Filing LTD Lawsuit

Is the Federal Court’s Job in Reviewing an ERISA Disability Insurance Claim to Weigh the Evidence or Determine if There Is a Reasonable Basis for a Claim Denial?

Unfortunately, it is not uncommon for ERISA disability insurance or plan claims to end up in federal court after a denial or termination of benefits. Many policyholders or plan beneficiaries don’t understand the role of a federal judge in an ERISA disability lawsuit.

Let’s first contrast the role of a federal judge with that of a state law judge. If you bought your disability policy through an independent insurance agent, you have an individual disability policy that is governed by state law. That is great because if the carrier denies or terminates your benefits, you can file a state law claim for breach of contract and a breach of the fiduciary duties the carrier owes to you. These claims can be heard by the judge or by a jury.

If you choose to have a judge decide your claims, the judge becomes the trier of fact and plays an important role in your case. The question for the judge is whether the disability carrier breached their contractual and fiduciary obligations to you and, if so, what you are owed.

On the other hand, the role of the federal judge in an ERISA disability policy or plan claim is different. ERISA governs most employer sponsored disability policies or plans. If you work for a state, county, or local government, your claim is governed by state law, as well as are policies or plans that are church sponsored.

What Is the Role of a Federal Judge?

Let me give you an example. In the case of Galvin-Bliefernich v. First Unum Life Ins. Co., No.1:20-cv-266, 2023 WL 6206148 (E.D. Tenn. Sep. 22, 2023) Galvin-Bliefernich sustained serious injuries as a result of a motor vehicle accident. She applied for and was paid Long-Term Disability benefits until First Unum terminated her benefits. She filed an appeal and, ultimately, filed a lawsuit in federal court.

The first thing the federal judge had to decide was what standard of review was applicable, because that would determine the judge’s role. There are two standards of review which can make all the difference in whether you win or lose.

Under a de novo standard of review, the federal judge is not bound by the denial, and can make their own independent decision about whether the termination was right.

The more common and less friendly standard of review is called the arbitrary and capricious standard of review. If the policy or plan gives the disability carrier or plan administrator “discretionary authority to determine the eligibility for benefits, or to construe the terms of the plan, the benefit determination is reviewed under the arbitrary and capricious standard.”

A decision is not “arbitrary and capricious if it is possible to offer a reasoned explanation for the decision based on the evidence” and is the “result of a deliberate, principled reasoning processes, and if it supported by substantial evidence.” While that sounds great, in practice it is not.

Courts will hold that a denial or termination is arbitrary or capricious if the carrier or plan relies on “the medical opinion of one doctor over that of another” and “ignored key pieces of evidence, selectively reviewed the evidence it did consider from the claimant’s treating physicians, or failed to conduct a physical examination while relying heavily on non-treating physicians.”

Remember that a decision is not arbitrary and capricious “when it relied on ‘the medical opinion of one doctor over that of another,’ because the administrator has articulated a reasoned explanation for its decision.”

There is rarely anything principled about the process, and the carrier or plan creates evidence to justify the claim denial or termination. Courts rarely look behind what is, in reality, a denial game executed by the carrier or plan with denial or termination tools in its claim handling toolbox.   

You already probably know the outcome in this case. The court noted that “it was not its job to weigh which parties’ evidence was more credible or reasonable, but only to determine whether Unum had a credible basis for its decision.” As expected, the judge upheld the denial.

The standard of review can make all the difference.