In ERISA cases, a big issue is the standard of review. Maybe that sounds boring, but it is important to understand the concept because it can mean life or death in an ERISA case. Let's start at the beginning though to understand this.
There are two different ERISA standards of review.
- De novo standard of review. De novo is a Latin term and means a new beginning or start. De novo standard of review requests that a court is asked to look at the evidence and make its own decision, without deference to the decision made denying the claim.
- Arbitrary and capricious/abuse of discretion standard of review. Arbitrary means a random choice or personal whim, rather than any reason or system. Caprice is evil intent. A term that is of similar meaning is abuse of discretion, which means a clear error of judgment in reaching a decision. Even though arbitrary and capricious and abuse of discretion do not appear to be identical terms, the courts have treated them synonymously. They boil down to proving that the decision made in your benefit claim was both wrong and unreasonable.
Logically then, if your claim is under the abuse of discretion standard of review, it will be more challenging to overcome the refusal to pay benefits. Obviously, that is because you must show that the decision was both wrong and unreasonable. There must be a clear error of judgment.
Most insurance bad faith cases are under the de novo review, which means that the plaintiff need only convince a court or a jury that the proof is in the plaintiff's favor more probably than not. Thus, de novo is an easier standard of review, and therefore it is a basic strategy for ERISA plaintiff's counsel to seek application of the de novo standard of review.
However, de novo standard of review is a two-edged sword. It cuts both ways as Ms. Dorris learned. In the recent case, Dorris v. Unum Life Ins. Co. of Am., No. 19-1701, __F.3d__, 2020 WL 524726 (7th Cir. Feb. 3, 2020), Ms. Dorris had received benefits from Unum for over 12 years. Her policy had protection for 2 years as to her own occupation and then after 2 years she had to prove she was disabled from performing any occupation. Unum found she did so and paid those any occupation benefits for 10 years! Finally, there must have been a change in adjusters or a new department boss, and so the company terminated her benefits.
Usually when Unum does this, terminate benefits after paying them a long time, it will dig in, and refuse to change the decision. While the decision-making may look remarkably inconsistent, Unum doesn't care. It strongly believes that arguing the inconsistency alone will not win the day. So, plaintiffs typically will take the case to court.
When a plaintiff complains of the inconsistent and wrong decision-making, Unum's next tactic is to explain to the court, that a low-level person in the company wasn't doing their job very well. As a result, the company was “asleep at the wheel”. The claim should have been terminated long ago. In fact, Unum did a favor by paying 10 years of benefits when they should not have paid those benefits. Now, they haven't asked the plaintiff to give the money back. Unum implies it is such a wonderful, nice company! (Yes, we have seen a few things in our decades of ERISA work.)
The plaintiff thoroughly examined the reasons why the claim was denied. It was recognized that the de novo standard of review should be applicable to this policy, and so she thought this would be an easy win. She forgot however that de novo review is a two-edged sword. You can't forget the edge is sharp on both sides. She focused only on the reasons why the claim was denied. She did not take it a step further and prove her case.
Laudably every reason why the claim was denied was refuted soundly by the plaintiff, but she then failed to demonstrate “anew” that she was disabled from performing any occupation. The district court found that the claim record provided an adequate basis for Unum's decision. It also found that the record was underdeveloped. According to the court the plaintiff failed to provide additional evidence proving she was disabled from any occupation.
Ms. Dorris was very upset and appealed the case to the Seventh Circuit. At this point Unum abandoned arguing that its decision was correct. It just argued that Ms. Dorris never provided her case. The Seventh Circuit agreed and noted that she had the burden of proof to demonstrate that she was disabled under the any occupation definition. It ruled “We see no inconsistency because Dorris never offered—and the court never rejected—relevant extra-record evidence.” Thus, even though Ms. Dorris had a de novo standard of review, she only disproved Unum's reasons for denying the claim and failed to provide her own evidence showing she was disabled. Her case was struck down in its prime even though the claim has been paid for 10 years under the any occupation definition because she failed to go back to square one and prove she was disabled.
De novo review is indeed a two-edged sword, and any plaintiff wielding it needs to remember that it cuts both ways. This case is another illustration that ERISA is crazy, but our experienced ERISA disability attorneys and long term disability lawyers know crazy. Contact us if we can help.