The Problem With ERISA

ERISA Gives the Insurer Discretion to Make Benefits Decision

Carol Stewart sued Hartford Insurance Company to obtain two insurance benefits that she believes it owes her:

  1. longterm disability payments and
  2. a waiver of life-insurance premiums.

In Carol H. Stewart v. Hartford Life And Accident Insurance Company, No. 21-11919, United States Court of Appeals, Eleventh Circuit (August 10, 2022) the Eleventh Circuit found itself compelled to follow the statute rather than its own conclusions regarding the availability of coverage to Ms. Stewart.

Hartford contended that although she was insured it concluded that she was ineligible for the benefits she sought.

Hartford’s policy, in accordance with the statutory ERISA statute indisputably granted it discretion to make benefits determinations.

In 2007, prominent Birmingham attorney Carol Stewart’s physician diagnosed her with Parkinson’s disease. At the time, Burr Forman LLP, Stewart’s employer, provided her with disability insurance through its ERISA health plan. Sun Life Assurance Company of Canada, which serviced that plan, began paying Stewart partial, and later total, disability benefits. In 2010, Burr Forman cancelled its policy with Sun Life and switched the administration of its ERISA health plan over to Hartford Insurance.

The new Hartford policy contained an exclusion clause specifying that a member of the firm was ineligible for disability-insurance payments if she was receiving:

benefits for a Disability under a prior disability plan that: 1) was sponsored by [her] Employer; and 2) was terminated before the Effective Date of The Policy.

Because Sun Life was still paying Stewart disability benefits, Hartford found that Stewart was “receiving benefits for [a] Disability under a prior disability plan” that had been “terminated” before its own policy went into effect and, consequently, that she wasn’t eligible for Hartford disability benefits.

Hartford also provided life insurance. Its life-insurance policy specified that one who was “Disabled” needn’t pay premiums for coverage, and it defined “Disabled,” in relevant part, as being unable to perform “any work for which [one is] qualified by: 1) education; 2) training; or 3) experience.”

Hartford determined that Stewart wasn’t “Disabled” within the meaning of its policy and that she therefore had to pay life-insurance premiums.

Stewart sued only to have the district court grant Hartford’s summary judgment.


When reviewing a plan administrator’s benefits decision” this Court conducts the following six-step analysis:

  • Apply the de novo standard to determine whether the claim administrator’s benefits-denial decision is “wrong” (i.e., the court disagrees with the administrator’s decision); if it is not, then end the inquiry and affirm the decision.
  • If the administrator’s decision in fact is “de novo wrong,” then determine whether he was vested with discretion in reviewing claims; if not, end judicial inquiry and reverse the decision.
  • If the administrator’s decision is “de novo wrong” and he was vested with discretion in reviewing claims, then determine whether “reasonable” grounds supported it (hence, review his decision under the more deferential arbitrary and capricious standard)
  • If no reasonable grounds exist, then end the inquiry and reverse the administrator’s decision; if reasonable grounds do exist, then determine if he operated under a conflict of interest
  • If there is no conflict, then end the inquiry and affirm the decision.
  • If there is a conflict, the conflict should merely be a factor for the court to take into account when determining whether an administrator’s decision was arbitrary and capricious.


Since the Burr Forman’s plan vested Hartford with discretion in reviewing claims (Step 2), that Hartford’s interpretation of the provision and its decision in Stewart’s case were “reasonable” (Step 3), and that any conflict of interest that Hartford had (Steps 4 and 5) didn’t lead it to make an arbitrary and capricious determination (Step 6) ERISA required the Eleventh Circuit to agree with the district court that Hartford is entitled to summary judgment.

The relevant policy language states as follows, with emphasis added by the Eleventh Circuit:

If You are receiving or are eligible for benefits for a Disability under a prior disability plan that:

1) was sponsored by Your Employer; and

2) was terminated before the Effective Date of The Policy; no benefits will be payable for the Disability under The Policy.

The Eleventh Circuit noted that if it was acting as a trial judge it tended to disagree with Hartford’s decision.

ERISA itself seems to recognize that a “plan” is distinct from the insurance policy that services it. However, because this is an ERISA-benefits case, the analysis requires the Eleventh Circuit to consider five more steps.

  • Step 2: Did Hartford’s policy vest it with discretion when reviewing benefits claims.
    • It did-the policy expressly states that Hartford has “full discretion and authority to determine eligibility for benefits and to construe and interpret all terms and provisions of The Policy.”
  • Step 3: Did “reasonable” grounds exist to support Hartford’s interpretation and decision.
    • They did. Although it might not be the best reading of the policy exclusion, it was reasonable for Hartford to interpret the phrase “prior disability plan” as referring to the Sun Life policy. Accounting for some unfortunate imprecision, the words “plan” and “policy” can be interchangeable.
  • Step 4. Did Hartford have a conflict of interest and, if so, the court must skip to Step 6 and ask whether that conflict led to an arbitrary and capricious decision.
  • Step 6: Requires that the Eleventh Circuit must determine whether the conflict led to an arbitrary and capricious decision. As a matter of common sense, it was reasonable for Hartford to interpret its policy to prevent an insured from receiving payments from two different sources for the same disability.

Therefore, Hartford had discretion to determine whether Stewart was eligible for benefits under its policy, and it exercised that discretion reasonably.

Accordingly, the Eleventh Circuit affirmed the district court’s decision rejecting Stewart’s claim to disability benefits.

Did Hartford Correctly Denied Stewart A Waiver Of Life-Insurance Premiums.

It did. Applying the plain meaning of the words in the contractual definition, Stewart was not “Disabled” and thus was not entitled to a waiver of premiums.

First, “work.” In this context, it seems clear to us that the term “work” denotes an effort made to attain one’s income or livelihood. Putting it all together, then, to be entitled to a waiver of premiums, Stewart must have been unable (1) to engage in any means of earning income (2) for which she was competent based on her knowledge or skill acquired over time. Since Stewart was able to perform work for which she was qualified by her education, training, and experience since she was educated, trained, and experienced as a lawyer. But she also graduated from high school and college and was thus qualified to perform work requiring less specialized skills, as well.

And here, the record shows that Stewart could sit for a couple of hours, stand for half an hour, and walk for half an hour. It also shows that while Stewart suffered from mild cognitive impairment, she retained the ability to perform less demanding tasks that didn’t require high-level analytical or organizational ability.

While Stewart might not have been able to ply her trade as a lawyer, the record supports Hartford’s determination that she could perform less demanding sedentary work was not unreasonable.

Even assuming that Stewart could work only part-time, that counts as “any work.” The word “any,” that is, expresses a lack of restriction when choosing something from a specified class. Because Hartford’s interpretation was not on a new review wrong, the Eleventh Circuit ended the inquiry at Step 1 and affirm the decision.

In any event, as already explained, Stewart’s insurance policy gave Hartford discretion in deciding benefits claims, and Hartford didn’t abuse that discretion when it determined that Stewart could perform “any work” consistent with her training or experience. Interpreting “any work” broadly to mean any work whatsoever was at the very least reasonable.

To summarize, Stewart was not entitled to disability payments because Hartford’s interpretation of the disability exclusion was reasonable, and its conflict of interest didn’t lead it to make an arbitrary or capricious decision. Likewise, Stewart was not entitled to a waiver of life-insurance premiums because she wasn’t disabled within the meaning of Hartford’s life-insurance policy.


ERISA is a special statute that allows employers to create a thorough and relatively inexpensive series of benefits for its employees. The result may seem unfair but the decision fits the requirements of the statute.

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(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at and

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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