On May 11, 2017, the United States Court of Appeals for the Ninth Circuit reversed a district court ruling, and upheld a California law that invalidates a plan provision that assigns the final determination on benefit payout determinations to an insurer. How will this impact the future of discretionary clauses in California life and disability insurance agreements?

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The US Court of Appeals for the Second Circuit’s recent ruling addresses various issues that could arise during a plan administrator’s review of a participant’s benefit claim and appeal and any ensuing litigation, including the deference to be granted upon review in a federal court, civil penalties and the possibility of introducing additional evidence outside the administrative record. This decision demonstrates the need for employers to review their benefit plans’ claims procedures to ensure they comply with applicable law and best practices.

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On September 4, 2015, the U.S. Court of Appeals for the Seventh Circuit ruled in Fontaine v. Metropolitan Life Insurance Company that the Employee Retirement Income Security Act of 1974, as amended (ERISA), does not preempt an Illinois state insurance regulation that prohibits discretionary authority clauses in health and disability plan insurance policies. The Seventh Circuit upheld the ruling of the U.S. District Court for the Northern District of Illinois, which decided that the Illinois regulation was not subject to preemption under precedent set forth in prior decisions by the Supreme Court of the United States.

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