Employees with ERISA governed long term disability insurance benefits provided by their employers are often shocked to learn the differences in how claims for disability insurance benefits are enforced under state insurance law and under ERISA § 502. They often ask what it means for an insurer to abuse its discretion, or be arbitrary and capricious. Those are terms of art dictated by the standard of judicial review, which depends on whether the ERISA plan contains a valid clause granting the insurer discretionary authority to interpret the terms of the policy and make benefit determinations. In such cases, the claimant must show in court that the insurer made the wrong decision, and that the decision was so wrong that the evidence could not reasonably support the insurer’s position. Often times, the sort of conduct we must demonstrate to show the insurer was arbitrary and capricious to prevail is the type that would entitle the claimant to punitive damages under state insurance law if the insurance were not governed by ERISA. An example may include failing to consider evidence submitted by the claimant. That is precisely what happened in a recent case against MetLife, Chavarria v. Metropolitan Life Insurance Co., No. 13-4712, 2014 U.S. Dist. LEXIS 164898 (E.D. La. Nov. 25, 2014).
Mr. Chavarria worked as an automobile body repairman, or bodyman, until he stopped working in October 2009 due to inguinal hernia. MetLife awarded him short term disability benefits, and approved his long term disability benefits from May 2010 until April 4, 2012. His employer reported to MetLife that he occasionally had to lift up to 50 lbs., and never had to lift over 100 lbs. Mr. Chavarria, however, reported that he sometimes had to lift up to 150 lbs. in that occupation. Mr. Chavarria applied for Social Security Disability Insurance benefits, and was ultimately denied following an Administrative Law Judge hearing. Though the ALJ denied Chavarria’s claim, he determined Chavarria did not have capacity to perform his prior work because he could not lift over 20 lbs. MetLife’s medical consultants advised MetLife that Chavarria could perform all the duties of the occupation of bodyman. But MetLife never mentioned, or even considered, the Social Security ALJ determination that Chavarria was disabled from his own occupation. It instead noted that his claim before SSA was denied, but did not appear to actually evaluate the substance of the factual determinations. The court held this amounts to an abuse of discretion.
Pursuing ERISA § 502(a) claims is complex, and requires an intimate familiarity with ERISA law, whether in litigation or when submitting an administrative appeal of a denied claim. By knowing the law and courts’ holdings, your attorney can more effectively present facts at the administrative level to give you the best chance at securing your benefits. If you have been denied a claim for long term disability benefits, contact an experienced ERISA attorney.