Private sector, employer-sponsored insurance plans are regulated by the Employee Retirement Income Security Act of 1974 – ERISA. ERISA is the federal law that establishes the minimum standards for group insurance plans that are offered through private-sector employers. Should your claim for ERISA disability benefits be denied, you will need to have a California ERISA claims attorney challenge that denial on your behalf.

However, under ERISA, before you may bring a lawsuit against an insurance company for denying your claim, you are required to pursue one or more “administrative” appeals through the company. If the appeals fail, only then may you bring a lawsuit challenging the claim denial.

If your own ERISA life, health or disability insurance claim has been denied, and if your administrative appeal does not succeed, what happens when you file a lawsuit to overturn the denial and to obtain your disability insurance benefits?

As we discuss below, there are different review standards used by the courts in these cases, and you will also learn where to turn for the legal help you may need if your own ERISA life, health or disability claim is rejected.

What Is a Standard of Review?

When a lawsuit against an employer or insurance company for denying an ERISA life, health or disability claim gets to court, there is no jury, and even if you can convince the judge that the insurance company was wrong, in some states, your lawsuit still may not prevail – because of the “standard of review.”

Two standards of review may be used by a court in these cases: the “de novo” standard and the “abuse-of-discretion” standard. A court will use one of these review standards when it hears your lawsuit:

1. To succeed with a lawsuit in a court that uses the abuse-of-discretion review standard, a judge must determine that the insurer was wrong to deny your claim, and the judge also must determine that the company abused its discretion by denying your claim.
2. To succeed with a lawsuit in a court that uses the de novo standard, the judge, reviewing the administrative record with “fresh eyes,” essentially determines if the insurance company was right or wrong to deny the claim for disability insurance benefits.

In other words, to win under the abuse-of-discretion standard of review, the judge must find that the insurance company’s denial of your life, health or disability claim was so unreasonable that it constituted an abuse of the company’s discretion. This standard of review gives a decided advantage to employers or insurers who deny life, health or disability claims.

But under the de novo review standard, a judge simply decides if the company was right or wrong to deny your claim. This standard of review gives neither party any advantage going into the courtroom. But, a life, health or disability claimant always has the burden of proof.

Why Do Insurance Companies Prefer the Abuse-of-Discretion Standard?

Under the abuse-of-discretion review standard, a court must agree with the employer’s or the insurance company’s denial of your disability claim and its denial of your administrative appeal – unless the company actually “abused” its discretion when it rejected your claim or your appeal.

In recent years, fewer states are allowing insurance companies to hide behind the abuse-of-discretion standard. California and other states now have laws that require courts to use only the de novo standard of review.

If you are seeking ERISA disability or life insurance benefits in California, and if your claim was denied and your appeal also failed, you will in most instances receive a de novo review of your claim if you and your attorney file a lawsuit against your employer or insurance company.

What Does the De Novo Standard Mean?

Even under a de novo review standard, if you have a California life, health or disability ERISA claim, you and your California ERISA claims lawyer still must prove that you are entitled to the ERISA life, health or disability insurance benefits you were denied. The de novo standard, however, lets the court make its determination more fairly and independently than if the abuse-of-discretion review standard applied.

In other words, under a de novo review, the court may consider both the legal and the factual issues about your entitlement to life, health or disability insurance benefits, and the court is not required to give any deference to the plan administrator’s or insurance company’s decision to deny benefits.

This all means that states that have required a de novo review through legislation, such as California, allow courts to make their own decisions in these cases, thus allowing the courts to substitute their own discretion rather than giving deference to the decision of an insurance company or plan administrator who have obvious biases toward denying life, health or disability insurance claims that negatively affect their financial interest.

What is the “Default” Standard of Review and What Standard is Now Used in Most Courts?

The de novo standard of review is the “default” national standard, and it has been since 1989, when the United States Supreme Court held (in Firestone Tire & Rubber Co. v. Bruch) that, by default, claimants are entitled to de novo reviews of ERISA life, health or disability insurance benefit denials.

However, the court also held that the abuse-of-discretion standard may apply if the language of the ERISA-governed plan unambiguously grants the plan administrator or insurance company full “discretionary authority” to determine benefits or to fully interpret the plan’s terms and conditions.

How Does the De Novo Standard Benefit California Consumers?

As explained above, California law prohibits the inclusion of discretionary authority clauses in life, health, and disability plans. The effect of that prohibition is to require California courts to use only the de novo standard of review in all cases that involve fully-insured plans.

Thus, in the words of the Ninth Circuit Court of Appeals (in Abatie v. Alta Health Life Insurance, 2006), the court “must conduct an independent, thorough analysis of the entire administrative record” and “evaluate the persuasiveness of conflicting testimony.”

In fact, to conduct an adequate de novo review, the court may take additional evidence into account by allowing the parties to augment the administrative record to evaluate the credibility of medical opinions or to hear claims that the medical reports in the case are inaccurate. For example, if a disability claimant received a favorable disability opinion from Social Security Administration, courts will typically allow disability claimants to augment the record to include them.

When Do You Need an ERISA Attorney’s Advice and Services?

Would you go to a knee surgeon if you had cancer? Of course not. You need to consult with an experienced ERISA attorney who knows ERISA life, health or disability insurance inside and out. A workers’ comp or personal injury attorney will almost certainly not be familiar with ERISA. You must be represented by a California ERISA life, health or disability insurance claims attorney who has considerable experience advocating for clients who are seeking ERISA insurance benefits.

If you are applying for ERISA life, health or disability insurance benefits – or if your claim has been rejected – you should have the specific and personalized advice that only a lawyer who is familiar with ERISA can provide.

ERISA lawyers usually provide your initial legal consultation at no cost and with no obligation. Your first consultation is your opportunity to obtain the personalized advice you need and to learn how the law applies to your own case and circumstances.

If you are disabled and you are applying for ERISA life, health or disability insurance benefits, or if your claim has been denied, act now. To initiate legal action – or if you need to learn more – contact California ERISA claims lawyers McKennon Law Group PC as quickly as possible.