If you have long term disability coverage provided through an employee benefit plan, then there is a good chance that your insurance policy is governed by the Employee Retirement Income Security Act (“ERISA”). A common provision found in group long term disability policies will state that the insurance company or claims administrator has “discretionary authority” to interpret the terms of the plan and make claims determinations. Although this language may seem relatively benign, “discretionary authority” can play a major role in how your case is decided if you file legal action against the insurance company that denied your long term disability benefits.
“Discretionary Authority” Means It’s Up to You to Prove Your Denial Was Unjust
When your disability policy is governed by ERISA and provides the insurer with “discretionary authority” to make claims determinations, courts have interpreted this language to mean a plaintiff must prove that an insurance company’s claims denial is “arbitrary and capricious”. See Holmstrom v. Metro Life Ins. Co. (7th Cir. 2010). This deferential standard of review is more burdensome than merely proving that the insurance company or claims administrator was unreasonable.
Some states have recognized the injustice it may cause when policyholders have to prove in court that the insurance company was arbitrary and capricious when denying benefits. In light of this, there are numerous states that have effectively banned disability insurance companies from using discretionary clauses. In the Midwest, Illinois, Michigan, and Minnesota have passed laws to ban the insurance company’s use of discretionary authority. In Fontaine v. MetLife, the Seventh Circuit upheld Illinois’ ban on discretionary clauses.
Unfortunately, Indiana has not yet passed a state law that prevents employee benefit plans from utilizing discretionary language. Because of state laws, it not only matters whether your case is governed by ERISA or whether your insurance policy includes a discretionary clause, it also matters where you live. If you live in Illinois or Michigan and your group long term disability claim has been denied, then your standard of review is more favorable to prove that the insurance company was wrong in denying your benefits.
Contact Keller & Keller for Help with Your Disability Claim
If you have received a letter from an insurance company or claims administrator notifying you of a denial of long term disability benefits, contact Keller & Keller for a free consultation. We have attorneys licensed in Indiana, Illinois, and Michigan who can assist you with your long term disability denial. Call 317-926-1111 or 1-800-253-5537 today.