ERISA disability insurance claims end up in Federal Court.

They are difficult to win. Part of the reason is that that your claim is heard only before a Judge…. without a jury. Moreover, the administrative record which was assembled during the appeal stage and relied upon by the claims reviewer is generally the only evidence that can be presented in an ERISA case. You should be aware at the outset that the ERISA procedures dealing with benefits lawsuits are heavily stacked in favor of the insurance company.

The standard the Court uses in reviewing the administrative record in an ERISA case is very important. Which one the Court uses often will determine the outcome of your benefits case.

There are two basic and significantly different standards of review:

1. the “arbitrary and capricious” standard (also called the “abuse of discretion” standard); and
2. the de novo standard.

The arbitrary and capricious standard is the most restricted and gives a decided advantage to the insurance company. To win you have to show that, given the evidence submitted, the claims reviewer behaved in an arbitrary and capricious manner or abused his discretion in denying your claim. If the de novo standard is employed, the court sets aside the decision of the claim reviewer and makes its own judgment based on its review of the evidence.

In litigating a case for ERISA benefits, claims reviewer’s benefit decision is automatically reviewed de novo (that’s good) unless the benefit plan gives the plan administrator discretion to determine benefit eligibility or to interpret the plan (policy). In that case, the arbitrary and capricious standard is applied (that’s not good) by the court. In practical terms, as long as there is any rational basis for the insurer’s decision, it will stand. Insurance companies are well aware of the litigation advantage they possess if they have discretionary authority and most benefit plans now have language giving them this discretion. However, to survive legal challenge, that language must be clear and unambiguous.

Although the arbitrary and capricious standard is a stacked deck, there are instances where it does not apply and may be converted to a de novo standard. This opportunity can arise if the insurance company is also the benefit plan administrator. Under ERISA, the plan administrator must act primarily for YOUR BENEFIT as a plan member. But the insurance company claims reviewer’s first duty is to act in the best interest of THE INSURANCE COMPANY. If you can provide evidence that this inherent conflict of interest actually affected your claims decision, you may be able to get the standard converted to de novo, which is to your benefit. This is decided on a case-by-case basis.

The following are some examples where evidence of a conflict has been found:

• the claims reviewer (administrator) gives inconsistent reasons for denying benefits
• a change in position without receipt of any new evidence
• reliance on an improper definition of disability
• determination of a material fact for which no supporting evidence is provided
• failure to provide reasons for denial of benefits
• failure to provide sufficient notice of the denial of the claim
• the record as a whole suggests that the claims reviewer acted as an adversary bent on denying the claim and oblivious to fiduciary obligations (as a plan administrator) to look out for your best interests.

In an ERISA dispute over benefits you need to level the playing field. Contact a skilled, experienced attorney to lead you through this long-term disability insurance process and protect your interests. And the earlier you get an attorney involved, the better.