1/20/2014 3:41:00 PM,
Philip A. Janquart
SAN FRANCISCO (CN) - A retired surgeon challenging Kaiser's termination of his long-term disability benefits need not show an abuse of discretion, a federal judge ruled.
Thomas Gonda had applied for benefits under the Employee Retirement Income Security Act (ERISA) after leaving his job in 2006 as a cardio-thoracic surgeon for Kaiser's parent, the Permanente Medical Group (TMPG).
The Life Insurance Company of North America (LINA) issued the group disability policy that insured the plan.
Gonda received benefits from 2008 to October 2010 when they were abruptly cut off.
He sued the plan and the administrator for breach of fiduciary duty and statutory penalties, leading the defendants to request that U.S. District Judge Samuel Conti adopt an abuse-of-discretion standard.
Conti denied such relief Thursday, crediting Gonda's claim that the de novo standard applies because "any grant of discretionary authority contained in the plan or the policy was rendered void by California Insurance Code."
The California Insurance Code must be read into the policy since it was renewed after the code went into effect, but before the final denial of Gonda's disability claim.
"Accordingly, the court finds that any provision in the policy that attempts to confer discretionary authority to defendants or LINA is void and unenforceable," he said.
In arguing for the abuse-of-discretion standard, the defendants said that "the policy grants LINA the discretion to interpret the terms of the plan documents, to decide questions of eligibility for coverage, and to make any related findings of fact."
Conti disagreed and likewise rejected claims that ERISA pre-empts state law.
"ERISA 'supersedes any and all state law insofar as they may now or hereafter relate to any employee benefit plan,'" the opinion states. "However, [ERISA regulation] saves from preemption 'any law of any state which regulates insurance, banking or securities. The Ninth Circuit has already held that state laws regulating discretionary clauses in insurance policies fall under the savings clause. The court sees no reason why the result should differ when a state law is directed toward a discretionary clause contained in an agreement or another document relating to the administration of an insurance policy."