Eighth Circuit Holds Arkansas Law Banning Discretionary Clauses Does Not Apply to Disability Insurance Policy Renewed Prior to Law’s Effective Date

In Roebuck v. USAble Life, No. 19-1855, __F.3d__, 2021 WL 1216217 (8th Cir. Apr. 1, 2021), Plaintiff-Appellant Karen Roebuck appealed the district court’s order holding that USAble Life did not abuse its discretion in denying her claim for disability benefits. Roebuck worked as a registered nurse before claiming disability due to injuries sustained after a car accident. USAble had her undergo a Functional Capacity Evaluation (“FCE”), which found she could work a full-time schedule. USAble also had a nurse review Roebuck’s claim before it decided to deny her benefits. Roebuck submitted an appeal with records showing her condition deteriorated since the FCE and included a new diagnosis of cervical radiculopathy. USAble had her appeal reviewed by a different nurse who opined there was inconsistent and insufficient evidence to disrupt the FCE’s findings.

On the issue of the standard of review, the Eighth Circuit found that Ark. Code R. § 054.00.101-4 (“Rule 101”), which prohibits discretionary clauses in insurance contracts issued or renewed on and after March 1, 2013, does not void the discretionary policy in this case. The policy was issued on January 1, 2011 and it lists a single renewal date of January 1, 2012. Because there is no evidence the policy renewed after March 1, 2013, Rule 101 does not apply. The court rejected the argument that the policy’s reference to a “first renewal” means that it renews on the policy’s anniversary date. Because the discretionary clause is valid, abuse of discretion review applies. Any procedural irregularities in USAble’s review of Roebuck’s claim would not change the standard of review from abuse of discretion to de novo. Instead, these irregularities are just factors to consider whether an administrator abused its discretion.

With respect to the merits of Roebuck’s disability claim, the court found that USAble’s use of an in-house nurse to review her claim did not violate ERISA regulation 29 C.F.R. § 2560.503-1(h)(3)(iii). In conducting the Finley analysis, the court found that: (1) use of an in-house nurse was consistent with the policy’s goals and ERISA’s regulation requiring consultation with a health care professional who has appropriate training and experience in the field involved in the medical judgment; (2) the regulation does not exclude nurses from the category of medical professionals so USAble’s interpretation of the policy allowing an in-house nurse to review the claim did not render the policy meaningless or inconsistent; (3) use of a nurse does not breach ERISA’s substantive or procedural requirements where the regulation is flexible on the level of education or training necessary to qualify as a medical professional; and (4) review by a nurse satisfies USAble’s requirement to provide a full and fair review. The court found that USAble’s decision was supported by substantial evidence and the policy does not require an automatic award of benefits for a radiculopathy diagnosis.