This article continues our series of articles answering basic questions about insurance law and the Employee Retirement Income Security Act of 1974 (commonly referred to as “ERISA”).  This one addresses:  In a lawsuit governed by ERISA, what actions taken by the claims administrator (usually an insurance company such as Blue Cross/Blue Shield or CIGNA) will reduce the level of discretion the court gives the insurance company’s decision when reviewing the decision for an abuse of discretion?

Under ERISA, the court does not necessarily review the claims decision by simply attempting to determine whether the insurance company made the “correct” decision.  Instead, the court first looks to see whether the plan documents unambiguously confer discretion for determining eligibility on the claim administrator.  If discretionary language is present, the abuse of discretion standard of review applies, and the court is required to give some level of deference to the claim administrator’s decision.  However, even if such discretionary language is present, the discretion given the claim administrator’s decision is not absolute.  Specifically, courts have ruled that the following acts will reduce the level of discretion give to the claims administrator’s decision:

• Rendering a decision without explanation, construing a plan provision in a way that conflicts with the plain language of the plan or relying on clearly erroneous findings of fact.
• “Hiding the ball” by failing to advise claimants of documents needed to obtain approval of claim and an explanation of why such material or information is necessary, and failing to submit forms to claimant or his doctors that would have elicited the information needed.
• Overstatement of and excessive reliance upon claimant’s activities in the surveillance videos and conducting a paper review rather than an “in-person medical evaluation.”
• Encouraging participant to file for Social Security Disability Insurance and, when benefits are awarded by Social Security Administration, failing to deal with and distinguish the contrary disability decision.
• Failing to obtain a physician’s recommendation and relying on medical reports that are not credible.
• “Tainting” medical file reviewer in the medical review process by giving the reviewer inaccurate negative information regarding the claimant.
• Failing to consult with a health care professional who has appropriate training and experience in the applicable field of medicine.
• Emphasizing a report that favored a denial of benefits while deemphasizing other reports suggesting a contrary conclusion, and failing to provide its independent experts with all of the relevant evidence.
• Failing to provide all bases for its denial and suggesting alternate reasons for denial after the fact, thereby precluding the claimant from responding to that rationale for denial at the administrative level.
• Adding new terms to the Plan, particularly when those terms are both imprecise and impose a higher evidentiary burden on a claimant, such as requiring that disability be proved by “compelling objective” evidence.

These are just a select few of the acts that courts have ruled require that the insurer’s decision not be afforded full discretion.  Numerous other actions will also cause a court to review a claim decision with something less than full discretion.  For additional information on this and other insurance matters you can visit the FAQ section of our website:  www.mslawllp.com.

If you need to consult with an attorney about a possible ERISA or insurance bad faith matter, please contact our office.