How the Court Will Review Your Long-term Disability Claim
If you have a long-term disability claim governed by the Employee Retirement Income Security Act (ERISA) that has been denied after you exhausted your appeal rights, the next step would be to file a lawsuit in federal district court against the insurance company and the long-term disability plan. The law that has developed since the enactment of ERISA in 1974 established that a denial of benefits challenged under ERISA’S civil enforcement provision must be reviewed under a de novo standard unless the benefit plan expressly gives the plan administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the plan's terms, in which cases a deferential standard of review will be utilized by the court.
If you have long-term disability coverage through a group plan at work, and depending on which jurisdiction you live in, chances are that the policy grants discretionary authority to the insurance company. This simply means that a federal court reviewing the decision must give deference to the insurance company's decision applying what is called an “arbitrary and capricious” standard of review. However, many states (i.e., California, Connecticut, Hawaii, Idaho, Illinois, Indiana, Kentucky, Maine, Maryland, New Jersey, New York, South Dakota, Texas, Utah) have outlawed discretionary authority clauses found in group long-term disability plans.
Under the abuse-of-discretion standard, is it more difficult for a claimant to prevail. If the claim is subject to a de novo review, “The court simply proceeds to evaluate whether the plan administrator correctly or incorrectly denied benefits.” (Abatie v. Alta Health & Life Ins. Co. (9th Cir. 2006) 458 F.3d 955, 983.). California enacted Insurance Code §10110.6 effective January 1, 2012, which outlawed discretionary clauses in life, health, and disability plans. Even if a group disability plan has an effective date before January 1, 2012, the policy ensuring the plan became subject to Insurance Code §10110.6 after renewing on the policy’s annual anniversary date after January 1, 2012.
When the Court utilizes a de novo standard of review, the Court evaluates whether the Plaintiff is disabled within the terms of the plan, and after evaluating the persuasiveness of conflicting evidence, decide which is more likely to be true. Kearney v. Standard Ins. Co., 175 F.3d 1084, 1095 (9th Cir. 1999) (en banc); Muniz v. Amec Const. Management, Inc., 623 F.3d 1290, 1295-96 (9th Cir. 2010). Under a de novo standard of review, it is the claimant’s burden to prove their disability by a preponderance of evidence. Muniz v. Amec Constr. Mgmt., 623 F.3d 1290, 1294 (9th Cir. 2010). This means it is the claimant’s responsibility to produce evidence demonstrating that the plan administrator incorrectly denied benefits. The evidence must establish that the claimant satisfies the definition of disability in the policy insuring the plan. See Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006). Essentially, it is the court’s duty to determine whether or not the plan administrator correctly or incorrectly denied benefit.