867 F.3d 1129
9th Cir.2017Background
- Williby, a Boeing Supply Chain Specialist, received short-term disability (STD) benefits under Boeing’s self-funded STD plan administered by Aetna after neurological issues beginning late 2012.
- Aetna approved benefits through February 28, 2013, then terminated benefits through June 2013 relying on file reviews that found insufficient objective evidence of disabling cognitive impairment.
- Treating physicians and additional consultants thereafter consistently opined Williby was disabled; Aetna’s internal reviewers and consultants disagreed and upheld the denial on appeal.
- Williby sued under ERISA seeking benefits; the district court reviewed Aetna’s denial de novo, concluding California Insurance Code §10110.6 voided the plan’s discretionary clause and found Aetna’s termination improper.
- On appeal, Aetna argued the court should have applied abuse of discretion review because (1) §10110.6 does not apply to Boeing’s self-funded plan or (2) ERISA preempts §10110.6 as applied to self-funded ERISA plans; the Ninth Circuit held ERISA preempted §10110.6 here.
- The Ninth Circuit vacated and remanded because the district court applied de novo review (and relied on inapposite precedent about conflicted administrators) instead of conducting an abuse-of-discretion review under the plan’s discretionary clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Cal. Ins. Code §10110.6 voids the plan’s discretionary clause (i.e., applies to Boeing’s self-funded STD plan) | §10110.6 applies; discretionary clauses in disability contracts for California residents are void | §10110.6 targets traditional "insurance" and insurers, not self-funded employer plans | §10110.6 does apply to Boeing’s STD plan under California law because the plan meets §22’s definition of insurance (risk-shifting and risk distribution) |
| Whether ERISA preempts §10110.6 as applied to a self-funded ERISA plan | §10110.6 governs and survives preemption | ERISA’s deemer clause preempts state insurance regulations applied directly to self-funded plans | ERISA preempts §10110.6 as applied to Boeing’s self-funded STD plan; the saving clause does not rescue §10110.6 here |
| Whether Williby’s claim that the plan is a non-ERISA "payroll practice" can avoid preemption | The STD plan is a payroll practice exempt from ERISA | The plan is an ERISA-covered employee benefit plan | Williby waived this argument by litigating exclusively under ERISA; plan is governed by ERISA |
| Whether the district court applied the correct standard of review and whether remand is required | District court’s ruling would stand even under abuse of discretion; no remand needed | District court should have applied abuse of discretion given the plan’s discretionary clause | Court vacated and remanded for the district court to apply the abuse of discretion standard properly (no opinion on merits) |
Key Cases Cited
- FMC Corp. v. Holliday, 498 U.S. 52 (Sup. Ct.) (deemer clause preemption of state insurance regulation for self-funded ERISA plans)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (Sup. Ct.) (standard for judicial review of ERISA benefit denials)
- Black & Decker Disability Plan v. Nord, 538 U.S. 822 (Sup. Ct.) (rejecting automatic special weight for treating physicians)
- Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir.) (discussing discretionary clauses and standard of review)
- Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan, 856 F.3d 686 (9th Cir.) (interpretation of §10110.6 applied to insured plans)
- Standard Ins. Co. v. Morrison, 584 F.3d 837 (9th Cir.) (state ban on discretionary clauses as saved from preemption for insured plans)
- Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623 (9th Cir.) (effect of administrator/payor conflict on abuse-of-discretion review)
- Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666 (9th Cir.) (review applying heightened skepticism where administrator had a conflict of interest)
- Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (Sup. Ct.) (conflict of interest as a factor in abuse-of-discretion review)