Discretionary authority is a common provision in an ERISA-governed disability plan that essentially gives the insurance company administering the plan full and sole authority to decide whether claims are approved and paid. This type of provision results in decisions made by the plan to allow or deny coverage much more difficult for courts to overturn on appeal. In other words, a court cannot simply review the insurance company’s decision and rule that it was incorrect. Rather, the court must be deferential to the insurance company’s decision. The reviewing court only can overturn a denial of benefits if the denial was an abuse of discretion or arbitrary and capricious in interpreting the policy language or deciding whether a claim should be paid. This is a far less stringent review than a regular de novo review that a court usually exercises in reviewing an administrative decision regarding benefits. In a de novo review, the court will examine the record before and make a decision on the evidence without giving any deference to the plan administrator’s decision.
However, Cal. Ins. Code § 10110.6 explicitly provides that a discretionary authority provision in a disability plan providing benefits for any California resident is void and unenforceable. Moreover, the Ninth Circuit Court of Appeals in Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan (9th Cir. May 11, 2017) held that this statutory provision is not preempted by ERISA. As a result, it is impermissible for ERISA-governed plans providing disability benefits for California residents to contain a discretionary authority provision leaving the insurance company solely in control of the determination of entitlement to plan benefits. In California, then, depending on a few factors, the standard of review is higher than it may be for ERISA-governed plans in other states, or the de novo standard of review.
Regardless as to whether your insurance plan contains a discretionary authority provision, we are here to fight for your rights to benefits under your plan. Bonnici Law Group has handled the claims of countless individuals who have encountered difficulties in procuring long-term disability benefits under their employers’ ERISA-governed insurance policies. We will protect your rights and advocate on your behalf throughout every stage of the claims process. Call our office at 619-259-5199 to set up an appointment to speak with us today.