Arbitrary and Capricious: Defining the Legal Standard for ERISA Long-Term Disability Claims

Arbitrary and Capricious: Defining the Legal Standard for ERISA Long-Term Disability Claims

Arbitrary and capricious, also sometimes referred to as abuse of discretion, is the legal standard of review in many ERISA long-term disability claims. Under this standard, the reviewing judge must determine whether the insurance company had any reasonable or rational basis for denying the long-term disability benefits. This standard requires the judge to accept any rational basis for the insurance company’s denial, even if the judge believes that the claimant should be entitled to the benefits or has a better argument than the insurance company. This is an extraordinary deferential standard of review that severely limits a judge’s ability to overturn a denial of long-term disability benefits.

This standard of review is based on the fact that many, if not most, long-term disability policies governed by ERISA contain a discretionary authority provision. This provision typically gives the insurance company the sole and final authority to make a determination of a claimant’s eligibility for benefits under a claim. Due to the nature of this provision, then, the court is required to give extreme deference to the insurance company’s decision, unless it finds that the decision had no rational basis.

Fortunately, the state of California, along with some other states, has taken the step of declaring all discretionary authority provisions in ERISA-governed disability insurance policies void and unenforceable through the enactment of a statute specifically addressing this issue. This statute, which the Ninth Circuit Court of Appeals has upheld, essentially allows courts reviewing the denial of benefits under ERISA-governed plans to use a de novo standard of review, rather than the deferential abuse of discretion or arbitrary and capricious standard. Under the de novo standard of review, the court is not required to give any level of deference to the plan administrator’s denial of benefits. The court instead can review the evidence in the administrative record, along with any other evidence, in order to review the decision.

Court review of the denial of long-term disability benefits governed by ERISA can be very limited, which makes it even more important to build a strong claim from the outset of your case. Bonnici Law Group has the experience and knowledge that you need as you fight back against a denial of your long-term disability benefits. We know how to help you create and maintain a strong claim for benefits supported by medical evidence and obtain the best outcome possible in your case. Do not hesitate to contact Bonnici Law Group at 619-259-5199 or help@bonnicilawgroup.com.


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