Employees in Chicago and elsewhere in Illinois consulting a long term disability lawyer are often caught off guard by the discussion regarding the standard of review of their claim in court. The language in the plan documents and insurance policy, coupled with state’s insurance laws, can determine whether a court in which a lawsuit over long term disability benefits is pending would review the claim for abuse of discretion or de novo (meaning anew, or in the first instance). Some lawyers would say the difference could be outcome determinative. Under abuse of discretion standard, a court will review whether the insurer’s decision had support in the record and was reasonable, even if incorrect. Under de novo, the court will determine whether the plaintiff demonstrated he or she is entitled to the benefits (like in any other breach of contract lawsuit). Insurers are much more comfortable with the abuse of discretion standard. From this author’s perspective in representing claimants, I certainly prefer a de novo standard, but the difference in standards rarely makes a difference in the outcome; it merely alters how to prepare a case. But knowing which standard will apply at the outset is critical to knowing how to prepare the case. A recent case handled by our colleagues in Northern California demonstrates how knowing what standard will apply helps prepare the case for success.
In Hirschkron v. Principal Life Insurance Co., No. 15-cv-00664-JD, 2015 U.S. Dist. LEXIS 147685 (N.D. Cal. Oct. 29, 2015), Amy Hirschkron worked for FTI Consulting in California when she became disabled, and subsequently filed a lawsuit seeking long term disability benefits under ERISA § 502(a). Principal Life Insurance Company issued the disability insurance policy to FTI Consulting in Maryland, and the insurance policy stated that Maryland law applies. Critically, the plan documents and insurance policy stated that Principal shall have the discretionary authority to interpret the terms of the insurance policy and decide eligibility for benefits under the policy. Maryland does not ban such clauses. California Insurance Code section 10110.6 makes any such clause that would otherwise apply to a California resident null and void. Principal argued the California law does not apply or nullify the discretionary clause because the policy expressly states that Maryland law governs the policy. The court rejected that argument, holding the California ban applies. The court thus determined that the de novo standard would apply to plaintiff’s case, and then scheduled a case management conference.
If your claim for long term disability benefits has been denied, contact an experienced long term disability lawyer to determine what standard of review applies to your case and strategize how to prepare your administrative appeal and hopefully avoid litigation.