The End of Discretionary Authority in Montana?

A ruling by District Court Judge Donald Molloy may signal the end of discretionary authority for ERISA plans in Montana. Standard Insurance Company brought suit against John Morrison, the Insurance Commissioner for the State of Montana. Morrison had implemented a state-wide policy disapproving ERISA plans that contained any clauses that conferred discretionary authority to the plan/claims administrator, which would give rise to a more deferential judicial standard of review when the decision of the plan/claim administrator is challenged in the district court. Standard Insurance argued Morrison’s actions were pre-empted by ERISA and exceeded his authority. However, the court found neither argument persuasive and stated that there was no law granting Standard the right to a particular standard of review. The court reasoned that “ERISA’s Savings Clause recognized the traditional role of states in regulating insurance on behalf of state citizens and in accordance with state public policy objectives.” This case “is the straight forward regulation of insurance, a matter ERISA expressly saves from preemption.” The decision in Standard Ins. Co. v. Morrison, came just two days before a similar ruling in American Council of Life Insurers v. Watters, 536 F. Supp. 2d 811, 815 (W.D. Mich. 2008). District Court Judge Richard Enslen faced a similar question of whether state bans of discretionary clauses are preempted by ERISA. Like his Montana counterpart, Judge Enslen ruled that because the regulations affected the insurance risk-pooling arrangement, they were “saved” from ERISA preemption. If these decisions are upheld on appeal, this could mean that in the states of Montana and Michigan, all ERISA plans will be subject to a de novo review standard.