In 1974, U.S. Congress passed a group of laws originally designed to protect pensions and other employee benefits. Congress intended to protect workers and their families by passing the Employee Retirement Income Security Act – known as “ERISA.” The ERISA act is contained in Title 29 of the United States Code, and like many other federal statutes, provides a rather general guideline for how the law is to be implemented. Under our system of laws, general laws like these are often flushed out in the courts, where judges interpret the meaning of the vague wording of the statutes. Because of its generality, a lot of the law that guides us today in the area of ERISA law has come from the courts, and a simple reading of the statutes rarely provides a complete answer to an ERISA question.
What is ERISA?
Learn the Basics of ERISA Law from Cody Allison & Associates
When Congress passed ERISA in 1974, it defined several terms which apply to ERISA plans. You will see these terms used repeatedly in ERISA plans. Below are just a few terms which are regularly used in these plans. Our ERISA lawyers have defined these terms so when you read your plan, you will understand the definitions.
ERISA Definitions: Common Terms
Plan Participant
Beneficiary
Plan Administrator
Summary Plan Description
Welfare Benefits
Standard of Review
Standard of Review: In Depth
The 3 different types of review that a court may use are:
1) De Novo
2) Abuse of Discretion (also called arbitrary and capricious)
3) Heightened Abuse of Discretion
The key to which standard may be applied in particular cases is whether the administrator has been granted “discretionary authority to interpret the plan or decide claims.”
ERISA disability insurance claims are litigated very differently than individual long-term disability plans.
ERISA disability insurance claims end up in Federal Court. They are difficult cases. 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 beginning that the ERISA procedures dealing with benefits lawsuits favor the insurance company.
The standard of review the Court uses in reviewing the administrative record in an ERISA case is extremely important. Which standard the Court uses could very well determine the outcome of your benefits case.
There are two 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 big 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 an ERISA benefits case, claims reviewer’s benefit decision is 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). As you can imagine, many policies are now written to make sure language is in the policy which accomplishes this task. (the insurance companies have lawyers too). In that case, the court applies the arbitrary and capricious standard (that’s not good). As long as there is any rational basis for the insurer’s decision, it will stand. Insurance companies are well aware of the litigation advantages 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 boon to the insurance company, 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 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.
These are some examples where evidence of a conflict has been found:
- apply an improper definition of disability
- failure to provide any 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 looking to deny the claim and oblivious to their fiduciary obligations (as a plan administrator) to look out for your best interests
- determination of a material fact for which zero supporting evidence is provided.
Types of Review
De Novo
When a court takes a fresh look at a case, and pays no attention to what has occurred before the lawsuit was filed, it is called de novo review.
Abuse of Direction and Heightened Abuse of Direction
If the language of the plan it gives the administrator discretion, then a court must use a form of abuse of discretion review, and the administrator’s decision will only be reversed if they were both wrong and that there is no reasonable basis for their decision. This gives the administrator’s decision a lot of deference, and it can make it very difficult for a person whose benefits have been denied to win. If the plan is insured, the court may apply the so-called heightened abuse of discretion, which gives the administrator less deference because it has a conflict of interest (i.e. it benefits financially if it denies claims).
A key aspect of abuse of discretion review relates to what evidence the court considers. In these cases, the judge will usually not allow any witnesses. Instead, the judge will only review the claim file which was created before the lawsuit was filed, and will make a decision based solely on those documents. In these types of cases, it is very important to have an attorney that is familiar with ERISA law to handle the pre-suit claim and appeal. The documents in your claim’s file at the time the claim is closed, could make or break your case.
We understand this is not clear and more importantly, we understand that it is not fair. If you have been denied benefits, whether they are covered by ERISA or a private long-term disability insurance policy, our team of seasoned lawyers and legal professionals can help!
If you have been denied benefits, or believe your current benefit is getting ready to be cut-off by the insurance company, please call CODY ALLISON AND ASSOCIATES, PLLC at (844) LTD-CODY or (615) 236-6000 and we will be happy to answer any of your questions. You can also e-mail us at cody@codyallison.com. WE WILL RESPOND QUICKLY!