finance group of the law firm of Mayer Brown LLP. Mayer Brown offered Fontaine long-term disability insurance through the Metropolitan Life Insurance Company (MetLife), and Fontaine paid the premium for that policy. In 2011, Fontaine retired after 30 years of practice at Mayer Brown. She said vision problems prevented her from continuing to perform at the high level and pace expected in her work as a structured finance attorney. Two days after retiring, Fontaine filed a claim for disability benefits with MetLife.
MetLife denied her claim, finding that Fontaine did not fit the definition of disabled in her insurance policy. MetLife affirmed that initial denial in an internal administrative appeal. Fontaine then filed this suit against MetLife under ERISA for wrongful denial of benefits.
Fontaine and MetLife each moved for entry of judgment by the district court pursuant to Federal Rule of Civil Procedure 52(a). This procedure is essentially a trial on the papers, see Hess v. Hartford Life & Accident Ins. Co., 274 F.3d 456, 461 (7th Cir. 2001), and is well-suited to ERISA cases in which the court reviews a closed record. Both sides presented extensive medical evidence, which the district court
examined in detail. See Fontaine, 2014 WL 1258353, at *2-10.
The standard of review is the pivotal issue. Fontaine's disability plan provides that MetLife's benefit determinations " shall be given full force and effect" unless they are shown to be " arbitrary and capricious," thus calling for deferential review. An Illinois insurance regulation known as § 2001.3, however, prohibits such terms in health and disability insurance policies. Here is its full text:
No policy, contract, certificate, endorsement, rider application or agreement offered or issued in this State, by a health carrier, to provide, deliver, arrange for, pay for or reimburse any of the costs of health care services or of a disability may contain a provision purporting to reserve discretion to the health carrier to interpret the terms of the contract, or to provide standards of interpretation or review that are inconsistent with the laws of this State.
50 Ill. Admin. Code § 2001.3. The district court held that § 2001.3 applied so that the court decided Fontaine's eligibility for benefits de novo. The court found that Fontaine had proven by a preponderance of the ...