Tenth Circuit clarifies the appropriate standard for discovery related to a dual role conflict of interest in ERISA cases
The Tenth Circuit clarified the appropriate standard for discovery related to a dual role conflict of interest in ERISA cases in Murphy v. Deloitte & Touche Group based on the recent Supreme Court decision of Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105, 128 S.Ct. 2343 (2008). While the holding did not change Tenth Circuit law, the court felt it was appropriate to clarify its prior holdings.
In an ERISA case where the plan “‘gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan,’” the administrator’s decision is reviewed for an abuse of discretion – and in this context, abuse of discretion and arbitrary and capricious are the same standard.
In reviewing a plan administrator’s decision under the arbitrary and capricious standard, the federal courts are limited to the administrative record. As a result, discovery is generally inappropriate in these cases. The court found that while case law prohibits courts from considering materials outside the administrative record where the extra-record materials sought to be introduced relate to a claimant’s eligibility for benefits, this general restriction does not conclusively prohibit a district court from considering extra-record materials related to an administrator’s dual role conflict of interest. Therefore, discovery related to the scope and impact of a dual role conflict of interest may, at times, be appropriate. The appropriateness of such discovery is governed by Fed.R.Civ.P. Rule 26(b). A district court has substantial discretion in handling discovery requests under Rule 26(b).
It appears Wyoming law is a bit more strict than Colorado law in this regard. See the Valley Forge case discussed below, which permitted the insurer to recover defense costs for defense of a non-covered claim.