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.
Plan participant is usually the employee who is enrolled in the plan.
Beneficiary is usually the spouse or child of the employee who may be actively enrolled in a plan (for example, 401k, health insurance) or who may be entitled to receive benefits under the plan if something happens to the employee/participant.
Most courts have defined the administrator as the company or person that actually makes the decision to deny or pay benefits. If the plan is insured, this is often the insurance company. If the plan is self funded (i.e. not insured), there’s often a committee of employees or a third party administrator (a “TPA”) that make the decisions.
Summary Plan Description:
Usually a plan will have a more complete document than the summary plan description, which spells out in detail all of the plan’s rules and terms.
Any benefit that is not a pension benefit, such as disability, health, or life insurance and pre-paid legal services, or any non-monetary benefit like day care services.
Standard of Review:
The method a court uses to decide a case is called the “Standard of Review.” In ERISA cases, there are 3 different types of review that a court may use, depending on key language which may be found in your plan document, benefit booklet or group insurance policy. They 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:
- the “arbitrary and capricious” standard (also called the “abuse of discretion” standard); and
- 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.
In order to give you the best chance to win your ERISA case, you should seek the advice and services of a skilled, experienced attorney to lead you through this long-term disability insurance process and protect your interests.