This ERISA case, decided in 2009, is another in the line of cases dealing with the “arbitrary and capricious” standard that the Court has to use when ERISA cases where short term and long term disability cases are appealed in most circumstances, and the case also deals with the “safe harbor” exception from ERISA.
In this case, the Plaintiff appealed the finding that his long term disability benefits plan was governed by ERISA and the finding that one insurer’s termination of benefits was not arbitrary or capricious. The Plaintiff alleged that the “safe harbor” provision applied in his case, which exempts from ERISA coverage certain group-type insurance programs. In cases where the safe harbor provision applies, state law governs the case. In order for this provision to apply, the Court states that there are four criteria that must be met: (1) No contributions are made by an employer or employee organization; (2) Participation in the program is completely voluntary for employees or members; (3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members to collect premiums through payroll deduction or dues checkoffs and to remit them to the insurer; and (4) The employer or employee organization receives no consideration in the form or cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs. In this case, the Court determined that the Plaintiff’s employer had contributed to premiums on behalf of the majority of the employees and therefore the first criterion of the safe harbor exception could not be met, so the Court affirmed the lower court’s decision. The Plaintiff then alleged that the insurer’s decision to conduct only a file review and to not interview his treating physician supported the allegation that the insurer’s determination to terminate long term disability benefits was arbitrary and capricious. The Court notes that some of the Plaintiff’s claim is based on job stress that is having health effects. The Court determined that the insurer’s thoroughness with regard to the Plaintiff’s stress was to be questioned, based on the disregard of the treating physician’s admonition that the Plaintiff not work, and that the dismissal of the Plaintiff’s claims by the insurer was purely subjective and not relevant. Therefore, the Court affirmed the lower court finding that ERISA governed the Plaintiff’s long term disability benefit plan, but reversed the lower court finding that the insurer’s termination of the Plaintiff’s long term disability benefits under ERISA was not arbitrary and capricious and remanded the case back to the lower court for further proceedings.
Once again, in ERISA cases, if there is a clause in the plan, in some states, that gives the administrator discretionary authority to determine the eligibility for short term or long term disability benefits under ERISA or to construe the terms of the plan, rather than the Court reviewing the decisions of the administrator under the de novo standard, the Court reviews under the “arbitrary and capricious” standard which means that the administrator’s decisions in denying the long term disability benefits must be arbitrary and capricious for the Court to overturn the administrator’s decisions.
If you need assistance navigating your claim for short term or long term disability benefits under ERISA, or it is time to sue the insurance company, please do not hesitate to give Cody Allison & Associates, PLLC a call (844) LTD-CODY, (615) 234-6000. or send us an e-mail Cody@codyallison.com. We provide representation nationwide and have successfully sued all the major insurance companies in many states. Our headquarters are located in Nashville, Tennessee. We offer a free consultation and would love to speak with you.