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An abuse of discretion standard is proper if its use was predetermined in a settlement agreement and the disputed policy was in effect at the time of the settlement.

Mark Stephan’s insurance plan, through his employer, Thomas Weisel Partners (“TWP”), was administered by the defendant, Unum Life Insurance. Stephan was insured under TWP’s long-term disability plan and in 2007, he suffered an accident that left him quadriplegic. In processing his long-term disability claim, Unum calculated his pre-disability wages based upon his salary only. Prior to Stephan’s suit, Unum entered into a settlement agreement with the California Department of Insurance, requiring Unum, in part, to “discontinue use of a[ny] provision that has the effect of conferring unlimited discretion on [Unum]” or require “an ‘abuse of discretion’ standard of review if a lawsuit ensues.” The district court granted summary judgment in favor of Unum. Stephan appealed the district court’s judgment, contending that his annual bonuses should have been included in his salary calculation, which would considerably raise his disability payments. Stephan argued that the district court incorrectly applied an abuse of discretion review, because his insurance policy was new and therefore not subject to Unum’s settlement agreement. Additionally, Stephan argued that Unum’s policy of reevaluating benefits claims and paying them created a conflict of interest. The Court affirmed the district court’s decision to apply the abuse of discretion standard of review, holding that Unum’s use of the word “amendment” clearly indicated that the contract was a renewal and was not a new policy. However, the Court reversed the district court’s summary judgment in favor of Unum. It held that the lower court had not properly weighted Unum’s conflict of interest in deciding if Unum had abused its discretion. AFFIRMED in part, REVERSED and REMANDED in part.