Leave No ERISA Stone Unturned

Representing ERISA claimants requires an attorney to start at the very beginning and go careful step by careful step to the end. Nothing is to be assumed. An attorney has to make certain that the plan structure and all actions taken pursuant to it by the administrator have been done properly and only as authorized by the plan and ERISA law.

A recent decision, Gaines v. LINA, 2013 WL 677886 (N.D.Ill.), clearly illustrates this point. The issue in the case was whether the court would apply the de novo standard of review or whether it would give deference to the claim denial issued by the insurer, LINA.

If de novo, the Court could hear evidence and decide the matter based upon the preponderance of the evidence presented. If the Court had to give deference to LINA’s denial of benefits, the Court could only consider the record and could overturn the denial only if it found, based on the record, that the denial was “arbitrary and capricious”, a very tough obstacle for a denied claimant to climb.

The ERISA plan documents showed that the employer and the plan administrator had authorized the claims administrator to utilize its discretion in deciding claims. If properly set up, this would force a court, under Firestone v. Bruch, 489 U.S. 101 (1989), to give deference to the denial of the claim.

The problem for the employer in this case was that the plan document relied upon to authorize administrative discretion gave “Cigna” not “LINA” the authority to exercise discretion. Therefore, the Court held, since only Cigna was authorized to exercise discretion, LINA had no authority to do so and the case would be heard de novo.

In making this ruling, the Court followed a line of cases which held that when an unauthorized body without fiduciary discretion to determine disability benefits denies an ERISA LTD claim, the claim will be reviewed by a court on a de novo basis.

Sometimes in the jungle of ERISA plan language and the thicket of insurance policy terms the insurance company and the employer stumble and the claimant gets a break. You can be sure it doesn’t happen too often, but when it does, it is cause for a celebration.

We’ll drink to that.



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