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6th Circuit Upholds Prohibition of Discretionary Clauses

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6th Circuit Upholds Prohibition of Discretionary Clauses

The Sixth Circuit in American Council of Life Insurers, et al. v. Ken Ross, No. 08-1406, 6th Cir.; 2009 U.S. App. LEXIS 5748 (March 18, 2009) upheld. Michigan’s prohibition against discretionary clauses in insurer issued Welfare Benefit Plans. The Court held that administrative rules prohibiting insurance companies from issuing policies containing discretionary language were intended to regulate the insurance industry as outlined in the savings clause and thus not preempted by ERISA.

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COMMENTARY:

The Ross decision is a victory for plan participants. Participants now may be permitted to conduct discovery outside of the administrative record and submit new evidence when pursuing their claim in federal court. It will be interesting to see whether the Ross decision is followed by circuits in which the director of insurance has issued similar prohibitions.

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