Insurer's Discretionary Review Clauses May Be Subject to State Law Prohibiting Same
The United States Supreme Court declined to review a decision from the Ninth Circuit Court of Appeals, Standard Ins. Co. v. Morrison, 584 F.3d 837 (9th Cir. 2009), holding that a state's practice (though its insurance commissioner) of disapproving insurance policies that give insurers discretion to determine benefits and construct the terms of an employee benefit plan is not preempted by ERISA.
Several states have laws that prevent an insurer from adding such a discretionary clause to an policy governing employee benefits. As a result of the Supreme Court's decision not to review the Standard Ins. Co. case, courts faced with the question whether these state laws are preempted by ERISA may be inclined to hold that they are not thereby legislating a de novo standard of review when insurers companies may employee benefit decisions.
