An insurance company, typically the party obligated to pay benefits and the administrator given discretion in construing and applying the provisions of a group health or disability plan and assessing a participant’s entitlement to benefits, is an ERISA fiduciary. See 29 U.S.C.§ 1002(21)(A)(i) and (iii); Aetna Health Inc. v. Davila, 542 U.S. 200, 220, 124 S. Ct. 2488, 2502 (2004); Mondry v. Am. Fam. Mut. Ins. Co., 557 F.3d 781, 803 (7th Cir.), cert. denied, 130 S. Ct. 200 (2009). Significantly, as a fiduciary, an insurance company is required to carry out its duties with respect to the plan “solely in the interest of the participants and beneficiaries and—(A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries;…[and] (B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims…” 29 U.S.C. § 1104(a)(1). Under the law of ERISA an insurance company owes the participants in its plan and their beneficiaries a duty of loyalty like that borne by a trustee under common law, § 1104(a)(1)(A), and it has to exercise reasonable care in executing that duty, 1104(a)(1)(B). Mondry, 557 F.3d at 807.
That an insurance company is an ERISA fiduciary is important because the deference the insurance company’s decision is afforded is, conceptually, tied to how well it complies with its obligations. If the insurance company acts like a fiduciary then it gets the benefits of a highly deferential standard of review. If it does not behave appropriately, then it gets less favorable treatment. That is why less deference is given to an insurance company’s decision if it does certain things, like fails to gather or examine relevant evidence, changes its decision rationale between its initial and final decisions, makes its decision based on a selective review of the evidence, refuses to credit a claimant’s reliable evidence, including the opinions of a treating physician, or fails to rebut key evidence submitted by the claimant. See, e.g., Caldwell v. Life Insurance Co. of North America, 287 F.3d 1276, 1282 (10th Cir. 2002); Wenner v. Sun Life Assurance Company of Canada, 482 F.3d 878 (6th Cir. 2007); Kinser v. Plans Admin. Comm. Of Citigroup, Inc., 488 F.Supp.2d 1369, 1382-83 (M.D. Ga. 2007); Black & Decker Disability Plan v. Nord, 538 U.S. 822, 123 S. Ct. 1965, 1972, 155 L.Ed. 1034 (2003); Calvert v. Firstar Finance, Inc., 409 F.3d 286, 297 (6th Cir. 2005); and Kalish v. Liberty Mutual, 419 F. 3d 501, 510-511 (6th Cir. 2005). Remarkably, many insurance companies do all of these things, failing to keep up their end of the bargain by not satisfying their duties as fiduciaries. As a consequence, such insurance companies’ arbitrary and capricious – unreasonable – behavior necessitates no deference be given to their decisions.